Actuarial Ethics – Generational Research

  • Actuaries in the insurance industry have been responsible for rigorously applying prescribed formulas by state insurance departments when creating input values to statutory accounting statements (balance sheets, statements of operations, etc.).  Inherent in the calculations are conservative assumptions to be ensure insurance companies remain solvent.
  • The industry recently moved to a principles-based approach to actuarial valuation where regulation provides the actuary greater freedom to use professional judgment when setting assumptions.
  • During my career, actuarial academic education has transitioned from largely a liberal arts/arts & sciences foundation to education through business colleges with attendant potential effects on ethics training.  I, myself, was required to take an Actuarial Roles & Ethics course when at UNL.

The proposal seeks to measure if/how actuarial ethics may have morphed over the last thirty plus years and whether there may be implications with respect to an actuary’s college education. 

Research will apply an historical analysis using methods outlined in earlier research (Larcker & Zakolyukina, 2012) “[p]rior research has used a variety of accounting-based models to uncover manipulations [e.g.,  (Jones, 1991), (Dechow & Dichev, 2002), (McNichols, 2000), (Dechow, Ge, Larson, & Sloan, 2011)].  In addition, professional organizations, such as Audit Integrity Inc., have developed heuristics based on accounting relations to provide warning signs of manipulation.[1]  Despite extensive prior research, the ability of these models to identify and predict accounting manipulations is modest.” 

A key challenge to overcome will be adjusting, where necessary, for the high degree of wordsmithing that exists with the written word.  As Larcker & Zakolyukina observed, “formal presentation text … has been rehearsed … and reviews … believe … formal text is an inferior corpus for detecting deception relative to the more spontaneous Q&A discussion.” (Larcker & Zakolyukina, 2012).  Gratefully, the actuarial profession has long recorded professional actuarial conferences and published the sessions.  The historical analysis focus will be on the unprepared question and answer sections from the floor.

Actuaries are inherently introverts.   During her keynote address at the Society of Actuaries’ Annual Meeting Susan Cain author of the New York Times bestselling book QUIET: The Power of Introverts in A World That Can’t Stop Talking offered a six question quiz.  Not surprising to the attendees, approximately 90% of the attending actuaries were introverts.

[1] See: