Executive Summary
This report provides an analysis on how ethical conflicts arise in the actuarial profession. Through extensive research we uncover many conflicts of interest and ethical dilemmas that actuaries can face during their everyday work and careers. In particular we look at how genetic factors and rating criterion create conflict. We look at ethical conflict with respect to testimony, pension and reserve actuaries, and also how external watchdogs play a role in auditing actuaries’ decisions. We found that actuaries must always be alert and prepared to deal with these ethical conflicts. They must be aware that their actions can have an impact on the financial future of a company, the insurance rates of an individual, or otherwise could result in a problem for themselves. They must also be aware that there are external watchdogs in place to make sure they are not forging numbers but are instead making informed and accurate decisions. We recommend that students who intend to pursue actuarial studies take a course called Introduction to Actuarial Practice (MTHEL 131). We also recommend that the faculty should modify this course to put more weight on professionalism and ethics to emphasise the importance of the subject. This will educate students so they can make informed and ethically sound decisions in their future careers.

Table of Contents 1.0 Introduction…………………………………………………………………………....…....…1 2.0 Methods…………………………………………………………………......…………....……3 3.0 Background Information……………………………………………………....………...….…4 4.0 Pension and Reserve Actuaries……………………………………………..........………....…4 5.1 Conflict of Interests………………………………………………......………....…..4 5.2 Conflict Resolution………………………………………………….......…...……...6 5.0 Controversy Over Pricing Criteria…………………………………………………..........…...7 6.3 Ethical Dilemma of Pricing Actuaries……………………………………….......….7 6.4 Rating Criteria…………………….............…...……………………………....……8 6.5 Analysis……………………………………...........…………...……………....……9 6.0 Court Requested Testimony…………………………………......……...…………....………10 7.0 Genetic Information, Insurance and Actuaries………………………………………........…12 8.6 Ethical Values Supported by Insurance Companies…………….…………....……12 8.7 Genetics Leading to Erroneous Results……………………………...……....…….13 8.8 Unacceptable Discrimination………........................……………….....……....…..13 8.0 Regulatory Bodies and Watchdogs……………………………………………………....…..14 9.9 Roles and Responsibilities……….......………………………………………....….15 9.10 Necessities of Watchdogs……….........……………………………………....……15 9.0 Conclusion…………………….........…………………………………………………....…..18 10.0 Recommendations……………………………….....……………………………....…….19 11.0 References…………………………………………………………………………....…..20 12.0 Appendices…………………………………………...................…………………....…..23

1.0 Introduction Actuarial science (the field in which actuaries work) is a combination of mathematics and ethics which cannot be separated, and hence actuaries face ethical conflict. If we separate the mathematical and ethical part of an actuaries role “we run the risk of having the badly informed do-gooder (many good ideas but no carry through) who often botches because of lack of knowledge, or the clever but un-trustworthy expert” (McDonald 6). This helps us understand that all actuaries at some time or another will face ethical conflict. These conflicts come from pressures on actuaries, and usually fall into two main categories: ethical use of authority and manager duties verses professional duties. Ethical use of authority arises particularly at a senior level because “their decisions may be less scrutinized than those of someone in a less senior position” (White 59). Since they are well respected and have years of experience where they have done their job responsibly, they are questioned less on the decisions they make. They must be careful not to surpass the level of authority they have been granted, and use their authority to carry out their responsibilities effectively. This relates to the next point on manager duties verses professional duties. “The actuary has a dual role: an objective professional providing guidance on insurance issues and a business manager promoting the goals of an insurance company” (Feldblum 1). Actuaries must act in favour of their company while at the same time providing reliable information for their clients. The two actions regularly conflict and so ethical issues regularly arise. As will be presented, actuaries face ethical dilemma throughout their career. So how can we solve or lessen the impact of these issues? Education and understanding is the key to this issue. Most actuaries are well educated in the mathematical portion of their field from their post secondary and higher education, but “the good actuary also realizes that the scientific basis of the profession is only a partial guide to ethical decision-making in the profession” (McDonald 7). They must realize that at some point the “science runs out” (7) and “you must draw on more than your scientific background” (7). Actuaries must learn to not only follow the rules that are in place, but also to make sure that their decisions are “sensitive to context, aware of circumstances... and have good moral judgement” (7). This will help create actuaries who think about how their decisions will impact others, and make ethically informed decisions rather than ones based on purely regulation. “While the actuarial profession has been developing standards and rules for actuaries to follow, it is necessary that actuaries look beyond the rules and focus on trying their best to do the right thing” (White 72). Although most ethical conflicts fall into these two categories, there are also more specific issues that occur. This will be discussed more in detail later on in the document. Overall, actuaries must do more than the specifications that their profession states. They must go out of their way to inform themselves on the issues at hand so they can make informed and ethically sound decisions that will not jeopardize their careers, but help them succeed. We feel that this is an important message that the Dean of Mathematics needs to hear. We also believe that the actuarial science students of the University of Waterloo need to recognize these conflicts in order to be fully prepared for their future careers.

