The Actuary’s Duty to the Public Interest

Simon Louw

Presentation to NOCA UK25 October 2019

Originally presented at the IAA Colloquium, Cape Town, April 2019

www.colloquium2019.org.za/wp-content/uploads/2019/04/Simon-Louw-Actuarys-Duty-IAA.pdf

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@simonlouw72http://linkedin.com/in/simon-louw-820631193

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Agenda

1. Do actuaries have a duty to act in the public interest?

2. What does it mean when we talk of “the public interest”?

3. Ought actuaries to act in the public interest?4. Conclusion

5. Questions

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Do actuaries have a duty to act in the public interest?

Go to www.menti.com and enter code (to be provided)

Pick one answer:• Yes (always)• No (never)• Sometimes• Unsure

Keep open for more questions.Can also at any time type in your questions for later.

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Do actuaries have a duty to act in the public interest?

I say yes. Why is this?

IAA 2017 “PG1 – Principles of Professionalism”:• “The distinguishing feature of a profession that sets it apart from a trade, craft, a guild or a

syndicate is the overriding interest of the individual professional in the public well-being.”• “The IAA membership Regulations require provisions in members’ Code of Conduct to be

consistent with the principle that “An actuary shall act in a manner that fulfils the profession’s responsibility to the public”.”

• “Actuaries have [a] professional responsibility to clients and/or employers, the public and to their Full Member Association.”

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Do actuaries have a duty to act in the public interest?

IFoA 2019 Actuaries’ Code:

• “The Code includes six principles… which Members must observe to support the profession in acting in the public interest.”

Actuarial Society of South Africa’s 2012 Code of Professional Conduct:• “the Code will play a vital role in guiding us towards fulfilling our mission in the public

interest” (Gamedze)

• “A member shall act… in a manner that fulfils the profession’s responsibility to the public”• “Members are encouraged to consider the public interest when rendering actuarial services”

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Do actuaries have a duty to act in the public interest?

Is there confusion between:

• A responsibility to promote the public interest

Versus• A responsibility to the public?

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What does “the public interest” mean for actuaries?

Go back to www.menti.com and vote on a sliding scale from strongly disagree to strongly agree:

• Consider third parties• Contribute to public policy

• Do your job properly• Ensure human flourishing

• Educate members and/or the public

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What does “the public interest” mean for actuaries?

• Conceptions range from narrow to broad

• Narrow = do your job properly

• Broad = human flourishing• According to the IAA, actuaries have an “overriding interest… in [the] protection of the public

from unsound practices” (2017, p.4)• IAA (2017) considers the following activities as supporting the public interest:

1. “upholding the values and standards of the profession”2. “fulfilling statutory roles”3. “avoiding conduct which could bring the profession into disrepute”4. “supporting the professional organization that provides public interface with the profession”

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What does “the public interest” mean for actuaries?

• IAA (2017):o “Provided an actuary meets the requirements of law as well as his or her actuarial association’s

code of professional conduct and applicable professional standards, then the actuary will be considered to have met his or her responsibility to the profession and to public.”

• IFoA Code (2019b s2.10):o “There is no specific obligation imposed upon Members to consider the public interest impact in

respect of the work that they carry out, or in their day-to-day conduct. Rather, by acting in accordance with the standards set by the IFoA, including the Code, Members will be helping the IFoA to ensure that it succeeds in meeting its wider public interest aims.”

• This is a narrow conception of the public interest, wherein actuaries do their jobs properly in the service of individual clients

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What does “the public interest” mean for actuaries?

• The narrow conception does not meaningfully resemble the public interest

• It is indirect

• It could be applied to ordinary employees and is thus universal• Public’s expectations should be considered, which is broad

• I favour a broad conception• On this basis a “responsibility to promote the public interest” is more than a narrow

“responsibility to the public”

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Ought actuaries to act in the public interest?

Should the code of conduct include a duty to act in the public interest?

