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The business of risk

What's most likely to hurt us? ASU's actuarial science program can tell us.
April 5, 2018

Two ASU professors give us the inside story on one of the top US jobs that you probably have never heard of

We worry about a lot of dangers in the modern world, but what's actually most likely to hurt us?

It's an actuary's job to know the answers — or at least the probabilities.

And that knowledge can be lucrative. Actuaries regularly earn more than $100,000 per year, according to the U.S. Bureau of Labor Statistics. ASU Now spoke with Arizona State University Professors of Practice John Zicarelli and Jelena Milovanovic about the actuarial scienceASU's actuarial science program is in the School of Mathematical and Statistical Sciences in the College of Liberal Arts and Sciences. program at ASU to get some insight on the field.

Question: What does an actuary do? 

Zicarelli: Actuarial sciences is fundamentally about analyzing and quantifying risk. Certainly, the risk of dying, or what we call a mortality risk, is a risk that a few actuaries work on explicitly, but the field is much broader than that. I never did that at all. My specialty was in business or commercial property-casualty risks. 

Milovanovic: For example, for premium calculations a pricing actuary determines the rating factors with a whole team behind the scenes. Having said that, it’s always a compromise between what should be charged and what can be sold; underwriting versus marketability. Then there’s the financial health of an institution — will the insurer be solvent to meet liabilities associated with written policies when needed? That would be one of the roles of the reserving actuary. There are also nontraditional actuarial roles: banking, finance, infrastructure, etc.

Q: Can you give an example of analyzing risk?

Milovanovic: So, I have a friend, a medical underwriter, and she wrote a general liability (GL) policy for a mortuary. What could go wrong in a mortuary?

Zicarelli: The clients are dead …

Milovanovic: Many things apparently. At one particular mortuary, they switched the deceased’s ashes. Another mortuary cremated a body when they were supposed to embalm (it).

Q: What are some misconceptions about your area?

Zicarelli: I think there is a perception that we’re incommunicative math geeks. It’s something that’s widely perceived within the insurance industry, and it’s true that we need to be reasonably skilled at math to do this kind of work. But, with some exceptions, most actuaries end up in much broader corporate roles. In order to be successful, we have to be good communicators.

Q: In 2004 Ben Stiller played an actuary in "Along Came Polly" who calculated and avoided risk in the office and his personal life. What did you think of his portrayal of an actuary?

Milovanovic: When I meet someone, more often than not, that’s the very first connection when you say you’re in actuarial sciences. I think the movie painted a very negative connotation of the type of personality an actuary has. Over the last decade, I would like to say that more people on average are aware of what an actuary is, but … they still try to buy insurance from me!

Q: People think skydiving is risky, but I’m sure other activities are riskier. How does actuarial science look at that?

Milovanovic: You are in your car for a much longer period of time over your lifetime than a one-time deal that you go skydiving. Unless of course that’s your profession, but that’s something different.

Zicarelli: I don’t have the information on exactly how many accidents have occurred related to skydiving — it’s likely a tiny fraction, less than 1 percent — (compared with) the number of accidents or deaths that have occurred from people driving cars down the road. But the reason that we see so few skydiving incidents is because there is a relatively limited exposure. The average person never does it all and the people that do do it at all are likely once a month or a year, and the exposure lasts for five minutes and it’s over. Whereas with automobiles, I commute from the northern part of Scottsdale to Tempe, and I take my life in my hands every time I do that. It’s that kind of continuous exposure over time that really creates a higher likelihood that something is going to happen to me than would happen to my stepson who likes to go skydiving.

Milovanovic: It’s a habit; you have this false sense of comfort that has been developed by repetitive motion.

Q: Do you see the role of actuaries as trying to change behavior or just to inform? 

Zicarelli: In general, we’re in the business of identifying and quantifying risk as opposed to giving life advice. Some of the work that we do can be interpreted as being prescriptive, but that’s really not the spirit of what we're doing and why we do it.

Milovanovic: I can see the association of trying to "alter" human behavior. The first thing that came to mind was a deductible; a cost sharing between the insurance company and the policyholder. If there wasn’t a deductible you’d pass the entire risk amount on to the insurer, so there is some altering behavior when the insurer decided to implement cost sharing through a deductible. Maybe now I’m going to alter my risky behavior because I know I have a $1,000 deductible on my policy?

Q: What do actuaries know that we don’t?

Milovanovic: I don’t double insure or under insure. That’s the biggest trick, like travel insurance, most credit cards have some form of travel insurance embedded but most people don’t know that. Also I think for me it’s more the knowledge, like having multiple plan Bs, specifically ones that entail the worst-case scenarios. In property and casualty insurance, sure we have a lot of small risks and I can deal with that, but can I deal with a very rare, large one?

Q: So, I just purchased liability insurance for myself as a photographer because I thought, "What if I’m taking a photo portrait and my light falls and injures a client?" What is the worst-case scenario from an actuary's point of view?

Milovanovic: The worst-case scenario is the light falls and not only kills the client but then burns down the building, which in turn results in multiple other casualties. No coverage equals you are done financially going forward!

