By Bob Beuerlein
Editor’s note: This is the second part of the “Professionalism in Action” series. The first part, “Are You Modeling Professionalism?” appeared in the March/April 2017 issue.
Many of us grew up with the old adage, “If you don’t have something nice to say to someone, don’t say anything at all.” This sentiment has served us well in helping us to avoid creating embarrassing or uncomfortable social situations. But, there are times when some empathetic but brutal honesty can be called for.
In sports, it is common for teammates to provide harsh but constructive criticism to one another in an effort to do what’s in the best interests of the team. In life, we all have blind spots that we don’t like to hear about or discuss, but we have the opportunity to be better individuals once someone does what is in our best interest and empathetically makes us aware of our shortcomings. This applies whether we are talking with friends on the golf course or co-workers at the office.
As professionals, we may focus on our communications with principals and intended users of actuarial services and pay less attention to our communications with fellow actuaries. But, it is important for actuaries to understand that there is a professionalism framework that supports—and in some cases expressly defines—the proper way to conduct actuary-to-actuary communications. If the Code of Professional Conduct, the standards of qualification and practice, and professional counseling and discipline are the bricks with which actuarial professionalism has been built, then communication between and among actuaries is the mortar holding the structure together.
This article examines the background and some key elements of the professionalism framework dealing with actuary-to-actuary communications. It explores relevant portions of the Code of Professional Conduct and the counseling and discipline process to explain how they can help actuaries in their communications with other actuaries.
Actuary-to-Actuary Communication and Protection of the Public
As actuaries, we talk to each other to maintain day-to-day contact and social interactions with our colleagues. But more importantly from a professionalism perspective, we also do so when providing actuarial services to our clients, which means that these communications are important to how we discharge our responsibilities to the profession and the public. This is true for several reasons. To begin with, in complex areas such as insurance, pensions, and other benefit programs, actuaries are uniquely well-positioned to understand when other actuaries are providing services in accordance with our profession’s standards … and when they are not. But, this determination is not always based on black-and-white distinctions. Our standards of practice “recognize that actuaries can reasonably reach different conclusions when faced with the same facts.” Actuaries may use different analytical tools to reach different, but reasonable, results. “It is not uncommon,” for example, “for two actuaries to select two different models to perform the same or a similar task and for both models to reflect generally accepted actuarial practice.” Given that actuaries can reach different but still reasonable results, the actuary’s explanation of how they reached that result is critical.
It is not surprising that the standards of practice require actuaries to “state the actuarial findings, and identify the methods, procedures, assumptions, and data used by the actuary with sufficient clarity that another actuary qualified in the same practice area could make an objective appraisal of the reasonableness of the actuary’s work as presented in the actuarial report” (emphasis added). The requirement for an individual actuary to demonstrate to a similarly expert actuary that his or her conclusions are reasonable helps assure the quality of the actuarial work product. To understand how important this requirement is to fulfilling our responsibility to the public, just imagine what would happen if it did not exist. How would we as a profession monitor the quality of actuarial services?
The flip side of this requirement is that an actuary reviewing another actuary’s work may, in fact, discover that the work does not adhere to professional standards or reach reasonable conclusions. In such cases, the professional obligations of the reviewing actuary do not stop. Difficult conversations with the other actuary may lie ahead.
The Code and Actuary-to-Actuary Communications
Before diving into the precepts of the Code that deal specifically with actuary-to-actuary communications, it is always good to start off with a reminder of the requirements of Precept 1, which underpins the rest of the Code and actuarial professionalism as a whole. Precept 1 requires an actuary to “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.” Precept 1 provides the essential backdrop against which the communications between actuaries take place in the course of providing actuarial services.
Precept 10: The Golden Rule of Actuarial Professionalism
If Precept 1 provides the meta-principle of actuarial professionalism, then Precept 10 might be thought of as professionalism’s “Golden Rule.” Precept 10, the longest precept in the Code, acknowledges that differences of opinion may arise among actuaries “particularly in choices of assumptions and methods.” It requires actuaries to “cooperate with others in the Principal’s interest” and specifies that two types of conversations should be “conducted objectively and with courtesy and respect,” namely:
- Discussions of such differences between an actuary and another actuary; and
- Observations made by an actuary to a principal on the work of another actuary.
