By Bob Beuerlein
In the final article in this “Professionalism in Action” series, I would like to circle back to an image that I described last November in my inaugural address as Academy president. I said then that, as actuaries,
“We must challenge ourselves to become more like thermostats than thermometers. … [A] thermometer is able to precisely inform someone of the exact temperature of the room … [b]ut … is not able to influence the environment. A thermostat, on the other hand … is able to influence the temperature of the room … if the temperature has varied from the desired level.”
In order to act like thermostats and influence the environment, I explained, “We must move the idea of professionalism from an abstract concept to a practical application.”
A thermostat is not cutting-edge technology. Thermostats have functioned in heating systems for over a century. We know they work. In the same way, we know that the Code of Professional Conduct and other professionalism standards, applied appropriately, are practical guides that can help an actuary to resolve ethical concerns.
Using Professionalism Tools to Resolve Ethical Dilemmas
Nowhere is the ability of the individual actuary to influence the environment more apparent than when confronting ethical dilemmas in the workplace. Actuaries are often faced with choices that may lead to different outcomes; one outcome may be ethically challenged but expedient; the other may be ethically correct but more difficult to implement. Professionalism tools are available to help the actuary make the right choice, setting the temperature in the business environment to “ethical.”
Over the past two decades, the tools in the “professionalism toolbox” of U.S. actuaries have increased vastly in number and sophistication. A uniform Code of Professional Conduct—adopted individually by the boards of each of the five U.S. actuarial organizations and binding on their members—has been in place since 2001. The Actuarial Standards Board has issued 50 actuarial standards of practice (ASOPs) covering every area of actuarial practice, including critical cross-practice standards. The Actuarial Board for Counseling and Discipline has responded to hundreds of requests for guidance and has investigated and recommended counseling or discipline in scores of cases. Since 2008, the U.S. Qualification Standards (including continuing education [CE] requirements) have applied to all statements of actuarial opinion, not just those required for statutory filings. Academy professionalism committees have also created supplemental tools such as the Applicability Guidelines, which can help an actuary consider which ASOPs may apply to a particular assignment, and the Frequently Asked Questions on the U.S. Qualification Standards. The bottom line is that the professionalism toolbox is full and available for use.
These professionalism tools can help practicing actuaries resolve ethical dilemmas. Let’s take a look at a concrete example. In a survey of actuaries published by the Academy in 2015 titled “Key Ethical Concerns Facing the Actuarial Profession,”actuaries reported that the No. 1 ethical issue they face in their daily practices is “Responding to pressure from principals and/or management to select inappropriate assumptions used in pricing or reserving.”
Here’s a scenario that was described by a former member of the Actuarial Board for Consulting and Discipline about how professionalism tools can help an actuary to address this issue:
“Suppose, for instance, that Joe … is preparing a rate filing and has selected a trend factor indicating that loss costs will increase by 6 percent a year over the next two years. Joe’s internal client has a negative reaction to the indicated rate levels and suggests that Joe use his actuarial judgment to select a trend of only 4 percent a year. Joe can use ASOP No. 13, Trending Procedures in Property/Casualty Insurance Ratemaking, to explain that although he is able to use his own judgment, he must be able to support his trend selection. If he selects a trend that isn’t supported by available relevant information, he needs to document and disclose the reasons for his selection. … After a few such encounters, Joe’s internal client will realize that he is a professional who must meet standards and an ethical code.”
I like this example because it highlights what I believe are three important components of the thermostat: knowledge of the rules (the temperature regulation system); a decision-making framework (a tool to help determine the desired temperature); and communication (the method of influencing the temperature). We need each of these components to put professionalism into action.
First, we need to know the rules. As noted earlier, a plethora of professionalism resources are available on the Academy website that we can use to familiarize ourselves with the Code and applicable standards of qualification and practice. In the above case, Joe uses an ASOP to explain his position to his client.
Second, it is helpful to have a decision-making framework that can help you decide when and how to adjust the temperature of the room. This sounds complicated, but it is a pretty straightforward concept: You have to get used to thinking about how your professional standards apply to ethical problems. In the example above, Joe understood that pressure from his internal client about trend selection had professionalism implications to which he needed to respond. Joe adhered to the Code by following the ASOPs and by having the integrity to initiate an honest and possibly difficult conversation with his client.
Moral analysis is as much a part of being a professional as the possibility of being presented with an ethical dilemma in the first place. You need to think about what it means to act with integrity, skill and care, and honesty in the context of your day-to-day practice. An actuary not only has to be familiar with the Code and the standards of qualification and practice, but must put them into practice. In other words, “integrity” means that you not only say you will comply with the Code and other standards, you actually do it.
More ethical decision-making tools are available for you to use in this regard. For example, the Academy has two eLearning courses that offer a primer on the Code and a decision-making framework to approach the top eight ethical concerns of actuaries identified in the Academy’s survey. The framework asks four basic questions that actuaries in all practice areas can use to come to an ethical decision:
Compliance—Am I adhering to all requirements, such as the ASOPs, the Code of Professional Conduct, and laws and regulations?
Transparency—Am I being open in my interactions with others?
Reputation—Am I upholding my own reputation and that of the actuarial profession?
Doing the right thing—Am I behaving properly, honestly, and ethically?
The third important component is effective communication—which, to continue the metaphor, helps you influence the temperature of the room. This may include communication with the principal, your colleagues, or others who have a stake in the resolution of the ethical dilemma. This may sound daunting, but it need not be. We and our clients and colleagues all benefit from a shared understanding of the ethical implications on the range of actions that we can take as actuaries.
In my view, this communication component is vital for actuaries to act as thermostats. But, as discussed in a previous article in this series, this type of communication can be difficult. In order to resolve these dilemmas, the actuary’s communication must be effective. Although some actuaries may say that pressure from management is “part of the game” and that it is best to go along with it, my response is that actuaries can and should discuss these issues professionally, objectively, and in a nonconfrontational manner, such that management understands and respects the actuary’s position. By communicating about the standards and our ethical concerns—and engaging in dialogue about what we can do and what we must do—we help set the temperature of the business environment to “ethical.”
A Professionalism Framework That Works When Put Into Action
I am very proud of the achievements of the Academy’s work on behalf of the U.S. actuarial profession in developing an effective and self-regulating professionalism framework centered on the Code of Professional Conduct. The existence of a robust set of professionalism tools has enabled actuaries to implement “professional and ethical standards … in order to fulfill the Actuary’s responsibility to the public and to the actuarial profession.” We must maintain professional standards to assure the public that we, as a profession, have taken steps to achieve these ends.
To those actuaries who say they do not have time to use these tools, I say you should carefully consider your obligations under the Code. Using these tools will help keep you in compliance, make your work better, and likely will save you time over the long run. To resolve ethical dilemmas in the workplace, we must put professionalism into action. If we do so, just like when we have a properly functioning thermostat that we can use to set the temperature, we and those we serve are going to be a whole lot more comfortable.
 These professionalism tools are extensively documented in Immediate Past President Tom Wildsmith’s “Web of Professionalism” series.
 American Academy of Actuaries; “Key Ethical Concerns Facing the Actuarial Profession”; 2015.
 Linda Bell, “The Rules Are Your Friends,” Contingencies, January/February 2008.
 “Actuary-to-Actuary Communication,” Contingencies, May/June 2017.
 Preface to the Code of Professional Conduct.