Professionalism and Actuaries

Professionalism #

Introduction to Professional Ethics #

  • An Actuary is a professional - a member of a professional body, e.g. Institute of Actuaries (IA), Institute of Actuaries of Australia (AI), Society of Actuaries (SoA), Casualty Actuarial Society (CAS), etc \(\dots\)
  • Overarching body is the "International Actuarial Association"
  • Professionals must protect the reputation of their profession, lest its value vanishes
  • Everyone must follow the law, but professionals (actuaries) MUST ALSO follow the rules set by the profession, and they are very wide-ranging

What are the additional rules? #

  • Actuaries are governed by Code of Conduct, which saw major changes effective 31 March 2020
  • This governs general behaviour, but there are also rules about the actuarial work—Professional Standards and Guidance notes

How many actuaries have gone to jail for professional negligence? #

  • Famous Equitable Funding case made into a documentary with movie star James Woods (“Salvador” and “Ghosts of Mississippi”) who plays an actuary (who in the end goes to jail) in a TRUE story
  • The movie is Billion Dollar Bubble - Equity Funding
    • Leveraged Unbundled Life Insurance - Single premium, Loan, Insurance, Investment in equities
    • Reinsurance - source of capital, financing of initial expenses repaid as part of future premiums paid to reinsurer
  • Download and watch the movie!

Other Recent Spectacular Failures #

Jessica Leong, President of the CAS #

Guest lecture 18 August 2021 #

Jessica Leong

The expert corner #

Interview: Kevin Allport, FIAA #

Interview with Kevin Allport

Kevin Allport, FIAA

  • Back then, Convenor of the AI Professional Conduct Committee
  • Most recently Appointed Actuary at MLC (2002-2013)
  • Chief actuarial advisor to the Board and Management of MLC

1:21: What is a profession? #

A “profession” is a group of individuals who are very disciplined in what they do, and who adhere to ethical standards in the way they approach things.

  • The profession possesses special knowledge and skills derived from research, education and training at a high level.
  • The public recognises the special knowledge and skills.
  • The profession applies this knowledge and skills in the interest of others.

The members of the profession:

  • are governed by codes of ethics;
  • profess commitment to competence, integrity and morality, altruism, and the promotion of the public good within their expert domain; and
  • are accountable to those served and to society.

2:18 #

3:05: The need for a profession #

  • The individuals and society have a right to trust implicitly that the professional will adhere to standards.
  • The professional enjoys asymmetrical knowledge in relation to others. Knowledge is power, and where power is wielded, ethical concerns come into play.
  • Trust is underpinned where ethics and altruism direct professional skills.

Benefits of a profession #

  • The community: Consumers face a complex array of professional services choices, from medical and health to business and financial services. Professions play a vital role in providing trusted expertise founded on established standards that are policed to ensure community expectations of good practice and social purpose are met.
  • The economy Professions improve consumers’ access to services and support economic activity by encouraging confidence and trust in the services offered by professionals.
  • Regulators The burden of regulation and supervision by government can be reduced by improving the standards of practice of professionals and the regulatory capacity of professional communities.
  • Professionals Professionals enhance their reputations and skills by adhering to the professional standards and requirements of their professional bodies.

4:40: The need for a code of conduct #

  • The Institute and its Members seek to serve the public interest.
  • Professional actuarial services are typically provided to a Principal that offers a promise in exchange for money today.
  • The actuary is uniquely placed to connect the interactions of all the moving parts involved in meeting the promise.
  • The public are reliant upon the actuary to join the dots.

4:40: The need for a code of conduct #

The code of conduct (CC)

  • Sets out the minimum standards of professional conduct.
  • Members need to meet:
    • Legal requirements;
    • AI’s Constitution;
    • Code of Conduct;
    • Professional Standards.
  • Disciplinary Scheme established to support CC

5.57: Disciplinary scheme #

You may ignore what follows from 5:57 to 9:33 on the disciplinary scheme as it has changed.

More on natural justice and procedural fairness

7:00: Examples of possible misconduct #

  • Providing professional services to a Principal when the actuary can reasonably expect that the services will be misconstrued and/or misused by third parties.
  • Breaching professional standards.
  • Not maintaining CPD and/or records to demonstrate such.
  • Criminal activity.
  • Undertaking the provision of services without the appropriate knowledge and skills in the relevant area.
  • Dishonest business/financial dealings.

9:33: What if you see something? #

Say something:

  • Discuss the matter with the “offending” Member.
  • If not resolved, seek guidance from another Member.
  • Make a complaint (if warranted).

10:45: Kevin’s take on the role of an actuary #

  • Most likely to be advising the ultimate decision makers rather than making the decision.
  • The actuary needs to do all in his/her power by way of exposition to ensure that the people who have to make decisions know what they are doing.
  • Incumbent upon the actuary to do his/her best in providing complete and appropriate advice to the decision maker; such that the decision maker can make a fully informed decision.
Calendar 16 August 2021