Actuarial Science Advisory Boards: A Survey of Current and Best Practices

AN0132664845;jeb01nov.18;2018Oct30.08:42;v2.2.500

Actuarial science advisory boards: A survey of current and best practices 

This research uses a survey mechanism to query actuarial science programs as to the usage of industry advisory boards at such programs in the U.S. The study’s methodology employs a questionnaire to examine the formation, governance, and utilization of such entities. The data collected identify the most widespread purposes and composition of industry advisory boards. The highest rated outputs of board members, in order, are addressing curriculum issues, guest speaker suggestions, and interactions with students via mock interviews and student presentations. A comparison of results to a similar survey of advisory boards at risk management and insurance programs is conducted as well.

Keywords: Actuarial science; advisory boards; education; survey

Introduction

Among the recent trends at institutions of higher learning across the United States is an increase in the establishment of advisory boards at the university, college, department, and even disciplinary levels. While I use the term advisory board throughout this article, it is important to note that this refers to an advisory council, which serves in an advisory-only capacity. It is not to be confused with a Board of Directors, Board of Regents, or other authoritative decision-making bodies. Examples of the benefits provided by university, college, or department advisory boards can include the following (Penrose, 2002):

Participate in the classroom experience by providing guest speakers, evaluating student projects or presentations, etc.

Provide financial gifts or assist with fundraising.

Bring current trends and hot topics to the attention of faculty.

Add credibility or status to the program and assist in publicizing the program to potential constituents.

Provide insight into hiring trends or changing skill sets needed for future college graduates.

Hire graduates or provide leads on internship and career opportunities.

Lobby activities on behalf of the program being advised.

According to Blue Avocado, a magazine of American nonprofits:

The board of directors of a nonprofit organization is its legal, governing body. In contrast, an advisory board does not have any formal legal responsibilities. Rather, an advisory board is convened by the organization to give advice and support. (Masaoka, 2015)

A similar distinction applies in academia where advisory boards are different from governing boards. Advisory boards commonly focus on offering advice, fundraising, program development, and institutional engagement (Mandviwalla, Fadem, Goul, George, & Hale, 2015).

There are very few areas of study as closely aligned to a specific industry, insurance, as actuarial science is. In a very general sense, the Society of Actuaries (SOA) is associated with pensions, life insurance, and health insurance. The Casualty Actuarial Society (CAS) is associated with property and casualty insurance. Forty-three percent of CAS members list property/casualty insurance as their employer, 10% list reinsurance, 6% work for organizations serving the insurance industry, and 2% for brokers and agents. Forty-eight percent of SOA members work for insurance companies, 33% work for consulting firms, and 2% work in state insurance departments and other government offices.

The increased usage of advisory boards at American universities has resulted from a dual need to remain relevant to industry and government, and also to pursue or maintain a competitive advantage. Advisory boards are varied in their scope and purpose. They can represent an entire school or college, a department, a specific discipline, or even an on-campus institute or center of study. Generally, the purpose of the board is the application of their experiences to assist with the entity's strategic planning goals.

It is imperative that academic departments have advisory boards comprised of individuals who have a natural interest in the department's academic area. To maximize the expertise provided by board members, the academic unit should avoid using the board as just name dropping accomplished executives to promote department prestige. However, it should also be noted that the advisory board could assist with developing relationships between both department alumni and outside individuals who would have an interest in supporting the mission of an academic department.

Advisory boards encourage much-needed reciprocity between universities and the private sector. Other ways that boards accomplish this is by disseminating valuable leads or advice to deans, department heads, and development officers regarding the unit's organizational mission, current trends, community relations, and fundraising opportunities. Advisory boards also serve students by providing guest speakers, internships, and career opportunities. They may even be an asset to faculty in their advisory role regarding the course curriculum and also by cultivating friendships with the community. These are just a few examples of how advisory boards can build a strong connection between the academic world and the workplace.