Vote by selecting one option:• Yes

• No• Conditionally

• Unsure

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Ought actuaries to act in the public interest?

I say “no” but let’s see why it might be “yes”:• Negative and positive protections

o - Prevent abuse of clients by actuarieso + Protect public against risks that they cannot manage

• However, there are already protections in place:o Law and other oversighto Duty of care to clients

• Preservation of professionAgainst this, I say:• Positive protection roles are voluntary• Promoting the common good is supererogatory

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Ought actuaries to act in the public interest?

Duty-based argument:

• There is a contract that exists between the profession and society

• One of the terms of this contract is that professions are given power by society in exchange for their promise to act in the public interest or for the common good

• One must abide by the terms of a contract• Therefore, professions must act in the public interest

• But is this true?• And why are professions singled out?

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Ought actuaries to act in the public interest?

Why I say “no”:• It is vague• It conflicts with the duty to manage conflicts of interest• The broad public interest is properly the role of the state

• Vagueness:1. Cannot fulfil the promise2. Cannot demonstrate adherence or otherwise so cannot enforce3. Misunderstanding4. Inconsistent outcomes

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Ought actuaries to act in the public interest?

• Conflict of interest:o “Conflict of interest arises, inter alia, when a member has an actual or potential interest that may

influence the objective performance of the member’s obligations to any specific client, or prevent the member from rendering an unbiased and fair service to any specific client, or prevent the member from acting in the best interests of any specific client.” (Actuarial Society, 2012, para. 16)

• Interest = gain, or loss avoidance, or attitudes, biases or allegiances to something else• Code requires members to avoid conflicts of interest by acting impartially

o “Members must ensure that their professional judgement is not compromised, and cannot reasonably be seen to be compromised, by bias, conflict of interest, or the undue influence of others.” (IFoA, 2019a, sec. 3)

• (Otherwise decline to act, or disclose)

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Ought actuaries to act in the public interest?

• Impartiality:o “Impartiality can be described as the principle that decisions ought to be based on objective

criteria, rather than on the basis of bias, prejudice, or preferring to benefit one person over another for improper reasons.” (IFoA, 2019b, sec. 5.2)

• But one cannot be both impartial and act for some interest (such as the public) at the same time

• Can be ‘objective’, meaning free from personal bias, but this is insufficient• Impartiality requires a display of fairness or lack of prejudice between competing non-

personal interests – or ‘independence’• But independence is difficult, or sometimes impossible, to achieve in the cases of conflicts

between public and client interests

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Ought actuaries to act in the public interest?

• Acting in the public interest means not acting impartially, meaning with independence

• There is a conflict between the duty to act in the public interest and the duty to manage conflicts of interest

• This is a problem and the current South African Code provides no guidance in how to resolve this (other than declining to act)

• It would be extremely difficult to provide such guidance

• We need the management of conflict of interest duty

• Therefore, my proposed solution is to remove the public interest duty

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Conclusion

• There is a duty in the South African Code for actuaries to act in the public interest

• While this Code defines this narrowly, I favour a broad conception

• For the duty: negative and positive protectionso But negative protections already provided for within the professiono And positive protections provided outside the profession

• Against the duty:o Vagueo Conflict with duty to manage conflicts of interesto Role of the state

• Propose to remove this duty19

Conclusion

• What if we do remove the public interest duty?o This will not detract from the primary professional obligation, which is to provide a quality service

to clientso It should not negatively affect the trust relationship between actuaries and clients or the public

• I think public service for the common good still desirable but voluntary

• Actuaries still have special responsibilities

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Questions

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References

• Actuarial Society of South Africa (2012). Code of Professional Conduct.

• Institute and Faculty of Actuaries (2019a). The Actuaries’ Code.

• Institute and Faculty of Actuaries (2019b). The Actuaries’ Code: Guidance to support the principles and amplifications in the Actuaries’ Code.

• International Actuarial Association (2017). PG1 – Principles of Professionalism.

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