On Professionalism and Ethics

Last updated on: January 4, 2014 at 6:51 pm by Jane the Actuary

On Professionalism and Ethics 2014-01-04T18:51:00-06:00 Jane the Actuary

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This is that time of year when we actuaries are calculating whether we have a sufficient number of hours of continuing education to remain credentialed and authorized to sign actuarial reports. Same as many professions, I suppose, but fairly new for us, as the requirements were first instituted five years ago.

The twist is that we need a relatively small number of hours of formal credits, and are able to count various forms of self-study — from reading about a relevant topic to preparing conference materials or an article — for the remainder if we don’t have enough hours of training sessions. We also have to have a minimum of three hours on “professionalism” topics — which means subject matter such as Actuarial Standards of Practice (which define, in broad terms, professional obligations in matters such as the content of formal communications with clients, assumption-selection process, etc.,)and, broadly speaking, ethics topics. And this year I missed the two-hour ethics training session marathon, so I found myself trying to read ASOPs online last night to accrue credits. (Yes, December 31st has passed, but I’m still OK as long as I’ve managed this before I sign off on my first batch of actuarial results in the new year, next week.)

Now, in my field, pension consulting, there are relatively few opportunities for ethical quandaries. Some time ago, there was an open question about whether valuation assumptions had to be “reasonable in the aggregate” or “individually reasonable” and there were some firms which were offering to clients the opportunity to tweak their assumptions in a way that would pass auditor scrutiny and still minimize their liabilities as much as possible. At this point, most of this is fairly tightly prescribed, either by the government, when it comes to funding requirements, or by strict auditor scrutiny, for accounting. I don’t really even see clients trying to push us to tweak the numbers to get a desired result.

And the various “ethical” aspects of pension accounting in the news — that is, the ethics of the persistent failure to fund pension plans fully and to overpromise benefits to keep the unions’ endorsements — aren’t really matters to do with ethics of pension actuaries but of plan sponsors

So what we end up with is much more a matter of garden-variety business ethics.

If you discover that you’ve made a mistake, do you immediately send over new results to the client? Do you slip the correction into that next version of results that you were planning on sending anyway, and hope the client doesn’t notice that there were more changes? Or, if the error is in some nonessential part of the report, do you just hope the client doesn’t notice? If you’re compiling results from others and sending them on, there’s a lot of fuzziness in when you take the blame vs. let the client believe that it was the other actuary’s mistake.

Of course, this only pertains to little mistakes — the big ones, like an error in calculating a required funding contribution or PBGC premium, have big consequences and the firm has spent a great deal of time and effort developing consistent peer-review procedures to minimize the chances of these sorts of errors. Which produces a different set of “ethics” questions: how simple does a calculation need to be to warrant sending it over to a client without chasing someone for a peer review? And, if asked to review, how thorough a review is needed in order to ethically tell your colleague, “yes, I’ve peer-reviewed your work”?

If some of your work is charged to the client on a fixed fee basis and other parts on a time-cost basis, how diligent are you about differentiating between the two? Or — let’s face it — a pretty common ethical question: if you’re “listening” to a training session and simultaneously replying to e-mails, how do you record your time?

So that’s my world. Do you have similar requirements in yours?

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