It is easy to say that one must discuss differences of opinion with another actuary, but how can you begin the conversation in a courteous and nonconfrontational manner? At one of my previous employers, we created “core values.” One of these core values was “straightforward communication,” and it was made clear throughout the company that everyone was expected to engage in straightforward communication. Having such a culture made difficult conversations a little easier—first, by creating the expectation that such conversations would occur from time to time, and second, by allowing us to start such conversations with, “In the spirit of straightforward communication…” That way, it was clear that whatever disagreement or criticism you were about to deliver was in the spirit of upholding the company’s core values.
Even if an actuary’s employer does not have such a policy or expectation, the professionalism framework can provide some assistance. One approach might be to take a cue from ASOP No. 1 and broach the subject by opening with, “I realize that, as actuaries, we can reach different but reasonable results when faced with the same set of facts, and I was wondering how you reached your conclusions in this case.”
Precept 10 also provides critical guidance on how actuaries must communicate and cooperate with one another in one of the most sensitive situations: when a principal decides to change horses (so to speak) by replacing an existing actuary with a new actuary. The precept recognizes the “indisputable right” of principals “to choose a professional adviser” and sets expectations for the actuary’s behavior toward the principal and the successor actuary. Those expectations deal with several sensitive issues, including the “4 C’s”—communication, cooperation, confidentiality, and compensation. Specifically, the actuary must cooperate in providing relevant information and may not “refuse to consult or cooperate with the prospective new or additional actuary based upon unresolved compensation issues.”
Occasionally, the successor actuary has difficulty obtaining information from the previous actuary, or finds issues in the previous actuary’s work, necessitating tough conversations. When engaging in such conversations, whether with the other actuary directly or with a principal about another actuary’s work, it is always a good idea to present your criticisms in an objective, courteous, and respectful manner.
On the other side of the equation, the previous actuary has a good reason to respond promptly to requests for information: The Actuarial Board for Counseling and Discipline (ABCD) has found that, under Precept 10, conducting communications with “courtesy and respect” means that communications must be conducted in a timely fashion. In 2011, the ABCD found an actuary in violation of Precept 10 “because he did not provide all such documentation until several months after it was first requested.”[5,6]
Precept 13 and Difficult Conversations
The counseling and disciplinary mechanisms that underpin and provide credibility to U.S. actuarial professionalism depend in large measure upon actuary-to-actuary communication. Under Precept 13, each actuary serves as a “cop on the beat.” When the actuary has “knowledge of an apparent, unresolved, material violation of the Code by another actuary,” the actuary is required to “consider discussing the situation with the other actuary and attempt to resolve the apparent violation.”
This requirement is intended as the first and best method of bringing the other actuary into compliance or, alternatively, determining that the apparent violation was not an actual violation. As John Purple, a longtime ABCD member, wrote in his “Up to Code” article, “Owning Precept 13,”
While each instance is unique, we find that many possible violations of the Code can be resolved by speaking with the other actuary. That discussion might even lead to a better understanding by both parties, especially when some aspect of professional judgment has been involved. In some instances, the discussion leads to clarification of the issue or application of the code or an actuarial standard of practice (ASOP), and the situation is resolved.”
As an Academy paper on Precept 13 notes, it is widely understood that “perhaps the biggest obstacle to a Precept 13 disclosure is an Actuary’s level of discomfort.” But such difficult conversations between actuaries are at the beating heart of self-governance and the profession’s commitment to protection of the public. By not attempting to resolve a possible violation, “the Actuary may be allowing substandard actuarial work to stand unopposed. In a worst case scenario, companies or governments relying on such substandard work, as well as their customers, employees and citizens, would end up facing the consequences of the actuarial profession’s failure to adhere to all of the Precepts of the Code.”
Therefore, it is critical that actuaries find a way to overcome their discomfort when faced with a difficult discussion about a potential violation of the Code. Again, it is important to remember that actuaries, faced with the same set of facts, may come to different, but reasonable, conclusions. As the Precept 13 paper suggests, “A key to initiating such a discussion would be to recognize that the conversation is about an apparent violation of the Code. Therefore, it would be prudent for the Actuary to approach a situation like this in an inquisitive, rather than accusatory, style.” That is, in an effort to understand how the other actuary reached their conclusion, it may be best to start by asking how the work was performed—for example, what methods and assumptions were chosen. In some cases, the paper suggests, “a letter of inquiry pointing out any perceived problems and asking for clarification” might be more appropriate.  With a courteous inquiry, the chance of reaching the preferred outcome—either the inquiring actuary gains new knowledge that eliminates the concern, or the responding actuary admits an error and works to correct it—increases.
