The actuarial code of conduct, with David Wright

David posts:

While my interview guests are getting settled in I occasionally ask them to read out some of the actuarial code of conduct and we discuss it. I’m assembling those clips into some content for my paid actuarial continuing education channel which all actuaries should check out (and get those CE credits before year-end!).

When I did this with Tyler my little warmup act turned into an impromptu Conversations with Tyler where we explore what it means to be an actuary and whether he and I might start a competitor organization! We end with a discussion of fronting and I missed an opportunity to talk about fronting can enable competition among insurers but that will have to wait for another day!
Listen to the (10 min) clip here!

There is also a transcript at the link.  For some time now I’ve believed that the best podcasts would be the pre-podcast discussions held right before the podcast proper starts.


Should there be a soothsayer code of conduct for economists? What would be in the code? I am a lawyer and subject to my state's lawyer code of conduct. Are economists subject to a code of conduct? I assume not. Actuaries and lawyers have to be because clients rely on their advice. Of course, people rely on economists' advice too, but I don't know that economists feel compelled to live up to a standard code of conduct in making predictions about future economic events, at least not in the same way as actuaries and lawyers. For lawyers, giving erroneous advice to a client is the surest path to bankruptcy. Skin in the game.

I assume erroneous for a lawyer means as per what the law says. Nobody expects a lawyer to predict what a jury will do. An economist’s prediction is tegarding what millions of people will do .....

The law seldom says what the law is because no two circumstances are the same. That's the beauty of the ambiguity that allows Apple to avoid billions in U.S. taxes by deflecting income to tax havens. Now, I admire the tax lawyer who rendered the opinion to Apple that Apple's scheme would actually work; he is as brave, or stupid, as the first person who ate an oyster. I suspect the person who rendered the opinion is an idiot, which really helps in rendering tax advice in an environment in which tax avoidance, tax evasion even, is considered an act of patriotism.

It may be ironic or purposeful or coincidental, but the people who know the most about cartel theory, economists, have declined to form a cartel or guild.

You can't practice law or medicine (and in many states you can't even groom a dog) without a license, and the ABA, AMA, etc. determine what the requirements are.

In contrast the AEA (American Economic Association) has no entry requirements except for paying the dues. And you don't have to be a member of the AEA, nor have an economics degree, nor have any economics knowledge, to call yourself an economist.

So with economics, it's caveat emptor. Anyone can call themselves an economist.

(The AEA did recently adopt a Code of Professional Conduct, although the code lacks concreteness. I thought it'd be more rigorous in its requirements about disclosing conflicts of interest and research funding sources. And it doesn't say what happens if someone violates that code of conduct. But the worst that could happen would be the AEA would boot them out of the association, which means pretty much nothing because AEA membership is not a prerequisite for doing economics nor calling yourself and economist.

There is no code. There is money.
There is no peace, there is anger
There is no fear, there is power
There is no death, there is life table.
There is no weakness, there is the Dark Side.

There's actually a lot of meat here. It'd be interesting to compare what actuaries work products are in different cultures. It'd be interesting to see how effective the 'authorities' are in policing their members AND to see how much of the burden they impose is to prevent competition. (my guess is near zero for policing and very high for the second.) It would be interesting to learn how deeply these authoritative bodies are embedded in the (local) legal system. And finally, it would be interesting to compare actuarial assessments with risk engineering assessments. There's gotta be some significant overlap between the mumbo-jumbo actuaries spout and the mathematically expressed mumbo-jumbo that risk engineers claim. Example is private space ventures, must have insurance but they also (I hope) have risk engineers.

Actuaries in the US are a self-policing / self-regulating profession. We have a board for counselling and discipline (the 'ABCD', of course) where we expel, suspend, or reprimand actuaries for bad behavior.

As to Tyler's question about what constitutes an Actuarial Communication, we leave that up to the Actuary. I see that actuarial communications as ones that your target audience may hear and rely on due to our status as an actuary.

David Wright was one of the best third basemen of the modern era in Major League Baseball, and his cogent and lucid thoughts on the actuarial code of conduct here are yet another example of why professional athletes are the top public intellectuals of our time. Stephen Curry intuitively has the insight of a NASA engineer and LeBron James’s photographic memory generalized to politics and not just basketball.

I was a bit surprised that David Wright didn't have more answers to the questions about who controls entry into the market for actuaries and how it's regulated. (But I haven't bothered to check David Wright's bio; I'm assuming he's an actuary but maybe as Tom suggests he's the David Wright who played with the Mets.)

An old one, but sometimes even a little stale humor is better than xeric analyses. How can you tell an extroverted actuary? He’s the one staring at YOUR shoes.

"Tyler Cowen:2:55 - it’s a natural monopoly, somewhat like a credit rating agency or. I would."

Natural Monopolies exist (?) -- certainly no controversy in economics about that superstition. And apparently even 'partial' ("somewhat") Natural Monopolies exist ??

There's been a bit of a controversy in the actuarial world lately as the main life/health actuarial organization is trying to push into the general insurance space with their own educational syllabus. They've had limited success as I understand it, but that's more to hiring managers preferring the traditional background rather than a (quasi) legal impediment. (And being a different actuarial accreditor, they may find it easier to branch out like this than Tyler's new actuarial society)

Would be interesting to know if the local contacts deliver on their trust. Are coverage disputes less likely than with large insurers? And as an alternative explanation, perhaps it's local knowledge/regulatory? Losses vary a surprising amount by locality, even for lines where there's no obvious relationship. That limits the value from scaling information while introducing monitoring costs, either internally or from regulators who might be resistant to approve rates that vary substantially within a single company in a way they wouldn't across companies.

The SOA’s general insurance track totally flopped. Gaining P&C market share was an uphill battle to begin with but the death blow was when the NAIC said it would not accept the credential as sufficient to sign off on P&C filings. Subsequently the SOA (switching tactics) announced a likely merger with the CAS, but then the CAS board recently voted it down.

Really the only legal barrier is the NAIC and requirements to sign the annual statement. But that doesn’t really explain much since the vast majority of actuaries don’t actually sign anything. That is to say that companies voluntarily hire far more credentialed actuaries than legally necessary (many companies would only need one). Hence it seems there’s market value to the actuarial credentials well beyond legal barriers to entry. And I think new organizations and credentials are viewed dismissively. Probably it’s that actuaries like to hire actuaries with the same credentials they have and management basically defers to the actuaries on this. Companies could of course substitute in noncredentialed labor but I think they find the filter sufficently useful.

Yes, that's my guess as to what's going on. In theory a company can hire a bunch of smart quantitatively oriented people and have one actuary check their work and sign the official documents. But they choose not to, quite possibly because it's an efficient filter; it might make a lot of Type II errors but probably only a small number of Type I errors. And with an employer's loss function, that might be a good tradeoff.

But my impression is that actuaries are unique in using what recently has become one of the hot trends in education, "competency based education" or "competency based credentials". Lawyers and doctors have bar exams (I don't know what engineers and architects have to do) but actuaries have that infamous sequence of actuarial exams that they have to pass. Or at least did as of many years ago, I haven't checked recently (I had a roommate who majored in math in college and was working at some sort of actuarial or insurance company and taking the first few exams -- and then decided to chuck it all and become a journalist, and seems to have succeeded at it).

That is, my impression is that if I hire a credentialed/licensed actuary, I've got pretty good assurance that they meet pretty good minimum standards. And that may be less true of lawyers and even doctors.

I'd guess though that as with just about any profession, having those fundamental actuarial skills is only the beginning, and that the truly good hires and truly good actuaries are the ones who also have good skills at communication, organization, management, etc.?

The exam system is alive and well. Right now there are about seven exams for associateship (plus some online modules) and then another three exams for fellowship. The early exams are mostly statistics, financial economics, and actuarial specific mathematics (life contingencies). The later ones require you to choose a track (life, health, pension, etc) and the exams are tailored to a practice area. They usually require knowledge of product development, reserving, accounting and reporting requirements, etc. I think it’s evolved this way because it’s niche, industry specific practice rather than a proper academic subject. Some universities cover the associateship material but I don’t think any really cover the fellowship material.