In this study, I distributed a survey tool to universities identified with some level of actuarial science studies. Questions were designed to elicit information regarding current practices of actuarial science advisory boards. These include queries regarding board structure, the relationship with actuarial science faculty, location and frequency of board meetings, and the purpose of the advisory council. While studies focused on the development of an advisory board for finance programs (Avila, Bratton, & Baur, 2005) and risk management and insurance programs (Query & Kugler, 2016) have been conducted, a study of the deployment and configuration of advisory boards at actuarial science programs has not been conducted to the author's knowledge and is warranted.

Given the increased interest in STEM (science, technology, engineering, and mathematics) areas of study and the consistent demand for actuaries in virtually all economic cycles, we are seeing the establishment of relatively new actuarial science programs or the expansion of existing programs. While three advisory boards in this study were formed in the 1980s, eight such boards have been established in the last five years. Facilitating the sharing of information and experience about advisory board usage, relatively newer programs can determine what is effective in maximizing the potential of their advisory boards. Those actuarial science programs that have not established an advisory board may find that the results of this survey provide supplementary relevant information as to whether or not an advisory board is appropriate for their situation. Even mature actuarial science programs with decades-long history may find the survey results useful as a benchmark for evaluating their current actuarial science advisory board strategy.

Accreditation and advisory boards

The Centers of Actuarial Excellence (CAE) program allows universities and colleges with outstanding actuarial programs the opportunity for recognition of that achievement and to compete for grants for education and research. According to the SOA, the CAE program was designed to meet the following objectives:

Strengthen the position of the academic branch of the profession.

Enhance actuarial research and intellectual capital development.

Encourage universities to play an integral role in advancing actuarial knowledge.

Build connections between the profession and top-tier actuarial programs and faculty.

To be designated a CAE, the university must meet each of four "A" criteria. These relate to the degree offered, curriculum, graduate count, and faculty composition. The university must also meet four "B" criteria, which are by nature qualitative. These relate to graduate quality, appropriate integration with other areas of study, connection to industry, and actuarial research and professional involvement. The B-level criteria is germane to this study. Specifically, Criterion B.3: "There is a connection to industry through activities such as an advisory board, campus speakers, career center, internship program, and others."

Schools are required to provide a narrative and supporting documentation showing how their program connects to industry through activities that could include, but would not be limited to, an advisory board, campus speakers, career center, internship program, and actuarial club. For guidance purposes, the SOA have provided a worksheet for universities pursuing the CAE designation (Appendix A).

Around 14% of survey responses were submitted by CAE universities, and their results are separated and reported on in the Results.

Literature review

A number of existing studies examine various aspects of advisory boards at academic institutions, including both those at the university-wide and at the college level (such as colleges of business or arts & sciences). Little, Tuckman, and Humphrey (2000) develop a marketing strategy for increasing advocacy among business board members for a college of business. In a 2002 survey of 114 business school administrators from Association of Collegiate Business Schools and Programs, Kaupins and Coco (2002) investigated the perceptions of their business school advisory boards concerning age, size, nomination and selection process, length of terms, meeting frequency, and primary roles. Kilcrease (2011) conducted a survey of over 1,600 business faculty members from 395 Association to Advance Collegiate Schools of Business (AACSB)-accredited schools, assessing faculty opinions about business advisory boards. In this survey, the vast majorities of faculty were not directly involved with their business advisory boards, but instead received updates through documentation and administrative feedback. Dorazio (1996) described the benefits of advisory boards to various stakeholders such as students, the program, and even advisory board members. Effective boards, according to Dorazio, engage in joint discussion and decision making. Feedback is generated and addressed, and two-way communication is encouraged, thereby recognizing accomplishments along the way.

The role of advisory board members in improving education quality and their success in achieving that goal is the subject of a study by El-Refae, Askari, & Alnaji (2016). Using a questionnaire, they found that three of five correlations—culture- and community-related variables, diversity of advisory board members, and university administration-related variables—were found to be significant, which is also consistent with previous literature.

Within the academic community, the last decade or two has seen an increase in advisory boards formed at the departmental or disciplinary level, which has resulted in a corresponding increase in research studying those boards. Conroy, Lefever, and Withiam (1996) surveyed 108 two- and four-year hospitality programs and found that 42 of 50 four-year schools had advisory boards, and all but one of the 58 two-year programs had such a panel. Other conclusions from the study include the revelation that advisory boards function primarily on matters pertaining to the curriculum. They act as advisers to program administrators and teachers. Board members also play a crucial role in developing and promoting the program as well as generating financial aid. The hospitality industry's perception of the program is also determined not only by the quality of the program's graduates but also by its relationship with the board members.

In a 2010 study, French cited the benefits of an advisory board to academic departments which include serving as fundraising, classroom guess speakers, and providing guidance to faculty members and department chairpersons. From the perspective of a marketing advisory council, Andrus and Martin (2001) discussed some caveats and pitfalls associated with developing and managing an advisory council, and outlined an innovative approach for building trust and commitment with advisory council members. Sena, Sena, and Crable (2010) studied faculty members' perspectives regarding the goals and achievements of their information systems advisory boards, and researched the extent to which faculty agree or disagree that 10 specific items serve as major goals for their advisory boards. The respondents also provided perspectives on the success of their boards along those same dimensions as well as the overall perceived success of the board. Baker, Karcher, and Tryon (2007) implemented a nationwide survey of accounting department chairs, and find that 64% have advisory boards, with a median size of 15 members. They also found that few departments require financial pledges from board members, and most are alumni. The main activities of accounting advisory boards, according to survey results, were providing internship opportunities for students, curriculum review, and strategic planning. Mandviwalla et al. (2015) conducted an in-depth study of four advisory boards in U.S. colleges that offer information systems programs. Their research provides epitomes that encapsulate different models for implementing advisory boards and best practices.

Method

This survey was created using SurveyMonkey, an online survey development cloud-based software. SurveyMonkey provides customizable surveys, as well as back-end programs that include data analysis, sample selection, bias elimination, and data representation tools. A list of actuarial programs was developed by first starting with the SOA's listing of Universities and Colleges with Actuarial Programs. The vast majority of programs were found on this list. We also looked at schools with chapters of Gamma Iota Sigma, a professional fraternity whose purpose is to promote, encourage, and sustain student interest in insurance, risk management, and actuarial science as professions. A few proprietary ranking lists were viewed and a handful of programs not listed elsewhere were found on some of those lists.

Individuals from each of those universities were identified and sent an email inviting them to either participate in the survey, or forward the email to the appropriate person to respond on behalf of their university. This was done to mitigate multiple responses from a single university. We received 52 responses from the original list of 150 schools, a response rate of 35%. Not all of the universities on our compiled list necessarily had a currently active actuarial science program.

The questionnaire was intentionally limited, to increase the rate of response given our relatively small population size of actuarial science programs in the United States. I compare selected applicable results to a similar survey conducted by the author and a coauthor examining the structure and utilization of advisory boards by risk management and insurance (RMI) programs. While both programs prepare students for a career in the insurance industry, in most cases, the two disciplines have numerous differences as well.

At most universities the RMI program is primarily found in a College of Business, usually within the Finance Department or FIRE (Finance, Insurance, Real Estate) Department. Some larger programs may be stand-alone departments in a College of Business. Actuarial science programs are commonly located in a College of Arts and Sciences, often within the Mathematics Department. The actuarial science board survey came about roughly a year after the RMI survey, and was initiated based on feedback from the RMI program respondents. Finally, while there is increased interest from the insurance industry in recruiting students with data analytic skills to maximize big data, there are still many RMI positions that involve subjective judgment and people skills, in contrast to the rigorously quantitative actuarial science requirements.

Results

Among the 52 responses, 24 indicated that they currently have an advisory board. Among those who do not currently have an advisory board for their actuarial science program, 36.7% are considering it, 30% are not considering forming a board in the next 3 years, and 33.3% are undecided. One respondent commented that they were in the process of forming a board, with the first meeting scheduled for October 2017. It appears from these results that industry advisory boards are making inroads into actuarial science programs.

A summary of selected statistics are displayed in Table 1. Actuarial science boards tend to be smaller (M = 11.9; median =11.5) than advisory boards of risk management and insurance programs (M = 20.8; median =21.7). The percentage of actuarial science faculty involved with the board (M = 57.3; median =50) is also lower than RMI faculty involvement (M = 70.8; median =100.0). Regarding the size of programs by number of students taking actuarial science program classes—such as math, statistics, and exam prep courses—the number ranged from 2 to 1,600 students, with a mean of 164 students and a median of 80 students.

