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Life Health > Life Insurance

AAA Points Birnbaum to 2010 Disciplinary Records

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Birny Birnbaum has asked the American Academy of Actuaries (AAA) for information about the effectiveness of its disciplinary process, and the AAA has suggested that he get the information from public sources on its website.

Birnbaum, executive director of the Center for Economic Justice, Austin, Texas, wrote to the AAA, Washington, earlier this month to request 20 years of data on matters such as the number of complaints filed with actuarial disciplinary boards and the number of actions taken.

The AAA has recommended that Birnbaum look on the AAA website for information about public discipinary actions that it has taken, and that he go to the site of the Actuarial Board for Counseling and Discipline (ABCD) for statistics on the number of complints filed and the disposition of the complaints.

The AAA and Birnbaum have been debating the role volunteer actuarial society committees should play in conducting the kinds of life insurance claims experience studies that might be needed to support a shift to a principles-based reserving (PBR) system. Advocates of the PBR approach want to replace reliance on static formulas with a move toward having actuaries use their judgment and come up with forecasts indicating how products, lines of business or companies might perform in a wide range of conditions.

Traditionally, groups like the AAA, Washington, and the Society of Actuaries (SOA), Schaumburg, have helped the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., collect and analyze insurance industry data. The Life Actuarial Task Force at the NAIC has been working on a valuation manual section that would give formal recognition actuarial groups play in experience studies and state that the groups should get access both to company-level data and to “sanitized” individual data.

Birnbaum has argued in a comment letter sent to the NAIC that members of actuarial groups who help on a volunteer basis may have conflicts of interest and may get involved with activities that could lead to antitrust concerns.

If the NAIC and individual state insurance regulators want help with experience studies, they should hire actuaries with formal contracts that spell out the actuaries’ obligations to keep confidential data confidential, disclose and avoid conflicts of interest, and avoid antitrust problems, Birnbaum says.

The AAA says in a letter of its own that the main U.S. actuarial groups have a strong Code of Professional Conduct that includes strict provisions regarding matters such as conflicts of interest and oversight by the ABCD. Once the ABCD makes a recommendation for discipline, an actuary’s professional group is responsible for acting on the recommendation.

Birnbaum wrote to the AAA to get quantitative information on the actuarial disciplinary system.

“For example,” Birnbaum asked, “how many actuaries were found in violation of the Conflict of Interest Policy? How many actuaries were found in violation of the Antitrust Policy?”

The United States had about 19,700 working actuaries in 2008, according to the federal Bureau of Labor Statistics.

The ABCD says it completed 22 cases that involved something other than questions for guidance in 2010, down from 36 in 2009 but up from 15 in 2005.

The ABCD recommended public discipline or a private reprimand in 5 cases in 2010, or about 2.5 actuaries per 10,000 actuaries, up from 2 in 2009 and up from 1 in 2005 according to the board’s website. The board provided counseling in 4 cases in 2005 and in no cases in 2010.

Over a period extending from 1992 to 2010, the ABCD has considered 369 cases involving something other than requests for guidance, and it has recommend private reprimands or public discipline for 23.

Other actuary coverage from National Underwriter Life & Health:


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