model should be fit for purpose
actuarial judgment to choose parameters etc
***model should not be overly complex so that is long/expensive to run and difficult to interpret/communicate.****
....
clients of actuaries would never understand the literature written by quants (plus quants dont need to worry about communication to the same extent when assisting internal clients like traders)
plus would predictive power of more complex justify savings etc
I know this is the kind of stuff we hear from the profession all the time, but I just don't buy it.
There's no problem in using a simpler model if we decide that it's worth sacrificing accuracy for the savings in time and money - but this decision still ought to be made by someone with the appropriate knowledge and skills.
Are actuaries really able to do this - are they really using the models they use because they think they give the correct trade-off between accuracy and cost? Or is it because they're the only models they know and the only models that are covered on the actuarial exams? To me it looks more and more like the latter.
And it seems that the profession sees the communication issue like this:
1. We're employed to use our skills to value liabilities more accurately than a non-professional could.
2. but we don't want to use models that are too hard to explain to non-specialists
3. so we don't bother learning about more complicated models and just use the simple ones
4. then we take credit for being good communicators when in fact we were only able to explain it so well because we deliberately chose a model that was easy to explain in the first place.
I'm starting to feel a bit disillusioned with actuarial life to be honest. The exams are hard, but for all the wrong reasons. And if you read an article or go to a talk titled "issues facing the actuarial profession" it's much more likely to be about whether the faculty and institute should merge or about how to assess work-based skills, than it is to be about the actual issues in finance and insurance that actuaries should be dealing with at work every day.