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The Actuary The magazine of the Institute & Faculty of Actuaries

SIAS views on Morris

Not only did the SIAS committee respond to Sir Derek Morris’s review of the actuarial profession, we were able to support our findings with survey data. The full response can be found at www.sias.org.uk.

By way of a reminder, SIAS is a body that represents younger members of the actuarial profession. The SIAS committee quickly decided that SIAS should respond to Sir Derek Morris’s review, on the grounds that younger members would be particularly affected by any changes to the profession over the long term.

The SIAS response
The main components of the SIAS response (reflecting the views of the committee) were as follows:

Actuaries are required to carry out work and provide advice in relation to complex financial and economic issues. Actuarial training equips actuaries well for this task, but not necessarily for wider business management. However, actuarial training is not intended to be a business management qualification.
Actuaries have a duty to a number of parties including members or policyholders, sponsors, their own employers, and the general public. In performing their role, actuaries are exposed to a number of conflicts of interest. The effective management of these conflicts is important to the long-term credibility of the actuarial profession. Greater clarity is required in relation to areas of conflict. Actuaries should always identify their client, to whom they should be responsible for providing clear, professional, unambiguous advice. Adequate protection should be provided to actuaries who do so.
It is recognised that historically there have been some areas of ambiguity in the guidance provided to actuaries by the actuarial profession. This has been, at least in part, the result of inadequate government legislation or inadequate guidance by other regulatory authorities. To move forward and to continue to improve the profession’s standards, additional peer review requirements should be introduced. Not only will this assist in continuing to raise standards, but it will also ensure greater consistency of advice. Government should also legislate adequately on areas of contention.
There have been significant changes within the regulatory and legislative environment over the past 12 months as a result of the enquiry carried out by Lord Penrose and as part of the Pensions Bill. These changes will, at least in part, address some of the current concerns that exist; however, further development is needed.
The current combined role of the actuarial profession, acting as both a regulator and representative body, should be reviewed with a clear separation of these roles. Furthermore, the profession should fully embrace commercial governance practices. Separate representative and regulatory bodies should be mandated to set clear objectives, and measurement against these objectives should be required. This is consistent not only with the approaches adopted in the private sector, but also with those adopted by some professions. The size of the actuarial profession (compared with other professions) should, however, be considered when establishing any governance and regulatory structures so as not to impose excessive burdens on the financial or time requirements of the profession.
The roles reserved for actuaries should be retained and expanded. In addition to the current roles that exist in insurance and pension schemes, there should be reserved roles in general insurance and for actuaries advising on investment policy to support long-term liabilities.
The market for actuarial services is highly competitive when external consultancies and in-house resources are taken into account. Some areas reserved solely for the Government Actuary’s Department could, however, be opened up to additional competition.
Highlights of survey findings
The survey operated by SIAS was open between 1 August and 31 August 2004. During this period 181 responses were received.

There were some strong views expressed in several areas.

Respondents perceived that actuaries were properly equipped to perform their role (20% strongly agree, 67% agree) and also supported actuaries getting involved in a wider range of business (37% strongly agree, 52% agree). In our response we suggested that wider business knowledge should be developed by those moving outside the area of actuarial expertise.

There was also widespread support for continued roles to be reserved for actuaries (26% strongly agree, 49% agree). In relation to pension schemes, the support was even stronger for retaining the scheme actuary role (40% strongly agree, 36% agree). However, the reserved roles should be subject to greater scrutiny (16% strongly agree, 47% agree) and should also involve greater peer review (20% strongly agree, 52% agree).

In the area of liability, there was a view that actuaries should accept some responsibility for designing financial products that turned out not to be all they promised (20% strongly agree, 50% agree). Interestingly there was also a view that actuaries were sufficiently liable for their actions (12% strongly agree, 60% agree). The committee interpreted theses responses as independent. Additionally, our response indicated that corporate shareholders and marketing departments have a strong role to play in the way that financial products are delivered to the market. The committee also went on to outline the actuary’s duty to his or her client and that clarity is required in this area.

On exams, there the assertion that the time taken to qualify of five to six years was adequate was supported (12% strongly agree, 67% agree). The view that companies that recruit and train students have an important influence on the profession was also supported (34% strongly agree, 56% agree). However, a view on whether this was a good or bad thing was not stated.

Finally, the respondents perceived that UK actuaries are well regarded internationally (23% strongly agree, 61% agree) but also that actuaries can learn from other professions (22% strongly agree, 52% agree), with lawyers and accountants being most commonly cited as professions from which actuaries should consider learning.

Final thoughts
The committee wishes to thank all those that participated in the survey. We would of course welcome any further views. The committee intends to continue to work with Sir Derek and provide support to the review process, while continuing to act on behalf of our members.

Adrian Hartshorn is honorary secretary of the Staple Inn Actuarial Society (SIAS); Adrian works for Mercer Human Resource Consulting, where he is a European partner