Summary statistics.

	Actuary students	Board members	Percentage of meetings held on campus	Percentage of actuary faculty involved with board	Total
M	164.1	11.9	70.8	57.3	5.4
Median	80.0	11.5	100	50	4.5
SD	266.6	7.5	37.9	43	4.2
Minimum	2	3	0	0	1
Maximum	1,600	32	100	100	22
n	39	24	24	24	40

1 Note. Total includes tenured or tenure track, college or clinical track, and adjuncts.

Figure 1 lists the year actuarial programs initiated an advisory board. While actuarial science advisory boards have been around since at least the mid-1980s, slightly over half of current boards created by survey respondents were established in the past six years. This is similar to what is occurring with advisory boards at RMI programs, with 19 of 35 advisory boards created from 2006 to 2016. A possible reason for this result is that some of the relatively new actuarial science programs are seeing the benefits of having an advisory board either through their peers, or from contact with other disciplines at their own university.

PHOTO (COLOR): Figure 1. Number of actuary advisory boards & year started.

Seventy percent of respondents offer undergraduate majors in actuarial science. An undergraduate minor or emphasis is available at 42.5% of the actuarial programs, and 25% of the universities offer some type of graduate degree. Totals exceed 100% as schools may offer areas of study in more than one of the survey choices.

The SOA, CAS, and Canadian Institute of Actuaries jointly sponsor the Validation by Educational Experience (VEE) requirement. There are three VEE topics: economics, corporate finance, applied statistical methods. The VEE topics are not prerequisites for the preliminary exams (Exams P/1, FM/2, MLC, MFE/3F, and C/4) and may be fulfilled independently of the exam process. However, a student must pass two SOA or CAS actuarial exams before applying to have the VEE credit added to his or her record. The survey queried as to whether the university offers classes approved for VEE. All but one of the 42 universities responding to this question offered such courses.

When asked who primarily runs advisory board meetings, directors of actuarial science programs were the most frequent answer, followed closely by a faculty member or members. Nonfaculty board members primarily run only about 10% of boards. However, a greater degree of joint collaboration among faculty and nonfaculty board members takes place when determining the agenda for board meetings. Figure 2 presents the composition of board members. Since a board member may fall under more than one category, the percentages total more than 100%. One somewhat surprising result was that over 60% of actuarial science boards had student representatives, compared with about 10% of RMI advisory boards. Again, comparing these results with the RMI program survey, another significant difference is in the number of alumni on the advisory board. Alumni consist of nearly 80% of actuarial science advisory boards, while making up less than 40% of RMI advisory boards.

PHOTO (COLOR): Figure 2. What percentage of your board consists of.

One question surveyed the effectiveness of the advisory board in producing specific outputs. Curriculum issues and assistance with guest speakers were among the areas given the highest scores. Slightly behind those two were enhancing alumni relations and interactions with students. This differs from the results on the RMI board survey, as internship placement was rated highest, followed by fundraising contributions and interactions with students. Since advisory boards are a valuable tool for encouraging engagement among influential alumni, it is not surprising that this is an area of successful output for many boards. Providing assistance with actuarial examination preparation and making financial contributions received the lowest scores.

There is a slight difference in scores for fundraising efforts versus providing financial assistance, which may underscore the reality that some boards members themselves are major financial contributors, while others provide value by connecting potential company or individual donors with program directors. Perhaps expectations for fundraising and financial support are generally much different among RMI programs versus actuarial science programs, as both measures were significantly higher in the RMI board survey.

Only one university required a monetary donation of $1,000 minimum from their board members. There was an opportunity with this question for respondents to expound further, which a handful did:

No donation requirements. No recruiting relationship is required either.

No requirements, but the members are our employer contacts.

All board members need to pass at least one actuary exam

No donations have been received - although we have suggested it. No formal requirements of any kind, although the board has helped students obtain interviews for positions.

