What do Harvey Dent, Hermione Granger and Stark Industries have to do with professionalism? At the “Actuarial Professionalism: Judge and Jury” session at the 2022 SOA ImpACT Conference in Orlando, Florida, we had some fun with character-themed mock trial case studies while exploring the serious and important topic of professionalism. In addition to technical competence, professionalism is one of the attributes that sets the actuarial profession apart to our employers and principals. We must maintain professionalism competencies, just like we would technical topics, to ensure relevance in a rapidly changing environment.
While rules of thumb like the “look in the mirror test” or considering how your actions might read as newspaper headlines can be useful, they don’t always help us with the gray areas we face in everyday life. At the judge and jury session, we explored some of the gray areas that span actuarial practice areas utilizing three case studies.
In our first hypothetical case, we considered a situation where an actuary sought to extend into a new, adjacent practice area. Neville, a pricing actuary, who had experience in long-term care and term life insurance, wanted to develop a new universal life product for his company with complex guarantees.
The Canadian Institute of Actuaries (CIA) Rules of Professional Conduct specify that an actuary may only perform actuarial services when they are qualified and have satisfied continuing qualification standards. However, the responsibility noted in this case study is not intended to discourage the development of new products that might better address societal needs or to limit actuaries from extending into new practice areas. Some of the resources available to support actuaries as they consider practicing in new areas include the following:
- Professional development activities—the CIA’s Qualification Standard, “Requirements for Continuing Professional Development (CPD),” requires that members meet ongoing CPD requirements and that the actuary’s professional development activities be relevant to the work being done.
- Standards of practice—Rule 3 of the CIA’s Rules of Professional Conduct requires that an actuary ensure that any professional services abide by the pertinent standards of practice.
- Quality assurance, including peer review—Section 1460 of the Standards of Practice, “Quality Assurance,” effective Jan. 1, 2023, provides guidance on quality assurance of actuarial work. The quality assurance processes should depend on, among other things, “the novelty of the work and the actuary’s experience in performing similar engagements.”1 Thus, an actuary practicing in a new practice area or innovating within a practice area should consider what peer review processes are appropriate given the specific circumstances. I encourage a review of Sections 1460 and 1000 (“General”) of the Standards of Practice as a refresher on quality assurance guidance, as there are numerous considerations and quality assurance approaches, including peer review.
I am enthusiastic about the innovative work actuaries are doing related to climate risk, pension plan design, insurance products and social insurance—and in brand-new practice areas. Innovations like these require that we stretch ourselves and the boundaries of actuarial practice. That said, we need to ensure we are qualified for the work performed through education, professional development and professional experience, and that we perform sufficient quality assurances relevant to the nature of the work being done and our experience level.
In the second case, Harvey is accused of inadequate actuarial communications in his engagement with the hypothetical Wayne Enterprises Pension Plan. In an extensive back and forth throughout the engagement via a variety of communication mediums, Harvey had to use professional judgment to ensure that users of his actuarial work product had sufficient information at each point in time.
For actuaries practicing in Canada, Section 1700 of the Standards of Practice, “Reporting,” outlines requirements for actuarial reporting. A “report” is defined broadly in the Standards of Practice as “an actuary’s oral or written communication to users about his or her work.”2 Further: “Appropriate description and disclosure in a report strike a balance between too little and too much. Too little disclosure deprives the user of needed information. Too much disclosure may exaggerate the importance of minor matters, imply a diminution of the actuary’s responsibility for the work or make the report hard to read.”3 Actuaries must use judgment in managing this balance within their actuarial reporting to support the intended users of their report.
Model Appropriateness and Management
In the final hypothetical case, we examined actuarial best practices regarding the use of complex models and Stark Industries’ SMART insurance pricing software. Technological advancements enable actuaries to employ more complex and sophisticated models, but these come with new professionalism considerations.
Section 1450 of the Standards of Practice provides guidance on the actuarial use of models, requiring that the model selected be appropriate for the intended purpose and that the actuary understands the relevant limitations of the model.4 At the heart of the case was a debate about how an actuary can be confident that they understand the model and the steps they should take to ensure model appropriateness. This is particularly relevant with complex machine learning and artificial intelligence approaches that are available to actuaries. Again, the Standards of Practice require an actuary to use professional judgment in the model selection, validation and quality assurance processes.
The hypothetical cases and the delivery were lighthearted, but at the core of each case are serious professionalism issues that many of us are likely to encounter in one form or another during our careers. Suppose you encounter a situation where you don’t know what to do. In that case, a good starting place is to refer to Rule 1 of the Rules of Professional Conduct: “A member shall act honestly, with integrity and competence, and in a manner to fulfill the profession’s responsibility to the public and to uphold the reputation of the actuarial profession.”
Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries or the respective authors’ employers. Discussion of case studies is intended for educational purposes only and does not replace independent professional judgment.
- 1. Canadian Institute of Actuaries, Standards of Practice, Effective January 1, 2023. Section 1460.03. ↩
- 2. Canadian Institute of Actuaries, Standards of Practice, Effective January 1, 2023. Section 1120.58. ↩
- 3. Canadian Institute of Actuaries, Standards of Practice, Effective January 1, 2023. Section 1710.07. ↩
- 4. Canadian Institute of Actuaries, Standards of Practice, Effective January 1, 2023. Section 1450.01. ↩
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