2.0 Methods
In order to successfully complete this project on ethics and actuarial science, the team has used the workshop hours at St. Jerome’s University every Thursday from 12:30 p.m. to 2:30 p.m. to discuss the report and to plan out the next steps. To gather academic resources the team has carefully researched mainly through the University of Waterloo library database and the Society of Actuaries website (www.soa.org). All articles we used for this project are academic journals written by university professors and actuarial scholars. In particular, the author of “Must Nice Guys Always Finish Last,” Michael McDonald, had a 21-year teaching career at the University of Waterloo and then founded the Centre for Applied Ethics at the University of British Columbia. We’ve also used a published paper from the Journal of Business Ethics by Sally Gunz and Frank Reynolds. Gunz and Reynolds are both the University of Waterloo professors, teaching ethics and business law.
In order to communicate effectively, team member have shared information and assignments through emails, and have used Microsoft Office suites (Word, Excel and Power Point) to draft our proposals and prepare for the final presentation. The team has also held additional in-person meetings outside of class to ensure team progress and meeting deadlines.

3.0 Background Information
First, we will start by stating what an actuary is. “Actuaries are business professionals who apply their knowledge of mathematics, statistics, and risk theory to real-life financial problems involving future uncertainty” (University of Waterloo). These uncertainties are usually most often insurance related but also include annuities, benefit plans and pensions. An actuary is also a very high and well respected individual in the business community. Next we will ethics, and specifically professional ethics. Ethics can be defined as “the discipline dealing with what is good and bad and with moral duty and obligation” (White 56). This can be used to create a definition for professional ethics as “the principle of conduct governing both a professional body and individual members of the professional body” (56). Overall this means that ethics covers the issue of doing things morally and correctly, without cheating or tricking others. As you will soon see, actuaries face situation involving professional ethics very regularly because of the nature of their profession. Now that we have background insight on what these important definitions mean, we can look at how actuaries and ethics conflict.

4.0 Pension and Reserve Actuaries Pension and Reserving actuaries face many different conflicts of interest, and so we will look into these conflicts and their solutions.
4.1 Conflict of Interests
This section examines the ethical dimension that arises in the area of pension and reserves when certain assumptions have to be made to meet future obligations. Actuarial assumptions are variables that are used to perform calculation of future benefits payments for example “mortality rates, employee turnover, employee salary increases, capital appreciation, earnings of pension fund investments, ages of retirement and other factors” (Gunz et al 85). The issue of conflict of interest with respect to pension funds arises when the sponsoring companies and the Fund Trustees rely on the same firm or actuary for advice (77). For example, a company may hire an actuarial firm to select a benefit plan for its employees-dental, medical, retirement benefits, drug benefits and that firm will have an edge on future or related actuarial work on the initial benefit plan selection. This connection naturally creates a situation where the firm in order to get more business may feel the need to modify the actuarial assumptions in favour of the sponsoring company so that contributions are reduced. This action clearly impacts a company bottom line as confirmed by this statement “The determination of the amount of the future pension obligations can be reduced by the adoption of certain assumptions for use in the actuarial calculation. Such a calculation would clearly benefit management as the impact is to reduce expenses for the provision of future pensions” (78). Therefore, an actuarial surplus is manufactured out of thin air where the pension assets are surpassed by future obligations and the funding of the reserves is reduced. However, a sound income provision must be secured to meet adequate reserves. Consequently, we notice that financial pressure is a primary motif for the ethical dilemma in the actuarial profession. Another aspect where the issue of conflict arises is the pressure on management to satisfy the stock market. This pressure leads to dangerous behaviour where long-term performance is sacrificed in favour of short-term gain. There is an incentive to modify some numbers to meet quarterly anticipated results. Obviously, a disappointing result will negatively affect the company perception by the stock market.
The other aspect where the ethical dilemma arises is when an actuary is working on behalf of two clients who are firmly competing against each other or “continuing service to client who has severed connection with a consulting firm” (William 175). It is clear that the actuary is put in an awkward situation if a valuation work has not been completed and the company no longer deals with the actuary’s firm, but wants the actuary to continue the work. With these issues in mind, what are the measures taken by the profession to tackle these problems? 4.2 Conflict Resolution
In the US for example, a Task Force was created by the US actuarial profession to investigate the matter and come up with recommendations. But, this task force concluded essentially that the code of conduct established by the profession is sufficient to guide the actuaries in their work. Instead, the Task Force proposed an expansion of the work of actuaries in non traditional actuarial areas like “retirement planning for individuals, health analysis, tort reform, terrorism analysis and so on”. The Task Force acknowledged the issue of conflict of interest in the profession, but indicated that the high ethical Standard established by the profession is enough since no major problem has occurred so far. Thus, we should still rely on the actuaries’ judgment to provide superior service. Really! With the recent collapse of major companies like AIG, is it not better to anticipate potential issues rather than avoiding them or being on the defensive? The other cases of the now bankrupt Enron, WorldCom, and Arthur Andersen are few examples in the accounting world that could serve has a reminder of what can go wrong when a profession is not kept in check. Although there are issues in the profession, some measures were put in place to standardise valuation report in Canada (MTHEL131 17-18). For example, all insurance companies must follow the same reporting format on a yearly basis. So, it is hard for an insurance company to manipulate the numbers. Thus, the protection of consumers is preserved. Moreover, insurance companies must have an “Appointed” actuary who is more independent the post 1990 reforms than the old valuation actuary (16). This actuary signs an “actuarial opinion” saying reserves are adequate, appropriate, and comply with the federal laws (17). Furthermore, the appointed actuary reports to the board of directors not to the Chief Executive Officer of the company. This actuary must report any issues to the appropriate authorities. This is an important fact because it shows that the public can rely on the actuarial statement published by the company. From this point, we see that the regulator is more in control even though it limits innovation in the actuarial field.
In light of the above discussion, we acknowledge the inherent issue of conflict of interest in the actuarial profession and the financial impact that it might have in the long run.

