Professionalism Event for Qualified Actuaries Friday 16 July 2010 Chris Daykin Past President, Institute of Actuaries Vice-Chairman, Groupe Consultatif

Aims of this event  to think about topical professional matters, away from day-to-day pressures  to share experiences and views  to keep up-to-date in your understanding of professional as well as technical matters  to consider your responsibilities to your employer, clients, the public and the actuarial profession

Professionalism for qualified actuaries  professionalism is a key component of actuarial education (separate topic in IAA Core Syllabus)  important to devote time to learning about professionalism as well as technical skills  need to develop a professional attitude and way of thinking – there are often no simple black and white answers

Added responsibilities for more experienced actuaries  setting a good example/professional tone of firm  management of (and advice to) colleagues  closer involvement in agreeing scope and terms of engagements  higher profile roles – more potential for adverse publicity or dissatisfaction of some party  greater likelihood of exposure to conflicts  dealing with adverse behaviours/attitudes of others  reserved roles and contact with regulators

Some current professional issues for actuaries  integrity  conflicts of interest  policyholders/shareholders  trustees /employers  communicating risk and uncertainty  peer review  commercialism in conflict with professionalism  criticising other actuaries  ensuring competence for the task in hand

Characteristics of a profession 6 key characteristics of a profession are: members join together to apply a specialised skill the skill has been developed through appropriate education members have a special relationship with those served (fiduciary relationship) recognised by the public as an authority in field of expertise, able to serve the public interest standards of competence and conduct of members high level of integrity by members in exercising judgement

What do members, clients and the public gain from the existence of our Profession? Clients, Public  specialist skills  quality control  high standards of service  integrity  input into public debate  statutory roles Members  agreed standards  mutual support  lobby strength  status  income

What is expected of us as professional people?  demonstrating and applying specialist skills  reliable up-to-date technical knowledge and advice  complying with the profession’s code of conduct  complying with legislation and standards of practice  performing statutory roles to a high standard  behaving ethically  exercising judgement with high level of integrity  communicating well  having due regard to the interests of those affected

What is expected of us as professional people? (continued)  respecting and supporting others  relationship of trust with clients  being reliably confidential  life-long learning – developing our knowledge and skills  having no adverse disciplinary record  assisting the profession to serve the public interest  contributing to public debate  contributing to the work of the profession

In our Profession, what must we comply with? The Profession’s Controls  code of conduct  qualification standards  CPD scheme  standards of practice  recommended practice  educational notes  disciplinary scheme External Controls  legislation  regulators  accounting standards

In our Profession, how should we contribute?  teach or mark exams  participate actively in local actuarial association  write a paper for, or speak at, a conference or seminar  become a member of a committee  join a working party or research group  represent the association on an IAA or GC Committee Your Profession Needs You

Professionalism in Practice Professionalism concerns behaviour of professionals and the profession which will:  maintain the reputation and integrity of the profession  serve the interests of our clients  serve the public interest (common good)

Vision of IAA To seek worldwide recognition for the actuarial profession as a major player in the decision-making process within the financial services industry, in the area of social protection and in the management of risk, for the well-being of society as a whole.

Professionalism at two levels  professional issues facing the profession, e.g.  responding to regulators  helping to educate government, the media and public  ensuring that the profession is ‘fit for purpose’  individual matters of professionalism, e.g.  high ethical standards  adhering to the code and standards of practice  reporting if necessary (whistle-blowing)

Professionalism for the profession  ensuring profession operates in public interest  …for the well-being of society as a whole  setting high standards  ensuring members comply with code/standards  making sure actuaries stay competent/up-to-date  educating policy-makers and opinion-formers  engaging with regulators and law-makers

Professionalism for the individual - 1  fiduciary relationship with client or employer  focusing on how issues may affect stakeholders  and bringing such issues to attention of the client  addressing the questions the client should ask  or which those affected may ask  defining clearly the scope of the advice  understanding and communicating well  operating within competence and experience

Professionalism for the individual - 2  readiness to speak your mind  not just doing what the client tells you to do  integrity in advice  prepared to report (blow the whistle) if necessary  not taking a narrow technical view  operating within code and standards of practice  demonstrating good judgement

Generic professional issues  economy with the truth

Generic professional issues  economy with the truth  answering the question as asked … ? ? ?....

