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Ethical Issues Forum
Another Rush Job Editor's Note: This article is part of a series written by members of the CAS Committee on Professionalism Education (COPE) and the Actuarial Board of Counseling and Discipline (ABCD). The opinions expressed by readers and authors are for discussion purposes only and should not be used to prejudge the disposition of any actual case or modify published professional standards as they may apply in real-life situations.
Actuary Bill, ACAS, works for Last Minute Insurance Company (Last Minute) in their actuarial department. Last Minute is a large multiline insurer that writes high-risk casualty business. Because of the type of business written, Last Minute cedes a significant amount of business to numerous reinsurance companies. The majority of Bill's work relates to the complexities of Last Minute's reinsurance arrangements. As usual, Bill's assignments are not given to him until the day they are due, which forces Bill to rush through his work.
Bill's latest assignment, which is due at the end of the day, is to estimate the loss reserves for a large reinsured block of business that Last Minute wants to commute with its reinsurer. Last Minute will rely on Bill's estimate for the transaction. Bill realizes there is simply not enough time to perform a rigorous analysis but figures he can make a rough estimate of the reserves using some shortcut assumptions. Since the commutation is scheduled to take place at the end of the day, there is not enough time for a peer review of Bill's calculations. Once the commutation takes place, it will be too late to make any changes or corrections to Bill's analysis.
A little voice inside Bill's head tells him that he has a professional obligation to refuse to do the assignment given the unrealistic deadline. Although Bill believes his analysis will be inadequate for the purpose of performing a commutation, Bill wants to please his company and doesn't want to risk losing his job. Ultimately, Bill decides to carry out the assignment and figures he will not violate the Code of Professional Conduct (Code) as long as he informs his boss of the limitations of his estimates. Included among his limitations is the statement that his estimate is preliminary and therefore should not be relied upon until further analysis and peer review can be done. Are Bill's actions in violation of the Code?
No
Oftentimes, actuarial work is performed under some kind of limitation, such as data availability, budget, and time, which can affect the quality of the actuary's work-product. These limitations, however, should not preclude the actuary from accepting assignments just because the analysis, based on the circumstances, may be less than ideal. Since Bill is disclosing the limitations of his work, he is taking reasonable steps to ensure that his work is not inappropriately used as is required by Precept 8 of the Code.
Precept 1: An Actuary shall 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. Annotation 1-1: An Actuary shall perform Actuarial Services with skill and care.
Precept 8: An Actuary who performs Actuarial Services shall take reasonable steps to ensure that such services are not used to mislead other parties.
Yes
Given the timing, it is highly unlikely that Bill will be able to perform the assignment with skill and care, which would be a violation of Annotation 1-1 of the Code of Professional Conduct (Code). Although Bill intends to warn his boss of the limitations of his analysis, he should be aware that the intended use of his estimate will be in direct conflict with his limitations. Therefore, it would be misleading for Bill to accept the assignment given the circumstances, which would be a violation of Precept 8 of the Code.