Professional Ethics and the Actuary

The American actuarial societies emphasize professional and ethical conduct of their members, by promulgating a code of professional conduct, instituting disciplinary procedures for ethical infractions, and requiring a course on professionalism for new members. Yet the ethical ideals espoused by the societies may at times conflict with the practices that corporations expect of their personnel. The actuary has a dual role: an objective professional providing guidance on insurance issues and a business manager promoting the goals of an insurance company. This paper examines three areas where business objectives may conflict with professional ethics: valuation, pricing, and testimony. Valuation actuaries provide professional opinions certifying statement reserves as being in accordance with statutory standards, even when "implicitly discounted" reserves may be booked by their employers. Pricing actuaries, as business managers, may determine premium rates and relativities to optimize income or market share, even when these rates conflict with policyholder equity. Actuaries may be asked to testify in support of their employer’s objectives, even when their own opinions are different. The Code of Professional Conduct prepared by the American Academy of Actuaries provides little explicit guidance to the practicing actuary facing ethical dilemmas. This paper concludes with several proposals to apply the precepts of the Code to the issues outlined above. Other key words: appointed actuary, management information, statements of opinion.