Chapter 1: Professionalism Flashcards
Jobs that actuaries do
- Actuaries LOOK AT RISKS.
They assess, quantify, manage and monitor them. - Actuaries BUILD AND TEST MODELS that project and discount cashflows.
To do this actuaries need to be able to
… handle data,
… use economic and demographic analyses to estimate assumptions
… and decide on margins. - Actuaries MANAGE FUTURE LIABILITIES.
They advise on contribution rates,
… premium rates and
… on investment strategy. - Actuaries MONITOR EXPERIENCE.
They compare actual with expected experience,
… analyse any variation and
… manage the variation over time. - Actuaries WORK WITH OTHER PROFESSIONALS and understand when to refer to others.
They should:
- communicate well,
- avoid conflicts of interest and
- encourage transparency in the disclosure of information.
Actuaries may work with the government to shape legislation and protect the public interest.
Statutory roles reserved only for actuaries
- Actuary must ensure that PROPER RECORDS have been kept
- and that PROPER PROVISION for the liabilities have been made.
- The liabilities must be valued in the context of the assets and in accordance with legislation and professional guidance.
- A statement of surplus must be produced.
The actuary must confirm that (in his view):
… premiums or contributions are adequate
… given reasonable assumptions and free assets
… to meet the liabilities
Responsibility of the government actuary
the government actuary is primarily concerned with
- occupational pension schemes
- public sector pensions arrangements
- pensions policy and regulation in general.
It is also concerned with
- social security
- regulation and supervision of insurance companies.
Professional framework of the IFA comprises of:
- professional conduct standards
- ethical standards
- technical standards
IFA regulatory framework requirements for professional conduct standards are defined in which 5 areas?
- ethical standards (including the Actuaries’ Code)
- continuing professional development
- professional skills training
- practicing certificates
- other non-mandatory resource material
What does being “a professional” mean?
- taking personal responsibility for actions
- acting with integrity and detachment from personal circumstances
- developing a trusting relationship with the client
- recognising that others have valid views
- achieving, demonstrating and maintaining competence in specialist field
- being reliable, i.e. producing good quality work on time.
What does an actuary need to know about a client before undertaking a professional task?
- for whom they are working in the company
- background information on the client
- whether there are any conflicts of interest
- be aware of what complaints procedures are in place
How can conflicts of interest be avoided?
- keep detailed records of assignments
if possible, decline one of the assignments causing the conflict.
However, it may be difficult to avoid a conflict of interest. In such cases:
- disclose the conflict of interest to the parties concerned
- establish chinese walls to seperate data and staff
Frequent conflict of interest
Between a client and a client’s customers.
In the financial world, there may be legislation to ensure that providers of financial products consider the interests of their customers.
When carrying out an actuarial task, what are the 10 broad areas that any actuary should consider?
- Exactly who the client is, and whether there are any conflicts
- Exactly what the problem is, and how it can be broken down
- Agreeing the scope of the problem with the client
- The understanding and competence of the actuary
- The data, assumptions and the methodology used
- checking the results produced
- how to report and communicate the results
- the implications of the results
- the implementation of the results
- professionalism
What things should the actuary bear in mind when communicating results?
Make sure that the CLIENT UNDERSTANDS the results and listens. So present the results clearly and - pitch them at the right level. Include background information such as - data issues, - assumptions, - methodologies - and risks (but don't let it dominate)
Demonstrate how the results can be used to give an optimal solution.
It may be necessary to state where the clients initial brief ends, or to issue a health warning to say that the advice is only fit for a specific purpose and is not appropriate in other circumstances.
Ensure that relevant professional guidance should be complied with
What are the 5 stages of the Actuarial control cycle?
- specifying the problem
- developing the solution
- monitoring the experience
- the general economic and commercial environment
- professionalism
“Specifying the problem”
You should specify an example objective,
- identify various risks and
- suggest possible courses of action for handling these risks.
“Develop the solution”
Talk about models.
- Suggest an APPROPRIATE MODEL to use and give examples of the assumptions needed.
- You would need to consider the IMPLICATIONS of the model results on all stakeholders.
- You may want to suggest ALTERNATIVE SOLUTIONS
“Monitor the experience”
This involves making the model dynamic:
analyse the differences between actual and expected experience
—–and whether such differences are one-off or recurring
FEEDBACK into the actuarial control cycle, e.g. updating the assumptions or respecifying the problem.
