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The Actuary The magazine of the Institute & Faculty of Actuaries

Two hats?

AS A BOY I REMEMBER READING the stirring accountof Captain Scott’s ill-fated last expedition tothe South Pole. Some words he wrotetowards the end have remained with me tothis day, so much so that in conversation I often referto what I call the ‘Captain Scott principle.’The words he scrawled in his diary were: ‘We tookrisks, we knew we took them; things have come outagainst us, and therefore we have no cause forcomplaint…’The crucial point here is that of knowing whetherone is taking a risk. If we look at investment in theStock Exchange it is clear that people know, or oughtto know, that they may lose all the money which hasbeen invested. Until recently, anyone seeking tobecome a Lloyd’s name was required to appear beforea committee of Lloyd’s and was left in no doubt thatthey could lose all their assets and had to confirm thatthey understood just what they were taking on. Nevertheless,a name might think that he or she was supportinga marine syndicate, and naturally imagine thatthe risks underwritten were boats and/or cargoes.However, they might not know that many marine syndicatesare allowed to underwrite what is called incidentalnon-marine business, which might contain awhole host of nasties.Over the years I have found the Captain Scott principlevery useful in clearing the air on many occasionsand in many different circumstances.One of the recurring problems faced by actuariesover the years has been that of reconciling our obligationsand duties to the profession with the responsibilitiesof our job. Chris Daykin, the governmentactuary, has recently drawn attention to the obligationof actuaries to be conscious of the need for the interestof policyholders to be firmly kept in mind when amerger or acquisition is being pursued. Furthermore, itis not sufficient for us merely to pay lip service to thisneed. As with the administration of justice, we have tobe seen to be paying close attention to the policyholders’natural expectations. Many of them take out policiesto cover mortgages or to provide a pension, andbecause many of them are ignorant of what preciselythey are taking on, rely on advisers to give them thebest advice. Using the CaptainScott principle, they aretaking financial risks butmay not know completelywhat risks they are taking.There have been too manyexamples of the mis-sellingof insurance policies andpensions for us as a professionto be complacent.When it happens I firmlybelieve that the Faculty andInstitute must speak outloudly and clearly. Nearly 50years ago, in a paper to theInstitute, FH Spratling wrote:‘The fathers of the Institutewere cultivated men ofaffairs who also commandedrespect and made major contributionsto knowledge andachievement in other quitedifferent fields There was a strong body of opinion inthe early days of the Institute that actuaries not onlycould but should apply themselves to matters beyondthe range of life contingencies.’Back in 1959, when the subject of national pensionswas in danger of becoming a political football, the Facultyand Institute came firmly out into the open witha paper, ‘National pensions: an appeal to statesmanship.’This set out the long-term financial implicationsof any proposals to increase national pensions. Atelling phrase in that document was that we were‘promising ourselves pensions which our children willhave to pay for.’We belong to a respected and learned profession witha high reputation for honesty and integrity. However,as with many things worth having in life, we havecontinually to maintain it by constant vigilance. MrDarcy in Jane Austen’s Pride and Prejudice says: ‘Mygood opinion once lost is lost forever’. So it is that wehave to keep the good opinion which people have ofus in our minds at all times, and to speak out when weperceive that something is not right.