The exams all have strict standards (pass rates generally 40-50%) and are 100% blind graded with a single pass mark, no exceptions. This system is relatively good for assuring minimum quality. A lot of people don’t finish the exams but remain employed in the industry in supporting roles if they have work experience and decent skills.

Take a linguistics approach to Mr. Blow:
the "UPDATE_ROLLBACK_FAILED state when AWS CloudFormation cannot roll back all changes during an update. For example, you might have a stack that begins to roll back to an old database instance that was deleted outside of AWS CloudFormation. Because AWS CloudFormation doesn't know that the database was deleted, it assumes that the database instance still exists and attempts to roll back to it, causing the update rollback to fail."
I’m listening for something enlightening, something arresting, a vision and a vocabulary that will rally and inspire. It never fully manifests. He talks of summoning a “common sense of purpose, of common national identity.” He chides Donald Trump’s divisiveness and churlishness. But somehow, it all flattens for me. I’m too familiar with the framing.

"I end up diluting the whole enterprise. Fortunately, the pattern of debate within mainstream Continental aesthetics is such that it seldom manifests itself as the philosophy of any one particular artform, and so there is little opportunity for bias to arise. Instead, themes emerge which draw on relationships between all the arts"

But Nietzsche is just as invested in the first-order evaluative point that what makes a life admirable includes its aesthetic features. Famously (or notoriously), Nietzsche argues that to “attain satisfaction with himself” one should “‘give style’ to one’s character” (GS 290). Here, it is the fact that the person’s character (or her life) has certain aesthetic properties—that it manifests an “artistic plan”, that it has beauty or sublimity, that its moments of ugliness have been gradually removed or reworked through the formation of a second nature, that it exhibits a satisfying narrative (or other artistic) form—that constitutes its value (GS 290, 299, 370; TI IX, 7; EH Frontispiece). Alexander Nehamas (1985)

The problem is the right to return delusional has severely impaired reasoning by the NYT as shown by a slew of headlines I have highlighted. Thomas Friedman sought to convert Americans to a law, not a religion, but an Israeli Law. If Nigeria said, hey nigerians, you have free right of return, that would not be an issue. The problem he mistook laws for beliefs. Thus what ought to be inspirational or hopeful, at least honest, were not even, they were corrupted.

So, let's assume Mr. Blow's editorial is in satire of Nietzsche, pointing out the error of (Mr. Friedman's) perfectly natural error?

Take the headline, "was indicted by American prosecutors for his involvement in interfering in the 2016 presidential election."
in in in in....In a more general sense, numerous mythological and cosmogonical systems consider Four corners of the world as essentially corresponding to the four points of the compass. The NYT believes presidential elections are time machines.

Professionalism seems like a minor aspect of actuarial work. As a retired actuary, I see the field gradually disappearing due to overregulation, consolidation of clients and the rise of other modes of analysis. Big data analytics and machine learning are elbowing traditional actuaries aside.

Actuaries don’t really do “big data.” Overregulation means more actuaries, not fewer. Obamacare, principles-based reserving, new GAAP and IFRS rules, all that stuff means more work.

So your not really familiar with the field or current practice.

I work in life. What specifically do you disagree with?


There are more actuaries now than ever. Every year there is more than the previous.

I don't wish to pick on actuaries, since it's not their fault hucksters are drawn to the insurance game. But insurance is where actuaries work. Anyway, before hucksters were drawn to politics, they were drawn to the insurance game. Looking at the insurance landscape, many were located in the southwest, Nevada being a favorite location. What one will notice is that "leaders" in insurance started many insurance companies, no sooner did they get one going that they started on another. Why is that? Maybe one of the actuaries reading this blog will inform us. Hint: it's motivated by actuarial analysis of risk.

The Joint Board for the Enrollment of Actuaries, a federal agency, certifies and regulates "enrolled actuaries" operating under ERISA for pension plans. Pension actuaries usually work for employee benefit consulting firms.

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