Not required. However, board members were a big help in improving the program, bringing recruiters to campus, and with donations.

Respondents were also surveyed as to the effectiveness of their current advisory boards in various areas of productivity. Rating their board on several measures on a 5-point Likert-type scale ranging from 1 (least effective) to 5 (most effective), Table 2 provides those results.

Success of board outputs.

Item	1	2	3	4	5	Weighted average score
Addressing curriculum issues	4.55%	4.55%	18.18%	31.82%	40.91%	26.67%
Contributing to fundraising efforts	27.27%	27.27%	31.82%	4.55%	9.09%	16.06%
Enhancing alumni relations	9.09%	4.55%	27.27%	22.73%	36.36%	24.85%
Enhancing the image of the program through publicity	18.18%	22.73%	18.18%	18.18%	22.73%	20.30%
Giving suggestions for class speakers	0.00%	18.18%	18.18%	22.73%	40.91%	25.76%
Interactions with students via student presentations, mock interviews, etc.	4.55%	13.64%	13.64%	31.82%	36.36%	25.46%
Making financial contributions	40.91%	18.18%	22.73%	13.64%	4.55%	14.85%
Meeting accreditation requirements	19.05%	28.57%	19.05%	4.76%	28.57%	19.68%
Offering internship placement	13.64%	4.55%	31.82%	31.82%	18.18%	22.43%
Performing strategic planning/mission statement	22.73%	13.64%	31.82%	18.18%	13.64%	19.09%
Assist with preparation for actuarial examinations	50.00%	18.18%	22.73%	4.55%	4.55%	13.03%
Providing program assessment	4.55%	22.73%	13.64%	27.27%	31.82%	23.94%

2 Note. This table represents measures of how successful your industry advisory board is in producing specific outputs. Please rate these measures as they apply to your advisory board on a 5-point Likert-type scale ranging from 1 (least effective) to 5 (most effective).

Of the 24 programs with advisory boards, seven responses were from universities designated as CAE. While a CAE program is not necessarily equivalent to a well-managed industry advisory board, the designation does represent the opportunity for universities and colleges with outstanding actuarial programs recognition for that achievement.

Seven of the 16 CAE programs responded to the survey, and all of them have industry advisory boards. Other characteristics of boards at CAE programs include:

The year boards were created ranged from 1990-2017.

All of the meetings are conducted by the Actuarial Science director or faculty.

The meeting agenda is determined by the Actuarial Science Department for all respondents except one, and for that school the agenda is jointly planned by board members and the Actuarial Science Department.

None of the CAE program boards have donation requirements for board members.

Who makes up the board at CAE programs?

100% industry.

A range of 60-96% are alumni.

A range of 0-30% have faculty, students, or academic administrators.

What is the level of formality for boards at CAE programs?

None of them have formal officers.

Only one program has a formal mission statement and objectives.

The areas identified as productive areas of their board include:

Providing program assessment.

Strategic planning (tie).

Enhancing alumni relations (tie).

Addressing curriculum issues (tie).

A somewhat surprising result is the lack of formality of the advisory boards at these highly accredited programs, most with hundreds of actuarial students. If a perception of formality and time-intensive resource requirements exists among those who have not established an advisory board, perhaps this result will allay such concerns. The other conclusion drawn from this small sample is that CAE programs use their boards in a broader, strategically oriented manner, as compared with other boards that rely on their boards for guest speakers, internships, etc. Possible reasons for this difference is that CAE programs are more mature and established in general, with a greater level of trust between those programs and the industry. This trust may have developed over time by the quality of actuarial science students from those programs. The one commonality between both groups is a high level of satisfaction with boards for enhancing alumni relations.

To get a broad understanding of the challenges that may be facing some programs with advisory boards, we asked two insightful questions, which are found in Table 3. At times providing meaningful projects for members to engage in is a challenging aspect of having an advisory board, according to a little over 28% of respondents. This response is considerably different from RMI program boards, which was a little over 72%. This would lead one to conclude that the purpose of actuarial science advisory boards are better defined than their contemporaries in risk management and insurance. Finding useful things for board members to do to increase involvement while not adding unnecessary burdens is a challenge for about 50% of the RMI programs, but only for a little less than 33% of actuarial science boards. For CAE, only 28.5% felt that the first statement applied to their board, and only 42.9% felt that way about the second statement.