Top photo: John Zicarelli and Jelena Milovanovic, both professors of practice in the School of Mathematical and Statistical Sciences, teach risk management and actuarial forecasting at ASU. Photo by Deanna Dent/ASU Now

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A life-changing journey of humanitarianism

April 5, 2018

New documentary, 'Seeking Asylum,' features students from ASU's New College as they work with refugees in Greece

The wave of refugees that began flooding into Europe as early as 2014 as a result of massive unrest in the Middle East has shown no signs of ebbing. In the last two years alone, roughly 1.3 million refugees have passed through Greece, a country that, thanks to its geographical location, has become a sort of unofficial gateway to Europe for those fleeing war, famine and religious persecution.

Director of ASU’s master’s program in social justice and human rights Julie Murphy Erfani called it “the nexus of the largest humanitarian refugee crisis since World War II.”

Since 2016, she has directed an annual, two-week study abroad trip that takes students to the region, where they volunteer and engage directly with forced migrants from Syria, Iraq, Afghanistan and elsewhere as they await asylum application processing for residence in the EU.

Last May, Erfani lead a group of 19 ASU students from a variety of disciplines — including social justice, communication, psychology and political science — to Greece’s capital city of Athens. Dave Hunt, New College of Interdisciplinary Arts and Sciences director of communications and marketing, accompanied them to document their experience on film.

The documentary “Seeking Asylum” takes us through the students’ days before they set off, their time in Greece and the close of their journey. We hear their expectations, their daily struggles and victories, and finally how it changed them in the end.

Criminal justice and international studies undergraduate Dania Kassab was excited when she first heard about the study abroad opportunity. Her parents emigrated to the U.S. from Syria 30 years ago, and she has always wanted to do something to help refugees in some way.

“I feel like it’ll be good for me too,” she said in the documentary before leaving for Greece last year. “I’ll come back with a different perspective and be more aware.”

In Athens, the students spent their time at one of three locations serving refugees: Caritas Refugee Program, a soup kitchen and clothing distributor; Hope Cafe, which also gives free meals and clothing; and Welcommon, a refugee community center providing families a place to live.

There, they witnessed firsthand the reality of life as a forced migrant.

“For the most part a lot of the people who are coming through here are pretty desperate,” said Tony Crowder, who graduated from ASU with a master’s degree in social justice and human rights in the fall of 2017.

“They look like they haven’t been fed, they’re wearing clothes that are torn. … These people aren’t fleeing because they want to flee. These people are fleeing because they have to flee. And they all want to go back home. Nobody wants to have this sort of life.”

Trailer; see the full-length documentary here.

The conditions faced by refugees in Athens are particularly harsh, Erfani said, because they’ve been waiting there, in some cases for years, for asylum applications to be processed. During that time, they’ve been unable to work and their children have been unable to attend school.

The psychological trauma they’ve endured, first as a result of violence and persecution in the home countries they fled, and then as a result of having their lives put on indefinite hold manifests in different ways. Sometimes parents withdraw, spending all day alone in their rooms. Many of the children express their frustration through aggressive behavior.

“From what I’ve just seen with the kids, there’s hostility but it’s because they’re in this survival mode, they’re trying to cope with what they’ve gone through,” psychology master’s degree student Julie Hurd said.

But there are moments of hope: “You can see with some of the kids … we’re building their trust. You see the joy in their face that someone cares.”

With the nation in the midst of an economic crisis and facing a 23 percent unemployment rate, the students were struck by the Greeks’ hospitable attitude toward the refugees.

“[They’re] very altruistic people,” Hurd said. “I’m in awe; I’m impressed, and I wish that more of the world could follow suit.”

Communications master’s degree student Thomas Jouganatos wonders if perhaps the Greek people's openness can be attributed to the fact that they remember a time when they were in the same situation — Jouganatos’ own family fled Greece roughly 100 years ago to escape violence and turmoil associated with the Armenian genocide.

“I can only imagine what my family went through,” he said. “They were fleeing their country and being killed on the roadside. … It’s kind of why I did this, just to give thanks to the people who helped my family.”

As conflict and chaos continue to roil the Middle East, Erfani is monitoring the situation closely in order to adjust the study abroad program’s focus for next year. In the spring of 2019, she plans to take students to Italy, where a new flow of refugees is forming from Africa, through Libya. There, she intends to focus their efforts on two populations of people she calls “involuntary migrants”: those fleeing war-torn regions and those who are victims of sex trafficking.

Erfani’s advice for those who don’t have the ability to travel overseas to help out?

“Welcome the stranger. And adjust your spirit and your heart to be prepared to respect and help restore the dignity of any asylum applicants or refugees who are arriving in your community. If you can pitch in through your local church or your local nonprofit, do it.”

For the students, although the experience is behind them, it will never leave them.

“At the end of the day, we’re all humans,” Hurd said. “We need to be humanitarians.”

Top photo: An image from the "Seeking Asylum" documentary featuring ASU students working with refugees in Athens, Greece.