Generic professional issues  economy with the truth  answering the question as asked  not making clear the limits of advice

Generic professional issues  economy with the truth  answering the question as asked  not making clear the limits of advice  not considering the wider impact …on third parties

Generic professional issues  economy with the truth  answering the question as asked  not making clear the limits of advice  not considering the wider impact …on third parties  failing to blow the whistle

Professionalism Event for Qualified Actuaries Friday 16 July 2010 Code of Conduct

Minimum Code of Conduct of IAA  Having a code of conduct meeting the IAA minimum is one of main requirements to be fulfilled before an actuarial association can be admitted as a Full Member Association of the IAA  Groupe Consultatif also requires the same basic code of conduct

Minimum Code of Conduct of IAA (a)  An actuary shall perform professional services with integrity, skill and care (client responsibility)  fulfil professional responsibility to client or employer  fiduciary relationship with client

Minimum Code of Conduct of IAA (b)  An actuary shall act in a manner to fulfil the profession’s responsibility to the public (common good)  uphold the reputation of the actuarial profession  not engage in false or misleading advertising or business solicitation

Minimum Code of Conduct of IAA (c)  An actuary shall co-operate with others serving the actuary’s client or employer  no disclosure of confidential information

Minimum Code of Conduct of IAA (d)  An actuary shall perform professional services only if competent and appropriately experienced  an association may permit derogations, e.g.  where client would be disadvantaged if advice denied  where actuary is working with another fully competent and experienced actuary

Minimum Code of Conduct of IAA (e)  An actuary is responsible for conforming to all applicable practice standards  conform to relevant binding (mandatory) practice- related guidance or standards issued or endorsed by actuary’s Association  take into account any non-binding (recommended) guidance  know the requirements of the relevant Code of Conduct

Minimum Code of Conduct of IAA (f)  An actuary shall, in communicating professional findings, show that he/she takes full responsibility for them  indicate whether the actuary is available to provide supplementary information and explanation

Minimum Code of Conduct of IAA (g)  An actuary shall, in communicating professional findings, identify the client and the capacity in which the actuary is acting

Minimum Code of Conduct of IAA (h)  An actuary shall not perform professional services involving the actuary in an actual or potential conflict of interest  unless ability to act is unimpaired (no inhibition); and  there has been full disclosure of actual or potential conflict  Associations may require that an actuary may only act in these circumstances if all principals have expressly agreed to it

Minimum Code of Conduct of IAA (i)  When asked to take on professional services previously provided by another actuary, the actuary shall consider whether it is appropriate to consult the previous provider to ensure there are no professional reasons to decline to take it on

Minimum Code of Conduct of IAA (j)  An actuary shall disclose to the client any sources of material income that are related to any service on behalf of the client, as soon as such a source is identified

Minimum Code of Conduct of IAA (k)  An actuary shall be subject to the disciplinary procedures for his/her Association and, subject to any right of appeal, shall accept any judgement passed or the decision of any appeal procedure

The Actuaries’ Code (Institute and Faculty of Actuaries) Chris Daykin

The Actuaries’ Code  principles-based  small number of principles  supported by Actuarial Profession Standards  actuaries who disregard the principles…  or operate outside their reasonable interpretation  …may be guilty of misconduct

The Actuaries’ Code (effective 1 October 2009)  Integrity  Competence and Care  Impartiality  Compliance  Open Communication

The Actuaries’ Code Integrity Members will act honestly and with the highest standards of integrity  show respect  confidentiality  honest, open and truthful

The Actuaries’ Code Competence and Care Members will perform their professional duties competently and with care  understand who your client is  appropriate level of knowledge and skill  care  new appointments  keep competence up to date (CPD)

The Actuaries’ Code Impartiality Members will not allow bias, conflict of interest, or the undue influence of others to override their professional judgement  objective and uncompromised advice  avoidance/management of conflicts of interests  consulting with previous adviser

The Actuaries’ Code Compliance Members will comply with all relevant legal, regulatory and professional requirements…..  challenging non-compliance  speaking up

The Actuaries’ Code Open Communication Members will communicate effectively and meet all applicable reporting standards  clear and appropriate communication for  the intended audience  the purpose of the communication  the significance of the communication for the audience  the capacity in which the member is acting  accurate and not misleading

Personal Responsibility  discuss problems with colleagues …  … or a senior member of the profession  think through all aspects carefully  listen to your conscience  take your decision  have your work reviewed

Generic Case Studies Report back from groups and discussion Usma, 16 July 2010

Privileged information (CS2)  Mortality investigations  Duties carried out by actuaries in your company  Calculation of reserves on particular policy types  Salary levels of actuaries in your organisation  Current product development being undertaken  Detailed bases for valuations you carry out  Premium revisions to take into account higher commission and recent tax changes

Challenging another actuary (CD1)  is it appropriate to disagree with another actuary?  how should you handle such a situation?  what conditions apply to making criticisms?  should you report the other actuary?

Ethical concerns (CD2)  What should Jack have done differently?  How did he justify doing what he did?  How could he have retrieved the situation?  What lessons can we learn from this case?

Reporting ( blowing the whistle ) (CD3)  What should Simon do when he overhears?  Should he report the situation? To whom?  Is the liability valuation relevant?  What are his responsibilities?

Professionalism Event for Qualified Actuaries Friday 16 July 2010