Ethical Problems Faced by Actuaries in Business & Some Possible Solutions to These Conflicts

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Executive Summary

Our group, “The Super Six” focussed our research on the problem of ethics and actuarial science. As Sholom Feldblum states “The actuary has a dual role: an objective professional providing guidance on insurance issues and a business manager promoting the goals of an insurance company” (Sholom Feldblum, pg.1). The purpose of our research was to determine the most common ethical problems an actuary faces, and the most appropriate methods to solve these problems. Solutions were necessary so that our stakeholders, current and prospective actuaries, will have more guidance when faced with these dilemmas.

In the valuation sector, we found that the two main conflicts faced by the actuary were to use discounted or full reserve values, as well as an actuary's relationship with upper management. The most commonly accepted resolutions to these problems was to network with experienced actuaries, and to work on communicating better with top management. In Pricing we investigated ethical problems involving social acceptability, business goals, and self conviction. We found that case studies and an established protocol for dealing with pricing procedures were most effective in dealing with these problems. Finally in the testimony and legal realm, we looked at actuarial testimony in ratemaking and justification of a proper rate of return. We determined that pure impartiality was the best approach to avoid economic crime when testifying in court.

We have concluded that all actuaries should regularly consult with the actuarial code of conduct, and always aim to practice actuarial techniques in a professional manner as opposed to conforming to the desires of their insurer.

We strongly recommend that all actuaries take advantage of actuarial sessions put on by professional organizations in order to gain perspective when dealing with the many ethical issues that may arise in their day-to-day work. We also recommend that actuaries develop strong communications skills, we found that strong communication skills can often prevent, or aid in the solving of many ethical issues an actuary faces.

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Our group, “The Super Six” has focussed our research on the topic of Ethics and Actuarial Science, based on Sholom Feldblum's article, “Ethics and the Actuary”. The purpose of our research is to provide relevant, practical information on some of the main ethical problems that actuaries face in the workplace. Through our research we hope to find a variety of appropriate solutions to the most common ethical problems an actuary faces, so that there will be fewer misunderstandings and discrepancies when the actuary is confronted with an ethical challenge.

This topic is of great importance to the member of our group, as we are all pursuing careers as actuaries, and thus we hope to be prepared for any ethical problem we face. The stakeholders of our report are all current and prospective actuaries who are seeking further information about how to resolve ethical conflicts that they may have faced, or are preparing to face.

Our report is divided up into three main subtopics, Valuation, Pricing, and Testimonies, all of which contain pertinent information regarding actuarial ethics. Valuation actuaries calculate reserve levels and provide crucial calculations to upper management, as well as providing important information for pricing actuaries to use. Pricing involves calculating the policy rates and premiums, which can be a challenging task given the insurers objectives, and consumer demand. Finally, actuaries are often called upon as experts to testify for or against policy rate increases, as well as for their opinions on an acceptable rate of return. All three of these topics, Valuation, Pricing, and Testimonies, are very common areas for a professional actuary to practice, and the moral dilemmas within each area are quite common. Solutions to these problems are essential,...
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