Precept 13 encourages, but does not require, the actuary to initiate a conversation with an actuary believed to be violating the Code. In some cases, the paper acknowledges, “the relationship between the two Actuaries may be of such a nature that it would be inappropriate or too confrontational to reasonably expect a discussion to resolve the issue.” The actuary may decide for valid and recognized reasons not to attempt the discussion, or the discussion may not be successful. In such cases, the actuary has the obligation to report the potential violation to the ABCD, except where so doing would be contrary to law or divulge confidential information.
The key takeaway is that an actuary has a professional obligation not to turn a blind eye, a deaf ear, or a mute tongue to an apparent material violation of the Code. Doing so itself might be considered a violation of Precept 13 and possibly Precept 1. (If you have reason to believe another actuary is violating the Code and choose to keep silent, are you really acting honestly, with integrity, and in a manner to uphold the reputation of the profession?)
When the Going Gets Tough: Request for Guidance
When facing only minor disagreements with or questions about another actuary’s work, most actuaries can, with a little thought and preparation, embark on a conversation on their own. But what if you harbor doubts about your conclusions, confidential information is involved, or some other circumstance leaves you wishing for a sounding board before initiating the conversation? In such a case, a confidential discussion with a third party may prove invaluable.
Where can you find this third party? By contacting the ABCD and taking advantage of its request for guidance process. The first thing to know is that requests for guidance are confidential. Second, talking through the issue with a third party—who may have had experience dealing with a similar issue—may help you clarify the issues and your approach. Third, having no doubt engaged in several difficult conversations in the course of their ABCD duties, the ABCD member you speak with may have some good advice on how to approach such a conversation. Remember, a request for guidance is only a phone call or an email away.
Talk the Talk
Sometimes communication with other actuaries is easy. But there are other times when it is difficult and can come at some personal and professional expense. The goal of professionalism is to maintain the profession’s commitment to high standards of conduct, practice, and qualifications at all times.
The Code of Professional Conduct requires actuaries to communicate with courtesy and respect and in a timely fashion—even in less-than-friendly situations. Actuarial professionalism provides tools such as the Code, the Precept 13 discussion paper, and the ABCD request for guidance process to help you approach the difficult conversations that will inevitably arise in the course of your actuarial career.
Communicating with other actuaries in a manner characterized by honesty, courtesy, and respect is vital. Having the courage and integrity to conduct those difficult conversations is critical for actuaries to carry out their responsibilities, both to their profession and to the public. So the next time you face a professional situation in which the old adage about not saying anything comes to mind, think about the trust that we have earned from the public—and then do what’s in the best interest of our profession.
 ASOP No. 1, Section 3.1.4.
 The Roles of the Actuary in the Selection and Application of Actuarial Models; Committee on Professional Responsibility; 2006; p. 6.
 ASOP No. 41, section 3.2.
 Actuaries can also find guidance on specific types of actuary-to-actuary communications in the actuarial standards of practice (ASOPs). Precept 4 of the Code states that an actuary should “take appropriate steps” to ensure that his or her actuarial communications satisfy “applicable standards of practice.” We will not delve into all of the scenarios where ASOPs deal with actuary-to-actuary communications, such as those described in ASOP No. 21, which deals with the obligations of “reviewing actuaries” and “responding actuaries” in the context of audits and financial examinations. Suffice it to say that the guidance in ASOPs reinforces the idea that courteous, respectful, and timely communications between actuaries are critical to the quality of the actuarial services being delivered.
 Academy Discipline Notice: www.actuary.org/files/DeFiori.4.pdf/DeFiori.4.pdf.
 For a detailed discussion of Precept 10 with more examples, see “Up to Code: Living with Precept 10”; Contingencies; March/April 2006.
 Contingencies; May/June 2014; p. 20.
 The Application of Precept 13 of the Code of Professional Conduct, p. 21.
 Ibid.; p. 9.
 Ibid.; p. 10.