Potential challenges facing advisory boards.

Item	Yes	No
The board needs something meaningful/concrete to do. Having projects within their range of capabilities is vital to the board's success. Assignments given must have as much importance as their work, as they are substituting their work for ours.	28.85%	71.15%
It is difficult to find things that the board can do that make the best use of their experience and expertise. We struggle with this constantly. We want them to feel useful and involved without taking up too much of their time.	32.61%	67.39%

3 Note. In response to the question: Do any of the following statements generally apply to your advisory board? Source of questions: Kaupins and Coco (2002).

A primary motivation of the study was to coordinate and facilitate the sharing of information that would be useful to (a) other programs with advisory boards and (b) programs considering the implementation of an advisory board. The survey included selected open-ended questions to encourage guidance and recommendations that would be supportive toward the objective of sharing best practices. To accomplish this, responses to the question, "What has worked best with your board?" can be found in Appendix B; answers to the question, "What advice or suggestions would you give to avoid problems or a lack of involvement from the board?" are located in Appendix C.

Conclusion

As this study was exploratory and to encourage a better response rate, the methodology made use of a questionnaire that would not require a large investment in time to complete. Because of this, I purposely did not probe into issues that would admittedly be judicious matters for future study. As outlined in the introduction, the purpose of this analysis is to provide quantitative and qualitative benchmarks related to the best practices of advisory boards, in addition to understanding how other actuarial science programs are maximizing the productivity and leveraging the utility of their board members. However, there are major findings from our results that are appropriate for clear delineation here:

Based on responses regarding board officers, bylaws, charters, and other representations of board formality, the boards at CAEs tend to be less formal and are also more involved with strategic and overall program planning/assessment. An advisory-type board is mentioned in the criteria to reach this highest level of program recognition. Perhaps this was one of the motivations behind the establishment of boards at some programs currently or aspiring to be at the CAE level.

The size of boards varies widely, from a high of 32 members to a low of three members. The number of board members on RMI program boards is nearly double the number of actuarial science boards. This may be due to more insurance industry executives, managers, and other professionals being available to serve on boards versus a relatively limited population of actuarial science practitioners, especially in nonmetropolitan areas. Another possibility is that because RMI programs are typically located in Colleges of Business, they are exposed to and even conduct research on corporate boards and corporate governance. Respondents were also divided by number of students taking actuarial science-related courses. Smaller programs, those with 80 or fewer students, had an average of 7.4 board members. Larger programs, those with 100 or more students had a board size nearly twice that of smaller programs, at 14.4 members.

Another result worthy of discussion involves the make-up of board members. While it is not surprising that both actuarial science and RMI programs all have industry representation on their boards, it was interesting to see a significant number of boards with a student(s) representative. Considering that actuarial science students are one of the key stakeholders in such a program, student inclusion on a board would likely provide a unique and fresh perspective regarding curriculum issues, recruitment, etc.

One area not investigated in this study, which may or may not be relevant, is in the matter of ad hoc advisory boards, which are typically empaneled for specific projects and then disbanded when the projects are complete. In addition, the dynamics of the relationship between program directors/department heads and their advisory boards could be the subject of an entire study in itself. While I did look at the difference in board size between smaller and larger actuarial science programs, further investigation of board differences as they pertain to program size may assist in advancing knowledge in this area.

The present study was limited to actuarial science programs in the United States. Another area of potential future research would be to investigate the prevalence and structure of advisory boards at actuarial science programs globally. The SOA listing of Universities and Colleges with Actuarial Programs includes nearly 50 schools from outside the United States. Fifteen of the 31 programs attaining the CAE designation are outside the United States.

Ideally, readers of this study may garner one or more ideas that either make their current or prospective board more effective, or provide insight into what mistakes to avoid. A secondary objective is to increase awareness among actuarial science Fellows of the need and opportunity to serve their respective alma maters, or university programs in close proximity as valued advisors.

By J. Tim Query