Consulting actuaries: what kind of network?
Actuarial sciences and mathematics know no border and are naturally global. Accordingly, the progress of European regulation and of international accounting principles tends to reduce the still prominent role of local rules.
A large part of the market for actuarial consultancy depends on big international companies. Therefore one possible answer for actuaries is a global firm built on the model of their big global clients. Centralisation, though, is not always efficient in solving local problems.
Moreover, actuaries generally feel very different from non-mathematical professions such as lawyers or accountants. A good specialist is happy to work in an expert firm where he has the impression that his skills are recognised for themselves and not only used as by-products.
Thus, there is room for small actuarial firms whose competitive advantages are: proximity to local clients, very good knowledge of the specificities, the regulations and the local situation. Savings, pensions, health and care insurance still follow local regulations and practices.
Furthermore, there is still a long way to go to achieve harmonisation in Europe, without looking at the global picture. Small firms, nonetheless, can lack information to follow the evolutions of the market and the move to globalisation.
Halfway between these two models lie independent networks. Not only do these give local firms access to transnational assignments, such as those, for example, connected with mergers and acquisitions, but it enables them to benefit from the opportunity of organising modern and decentralised information sources.
The classical arguments of economies of scale can only be applied to some limited products or services, such as, for instance, huge software systems or IT services. On the other hand, limits to centralisation should not to be underestimated. These include:
q Management of human resources: job satisfaction, turnover, and adaptability to labour-market, which do not support centralisation;
q Cost and quality of client’s servicing: a big centralised firm suffers from lack of productivity due to bureaucracy, timewasting related to internal meetings abroad and many occasions of rivalries, if not more between members.
q Decision-making: local responsibility responds to clients’ demands of individualisation, reactivity and adaptation.
An independent network takes advantage of another quality. Each participating firm is co-opted by the other members and there is no obligation to remain within the network if co-operation is not appreciated as good or excellent by each individual member. There is no possibility of lasting rivalry or non co-operative behaviour in an independent network. The pressure for quality is equally constant and very strong.
Actuarial consultancy is a matter of service and must be client-driven. Actuarial firms must, in order to satisfy their clients be at the same time global and local, exactly as their clients are. Specialised independent networks of actuarial firms are a good solution to this.
Dominique Piermay is chair of Euracs, an international network of independent actuarial consultancy firms