Chapter 1 - Actuarial Advice

Question 1

What aspects are considered in Actuarial Advice?

Answer 1

• Stakeholders (Clients and other)
• Consideration of all stakeholders
• Functions of the Client
• Information about the client
• Types of Advice
• Attitude of stakeholders (Risk)
• Advice vs Decision
• Professional Standards

Question 2

Describe how other stakeholders might be affected by Actuarial Advice?

Answer 2

• In many cases advice give will impact other stakeholders
• Actuary must consider interest of all stakeholders
• Not only stakeholder seeking(paying) for advice
• Omitting a stakeholder distorts context
• One’s risk is another’s gain
• Maintain sense of proportionality (significance of interest in relation to others)
• The vulnerable - face the risk of harm and may not have access to advice nor means to mitigate such harm

Question 3

Explain why and how factual information about the client should be sought in order to give advice?

Answer 3

• The actuary is giving advice on a specific problem
• Advice set out as alternative solutions and their implications
• Solutions must be relevant to specific circumstances
  
  • Information from the public domain
  • Per-project meeting
  • Attitude of client - risk appetite and culture
  • Potential conflicts of interest
  • circumstances and objectives
• Results should be produced:
  
  • In a comprehensible format and timely manner
  • Taking impact of all stakeholders into account

Question 4

Why is the attitude of clients and other stakeholders relevant to giving advice?

Answer 4

• Misinformation can lead to the risk of giving inappropriate advice
• Corporate bodies have a risk appetite driven by the risk appetite of their stakeholders
• This should be considered for the client, the end customer, marketing issues and the vulnerable

Question 5

What are the types of advice that actuaries might give?

Answer 5

• Indicative advice - opinion, without fully investigating (response to an oral question)
• Factual Advice - based on research and facts (legislation)
• Recommendations - researched and modelled forecasts, alternatives weighted, consistent with requirements, normally peer reviewed

Question 6

Responsibilities for giving advice vs. Responsibilities for making decisions?

Answer 6

• Advice :
  
  • Set out alternative solutions and their implications on the client and other stakeholders
  • Outline assumptions and the reasons for assumptions made
  • Inform client of impact of changing assumptions
• Decision:
  
  • Danger of making decision based on own conclusions
  • Should seek further advice or peer review
  • Rationale behind decision should be well documented
  • Documentation of alternatives that have been considered

Question 7

Discuss the Professional and Technical standards that might apply to actuarial advice?

Answer 7

• Actuaries that are part of a professional body must comply with a professional code of conduct, such as:
  
  • Actuaries’ Code in the UK and Code of Professional Conduct in SA
  • Standards of Actuarial Practice (SAPs) and Advisory Practice Notes by ASSA
  • Ethical and professional standards as set in the Technical Actuarial Standards maintained by the Financial Reporting Council (FRC)
• The International Actuarial Association(IAA) influences standard setting, which leads to consistency in approaches
• The FRC’s Actuarial Quality Framework aims to promote quality through:
  
  • Methods
  • Communication
  • Actuaries
  • The Environment
• ASSA has a disciplinary Procedure to take action against unprofessional or unacceptable conduct