Showing posts with label communication. Show all posts
Showing posts with label communication. Show all posts

Dec 21, 2014

Actuarial Readability

As an actuary, accountant or financial consultant, deep knowledge, expert skills and experience are key to writing an interesting article or paper advice.

However, no matter how much you're an expert, finally you're as good as you can get your message across to your audience.

The art of the expert is to simplify the complexity of his/her research into simple, and for the audience understandable text.

In practice this implies that the expert will have to measure the readability of his papers before publishing.

The two most important issues to tackle are 'readability' and 'text-level'.

Although there are many sorts of tests, both topics are simply covered by the so called  Flesch-Kincaid Readability Test.

Let's take a look ate the two simple test formulas of this test:

Flesch-Kincaid Readability Test

Flesch Reading Ease Score

FRES = 206.835 – (1.015 x ASL) – (84.6 x ASW)

Flesch-Kincaid Grade Level

FKGL = (0.39 x ASL) + (11.8 x ASW) – 15.59

ASL  = average sentence length
number of words divided by the number of sentences

ASW = average number of syllables per word

number of syllables divided by number of words

Texts with a FRES-score of 90-100 are easily understandable by an average 5th grader and scores between 0 and 30 are best understood by college graduates.

Some examples of readability index scores of magazines:
- Reader's Digest Magazine: FRES = 65
- Time magazine: FRES = 52
- Harvard Law Review: FRES = 30

The FRES-test has become a U.S. governmental standard. Many government agencies require documents or forms to meet specific readability levels. Most states require insurance forms to score 40-50 on the test.

Where to test your documents?

Besides matching the FRES and FKTL scores in your document, as a guideline try to establish the next English text-test-characteristics
  • Average sentence length 15-20 words, 25-33 syllables and 75-100 characters.
  • Characters per word: < 7
  • Syllables per word: 1.5 - 2.0
  • Words per sentence: 15 - 20

This blog text resulted in scores:
- Flesch-Kincaid Reading Ease 64.7
- Flesch-Kincaid Grade Level 7.2
- Characters per Word 4.4
- Syllables per Word 1.5
- Words per Sentence 11.8

As an example we test the readability of one of the articles of the Investment Fallacies e-book, as published by the Society of Actuaries (SOA) :

By Max J. Rudolph, published in 2014

The readability outcome is as follows:

Readability Score 'The Best Model Doesn’t Win'

Reading Ease
A higher score indicates easier readability; scores usually range between 0 and 100.

Readability Formula

Grade Levels

A grade level (based on the USA education system) is equivalent to the number of years of education a person has had. Scores over 22 should generally be taken to mean graduate level text.

Readability Formula
Average Grade Level

Text Statistics
Character Count 7,611
Syllable Count 2,531
Word Count 1,495
Sentence Count 98
Characters per Word 5.1
Syllables per Word 1.7
Words per Sentence 15.3

Actuarial Texts
With regard to public financial or actuarial publications a FRES-score of around 50 assures, that your publication reaches a wide audience. Even in case you're publishing an article at university level, try to keep the FRES-score as high as possible.

If you write an academic paper, you may use the online application Word and Phrase to measure the percentage of academic words. Try to keep this percentage below 20% to keep your document readable. The publication 'The Best Model Doesn’t Win' would score 17% on academic words......

Next time you write a document or make a PPT presentation, don't forget to


Nov 25, 2011

Humor: Past Performance is...

To protect (!) the customer more and more, investment funds feel the need  - or are obligated - to communicate about the expectation of their funds' future return.

One of the most used non- or disinformation statements funds use, is the line:

Past performance is no guarantee of future results

A general lesson is that all prefab communication lines and static communication tools are doomed tot fail, as communication is context and time dependent.

Just as Communication, your Actuarial, Investment or Financial Models are also context (economic, fiscal, ethics) and time dependent.

Change them upfront, as 'performance of yesterday's models is no guarantee for the future.....'  ;-)

- Free Flash Animations - Smilies by Adrian Wilman

- Disinformation: Everything You Know Is Wrong

Jul 27, 2010

What kind of actuary are you?

We all know plain actuarial skills are not enough to be(come) a successful professional actuary.

Time and time again we have to conclude that it takes more than average communication skills to overcome the persistent communication gap between actuaries and their audience.

In a 2008 workshop Matthias Bonikowski (Senior Manager at Milliman) presented the outcome of a German survey.

Here are the stunning results:
Proposition Actuaries' opinionNon-Actuaries' opinion
1.Actuaries are pessimists85%85%
2.Actuaries are not opportunists70% 70%
3.Actuaries communicate clearly and transparently 15% 5%
4.Actuaries think out of the box50%15%
5.Actuaries live in an ivory tower10% 50%

The Copy Paste Actuary
From the Bonikowski survey it's clear that non-actuaries (including: board managers, sales directors, product managers, coaches and headhunters) don't speak highly of actuaries.

It looks like most of the 'actuary species' are perceived as a kind of 'Copy Paste Actuary'. One who's not able to think out of the box.

We are congenital pessimists, trained to do a sort of one trick pony act. An act we can't explain or communicate, like 'normal' people seem to be able to do. 

On top of this  - just like the famous Baron Münchhausen who was unable to escape from a swamp by pulling himself up by his own hair - we actuarial poor devils seem unable to lift ourselves to the next level.

We're obviously trapped in our 'non-communication' addiction, smoke gets in our eyes and nobody around us seems capable of helping us to move from our alien planet to the world of real people, business and social life.

