Self-Regulation and the Actuarial Profession is a new discussion paper from the Committee on Professional Responsibility (COPR). Three of the paper’s authors—COPR Chairperson Audrey Halvorson, Nancy Behrens, and John Schubert—sat down with Actuarial Update to discuss self-regulation and its importance to the actuarial profession.
Why are so many professions regulated?
SCHUBERT: Professionals typically have specialized knowledge and skills that can be used for the public good. That knowledge gap, between the public and the profession, creates an opportunity for people to take advantage of the public. Regulation can help serve the public by ensuring professionals are held to the highest standards.
BEHRENS: In the actuarial profession, much of what we do is really important to people’s financial well-being—their pension plan, the solvency of insurance companies, the insurance rates, all of those things are very important to individuals and the public. And that importance makes effective regulation of the actuarial profession vital.
Some professions are regulated by the government. Yet the actuarial profession is largely self-regulated. How does the actuarial profession regulate itself?
HALVORSON: We have the Web of Professionalism—the Code of Professional Conduct, our map to make sure we practice with ethical, appropriate behavior; the U.S. Qualification Standards, which you have to meet to practice as an actuary; and the actuarial standards of practice (ASOPs), which guide us in how we do our work. And we have the Actuarial Board for Counseling and Discipline (ABCD).
BEHRENS: During my time on the ABCD, we saw so many cases where actuaries were willing to come forward and raise the issue of other actuaries doing work that was not in compliance with our standards, which is absolutely necessary for us to maintain our high standards and show the public that we are regulating ourselves. The ABCD’s request for guidance (RFG) process allows people to call in and ask questions confidentially. I fielded a number of those when I was on the ABCD. People call and say, “Hey, this is going on in my company, and I’m not really comfortable with it.” Knowing that actuaries are raising issues is really important.
Why is self-regulation important to the actuarial profession?
BEHRENS: When actuaries set the standards for how actuarial work should be done, when actuaries review what other actuaries are doing, it’s much easier to get things done that serve the public and the profession. For example, it’s much easier to change an ASOP than a law. So in that sense, self-regulation is a more effective and efficient way of regulating the profession. Self-regulation makes our system a little bit more flexible and, because we are able to react more quickly, it contributes to a better-regulated profession.
HALVORSON: In the early days of the Affordable Care Act (ACA), sometimes the proposed instructions to actuaries had problems, in part because non-actuaries were involved in developing them. The Academy’s work to make sure those kinds of issues were corrected was key to the relative success of the actuarial professional side of the ACA.
SCHUBERT: It is also better to have fully qualified actuaries determine whether actuaries are performing professionally and making good choices. Who better than actuaries to decide if an actuary has failed to live up to our standards? We have the knowledge to make an informed and educated decision.
What can actuaries do to help maintain self-regulation?
BEHRENS: First of all, be diligent about your own qualifications, stay up to date, and make sure that if you’re practicing in a new area, that you’re actually qualified to practice there. But then make sure that others are doing their work correctly—that’s also very important to the profession.
HALVORSON: As I progressed in my career, I realized I needed to make sure that my staff understood the responsibility of the actuarial profession. So I would talk to them about the Code, ask them what ASOPs apply, and really make it their job to ensure that we were doing the right thing as actuaries. But it took a long time for me to get to that point because I didn’t have a leader actuary pointing these things out to me in the early years of my career. So, I hope actuaries in leadership positions will educate their younger staff on professionalism and the fact that we regulate ourselves, as it is so important to our profession. Because actuarial work is very complicated, you really need other actuaries to make sure we live up to the public expectation of professionally performed work. You need to understand that not only your principal, but the public, is relying on you to get it right.
SCHUBERT: Lead by example—approach your work in a professional manner, perform only work that you are qualified to do, and use the ASOPs to guide your work. If you see other actuaries not following these principles, you should point it out to them. If that is unsuccessful or you are uncomfortable doing that, the ABCD is there to help. If we fail to enforce our standards, we risk losing the privilege of self-regulation.
What do you hope people will take away from the paper?
HALVORSON: I would like to provide some background on why we think this paper is important. Back in 2018, there was a report from the UK called the Kingman Report. The UK actuaries are not self-regulated, and the Kingman Report said they should be even more strictly regulated. So the COPR provided this paper to educate actuaries about the fact that we are self-regulated and why that is important.
BEHRENS: The paper goes through a lot of aspects of professionalism, what they mean, and why it’s important to be self-regulated. As actuaries read it and take it to heart, I hope that they will have discussions with their peers and within their companies so that they get a better sense of how important self-regulation is to the future of the profession.
SCHUBERT: The paper is also a great refresher for those of us who have been doing this for a long time and need to be reminded, maybe, that it’s still our responsibility to pass that look-in-the mirror test, to make sure we’re setting a good example, and to pass that information on to all actuaries, because we’re all in this together. Poor work or problems created by just a few actuaries can reflect on the entire profession.
Self-regulation is a privilege that many professions do not have. More than 30 years ago, leaders of our profession understood the importance of self-regulation and created the framework we’ve just described, and they’ve nurtured it to this point. Now it’s up to us to maintain self-regulation. This paper serves as a reminder to make sure all actuaries keep professionalism and the importance of self-regulation in mind as they do their work.