Actuarial Word Clouds

We all know the saying 'one picture is worth a thousand words'....

What if that picture also contained words itself?
Such a Word-Picture must be worth at least a million words.....

What if that Word-Picture is also an Actuarial-Word-Picture?
This kind of picture must be worth a billion words!

Enough balderdash..., there's a fabulous online application, called Wordle, to empower and spice up your traditional power-point presentations.

Wordle
Wordle uses words and their frequency to turn them into a Word-Cloud - or better - a Word-Picture.

You may use Wordle on any group of words or even a RSS-feed.
So in fact Wordle creates a weighted summarized and visualized impression of what you, your document or your employer is. 

Here are some examples of Wordle voor the RSS pages of two actuarial giants....

Mercer
Let's start with Mercer:

Towers Watson
And now for some Towers Watson's...

 
Actuary Info
Let's conclude with an example of a more modest and smaller actuarial giant: Actuary Info

Presentation Tip
Next time you give a presentation,  instead of summing up the standard dry bullet points, replace them by a Wordle cloud.

Your audience will be spellbound , 'turn their head', 'look for expected words' and 'immediately grasp the relative size of the issues mentioned'. All resulting in (1) you - the presenter - will have much more attention and (2) the facts shown on your slides will be longer remembered, because the are 'your visualized words' and therefore will be better memorised...

An AON Example...
Let's end with a simple example from AON's 2010 Risk Survey:

I. Traditional (PPT) Slide Presentation

Risk Quantification Tools Used (2010)

(to measure demonstrable Value Received from ERM Efforts)

• Qualitative tools 59%
• Industry benchmarks 34%
• Earnings/Cash flow/Value at Risk 27%
• No use of risk quantification in ERM process 23%
• Actuarial analysis 13%
• Stochastic/Monte Carlo simulation 13%
• Not specified 7%

II. Wordle Presentation

Now..., get your head in the 'Actuarial Word Clouds' an have even more success with Wordle!!!

- Download: AON Risk Survey (2010)
- Wordle

Voltaire: Diplomats, Ladies and Actuaries..

Actuaries understand the difference between 'being sure' and telling it....
Some of us are Diplomat, Lady and Actuary in One.... what a dazzling combination...
 

Diplomats, Ladies and Actuaries
When a diplomat says yes, he means ‘perhaps’;
When he says perhaps, he means ‘no’;
When he says no, he is not a diplomat.


When a lady says no, she means ‘perhaps’;
When she says perhaps, she means ‘yes’;
When she says yes, she is not a lady.

- Voltaire 1694-1778 quoted in Escandell 1993 -

When an actuary says yes, (s)he means 'probably'
When (s)he says probably, (s)he means 'sure'
When (s)he says 'sure', (s)he is not an actuary.

- Joshua Maggid Actuary Info 2010 -

Questioning Solvency II?

Every now and then, when you're in the middle of some-, any- or every-thing, it's wise to sit back and ask yourself some basic questions:

Is what I'm doing still adding value?
If so, what's that value and for who?
If not, how can I add value one way or the other?
If not, stop!

A Solvency example...

Suppose you're up to your neck in a solvency II project and you've not really seen your family for two weeks. Just sit back, relax and simply ask yourself the next questions:

1. Why are we implementing Solvency II
   (Better: What's the goal of Solvency II)
2. Are the reasons for implementing Solvency II valid and sound?
3. Is it possible and profitable to define and measure detailed risks at company level?
4. What's the RETURN on Solvency II for policyholders and shareholders?

The official (CEA) answer to question I reads in short:

We implement Solvency II because the current framework is too simple and does not direct capital accurately to where the risks are.

Key question (II) is: Are "too simple" and "more detailed directing capital" valid or sound reasons........?


Alternative
A more valid reason for implementing Solvency II would be something like:

Recent decades have shown an increase of Insurance Companies Bankrupts (or Insolvencies) to a level of x% p.a. (measured in value instead of numbers). Solvency II intents to bring down this x% risk to (x-y)% in Z years by means of a more detailed capital-risk approach.

The estimated costs of this yearly y% reduction by implementing and maintaining Solvency II, are estimated at z% p.a. .

Main challenges implementing S II at company level

1. Capital allocation
   At an individual company level, the effect of Solvency II on shareholder and client value will only be negative. More 'dead capital' has to be allocated, decreasing shareholder value and decreasing clients profit share.
   
   
2. Revenues
   Pricing Solvency II, will increase premium/contribution levels. However higher contribution levels will have a negative net impact on sales and revenues.
   
   
3. Capital Inadequacy
   On top of, the extra solvency created by Solvency II will turn out to be inadequate at an individual company level in case the deTAILed risks actually affects (hits) a company. A more (inter)national reinsurance program could bring help here. However, these kind of reinsurance programs turn out to be expensive. Moreover, take care that these deTAILed risks don't turn out to be systemic risks in the end....

Conclusion

It's clear that the Solvency II goals are not smart formulated. Nevertheless, Solvency II seems an irreversible process.

Therefore the key question is:

How can you use Solvency II to add (long term) value to your clients and shareholders?

The art of asking the right question

Now you've replaced your fuzzy feeling and foggy discussions about the goal of Solvency II, by a leading question.

Answering and discussing this question will turn out the way to create efficiency and joy in your project and time for your family.

A lot of colleague actuaries can help you on discussing and answering this question.

Start discussing this question in the company board's next meeting!


Risk management Moral
In fact Risk Management in general is more the art of asking the right question instead of giving the right answer. This is well argumented by Professor Stefan Scholtes (University of Cambridge), who states that what we need is a complementary balance between modelling and intuition; models that relate to and enforce our mental abilities, not replace them.

audio link

We actuaries can learn from that. Actuarial questioning turns out key. Next time you have to give a (Board) presentation, start by asking the right (effective) questions instead of giving answers straight away.

One last tip: Never ask 'Why questions', instead ask 'What questions'....

Related links
- CEA Why Solvency II?
- Prof. Stefan Scholtes: The art of asking the right question
- Asking the right questions