The non-actuaries' view in Bonikowski's survey emphasizes this image...

The non-actuaries' view
The non actuaries' view on actuaries comes down to::
- They explain complex terms as complex as possible
- Inability to make actuarial things clear to non-actuaries
- They are not able to take a bird‘s eye view
- They are missing empathy for non-actuaries

As possible reasons for this view, non-actuaries notice:
- They are isolated from decision processes…
- High expectations about actuarial knowledge – deep and broad
- Communication skills are not a part of actuarial education

As a 'solution', 7 suggestions for successful communication are developed:
  1. Point out key messages
  2. Leave out details
  3. Use more pictures and examples
  4. Explain more in “black and white”
  5. Avoid academic language/technical jargon
  6. Pick up non-actuaries earlier
  7. Define target-group specific communication rules

As we all know, these issues and solutions are not really new or surprising. Why is this issue of non-communication and 'Ivory Tower Effect' so hard to solve?

Actuaries are invisible
In 'My Opinion' of the Actuarial Review 2010, Grover Edie shows that we 'actuaries' are not in any way involved in important (political) decisions.

Important decisions that society has to take in coping with challenges as aging, longevity, health, etc.  Grover Edie explicates: 'they don’t ask us (actuaries) because we are not visible'.

My view is that the 'invisibility of  actuaries' is more or less a global issue.

Undoubtedly this theme of invisibility finds his roots in the actuary's attitude. This is well illustrated by Grover Edie's summarized reactions of actuaries on the issue:
  • “If I do good work, others will ask me for more of it.”
  • “I don’t need to advertise or to sell my work: My work speaks for itself.”
  • “I certainly don’t need to sell others on the value of my work, and if they are too stupid to know the value of what I do, that’s their problem.”

Supply and Demand
Grover Edie thinks that this underlying 'laissez-faire  attitude' is the basic problem. A problem that - in his view - can be solved with a simple sales training approach.  With all due respect...., the invisibility of actuaries has probably a deeper cause than this superficial laissez faire attitude only, that is mainly the effect of the Law of Supply and Demand.

Most actuaries had to study hard to achieve their goal of becoming a qualified actuary. Once they'd become an actuary, there was, still is and will be, more than enough well paid work. In other words: The Demand side of the market market exceeds (by far) the Supply side of the market. Why should actuaries develop a commercial sales attitude if they don't need it?

In this situation the risk that an actuary eventually becomes a 'Mirror Actuary', is not inconceivable.

A mirror actuary, one who just reflects and gives back what the environment offers him.

He looks a bit like the invisible actuary. Without a real own opinion,  the mirror actuary just reflects the financial impact and consequences of decisions taken by others.  He  acts without sincere social engagement or conviction. Hence he's unable to generate a critical positive feedback viewpoint, necessary to make what its takes, the difference.

What does it takes?
Convincing actuaries to become more visible and socially or publically involved, takes more than a professional sales approach. Actuaries have to be made conscious of why and where they are and what they really want to achieve in life.
In other words:

What kind of actuary would you (really) like to be?

In this case the answer is not a traditional one like 'Pricing Actuary', 'Pension Actuary', 'Health Actuary; or the humorous answer 'very kind'. No, the answer to this question hits our actuarial soul....

The good old actuarial horse
Would you like to be the well paid 'actuarial horse' in front of the wagon, that gets his orders from the coachman and does his calculation work every time he's being asked to do deliver some?
Or do you want to sit on the wagon, next to the coachman, discussing and advising on the best route of the wagon?

Answering these simple questions is key in solving the persisting actuarial mind setting issue.

Visibility? Select at the gate!
This invisibility issue deals with the fundamental structure of an actuary's personality.  It's not something that can be easily learned or changed during or after achieving a (long term) study. If we want visible actuaries who are socially and publically involved, we'll have to select them on that attitude at the gate, before they undertake an actuarial study. Just like we test their arithmetic talent and other mental capacities, before actuaries start their study.

The Dancing Actuary

If we don't act upon this new 'visibility insight' and keep trying to beat the famous dead horse, things will never change.

In this situation there's a tricky risk that we enjoy our salary and comfortable position so much that we suppress our critical view and potential power to change things. In which case we become totally dependable on our monthly paycheck and the opinion of our boss or manager.

In doing so, we might gradually become implicitly susceptible to extortion and eventually things will escalate.

Ultimately in this situation, we could even develop to a kind of 'dancing bear', in this case a 'Dancing Actuary'.

Try to keep your eyes open. If you feel completely 'chained' or if our environment constantly forces you to support actions or decisions you can not really account for, seek help or step out before it's too late.

The Wise Actuary
Wrapping up this warning blog about invisibility, you could get the wrong impression that black swan actuaries doe not exist at all.

Of course we know better. There are lots of wise and visible actuaries around the world and as you've made your way to the end of this blog, you'll be probably one of them....

Wise actuarial owls that want to make the difference in life and society. Actuaries who are not for sale and who know their personal limits. Actuaries that know when and where to say 'no' or 'yes'.

Actuaries that don't just want to talk about a better world, but want to act(uary) on it.

Are you that 'wise actuary', who's visible, socially active and leading society to the next level?

If you want to find out if you're a wise, invisible, mirror or dancing actuary, take the next 5 minutes 15 questions test called:

Good luck with this 'actuary stress test'!

Related links/ Resources:
- Workshop Actuarial Communication (2008) Presentation (pdf)
- Article: They Don’t Ask Us Because We Are Not Visible
- Test:What kind of actuary are you?