5.0 Controversy Over Pricing Criteria There are many criteria to consider when determining prices for products. We will now look into the ethical dilemma of different rating criteria, and how these criteria should be effectively used. 5.1 Ethical Dilemma of Pricing Actuaries
“Pricing actuaries, as business managers, may determine premium rates and relativities to optimize income or market share, even when these rates conflict with policyholder’s equity” (Feldblum1). This is the main idea of the ethical dilemma of pricing actuaries. Traditional ratemaking procedure uses cost-based pricing techniques: premiums should cover expected losses and administration expenses (3). That is, premium rates increase from low-risk group to high-risk group since the expected loss increases. Although the method sounds reasonable, controversy arises at times over price discrimination: is actuarially reasonable pricing actually fair? For example, statistical evidences support price differential while social considerations are against it. The public controversy over price differential based on potential policyholders’ characteristics makes heavy use of terms like “fairness” and “discrimination”; in particular, both sides argue that they are in positions dictated by justness (Beider65). In the business side, rate differential can be a source of competitive advantage just like any other product differentiation. Thus the actuaries, either as business managers or employees, may employ various rate differential criteria to maximize profit, regardless of the social acceptability. The following paragraphs discuss the controversy over two of the risk classification criteria, gender and age.
5.2 Rating Criterion
The use of gender as a classification factor in the rating of insurance policy has been under increasing attack in recent years. Actions have been brought against insurers contending that gender-based classification systems violate the civil rights (Milbourne264-266). Various evidences show that women pay more than men at the same age for a number of insurance products such as privately-purchased major medical and disability insurance. Moreover, the Women’s Rights argues that female customers are overcharged and advocates the complete elimination of sex as a rating variable, while the insurance industry contends that the ratemaking procedure is both fair and according to the principles of risk classification (Beider65-67). In fact, not all insurance products have higher premiums for women. For example, life and personal auto insurance charge women lower rates than men. Women have longer life expectancy than men at the same age, so they pay lower rates for life insurance. Statistically, female drivers have lower accident rates than males of the same age group, so their auto insurance rates are lower. From a business manager’s point of view, using gender as a rating variable makes sense, and an insurer who does not use it may be at a competitive disadvantage (Feldblum 14 -16). So, an actuary who considers gender as a morally unacceptable criterion will face a dilemma.
As an illustration, consider automobile insurance. In certain provinces and states of North America, insurers are legally entitled to charge increased premiums to certain drivers based simply on their age, because actuarial analysis does bear out the fact that both younger and older drivers, as a group, present a greater risk for insurance purposes, even though a particular individual may not present such a risk. Many Canadians consider driving a car as a right even though it is a privilege. Thus the prohibitively high price is viewed as an affront to their right. Rea and Trebilcock (1982) examined ethical arguments for and against using policyholders’ characteristics as a basis for risk classification. They concluded that the case against employing discriminating factors is weakest for age, primarily since all of us must bear the burden of old or young age at some point in time. That is, all of us face an equal probability of passing through each class in our life time.(Brown et al103-104)
5.3 Analysis
It is easy to understand why one might conclude that any differential treatment based on gender or age must be unfair, and therefore, unethical. Actuaries, however, would view this as positive differential as it makes distinctions based on valid and reasonable statistical evidence. Here are the two relevant principles of risk classification: * The system should reflect expected cost differences. * The system should distinguish among risks on the basis of relevant cost-related factors.
The risk classes are certainly not defined simply by one or two variables. Other criteria such as past record are also used. Keep in mind that the price of insurance is set at the beginning of the policy exposure period, when no one knows for sure how much the actual cost would be. Thus all values are determined by expectation. Therefore, whether one is easily ascertainable is also an important factor of choosing rating variable. The gender and the age are such variables. Driving patterns, a useful variable for auto insurance in predicting exposure to risk, however, is extremely difficult to determine (Brown et al105-108).
We are not going to defend rate discrimination, nor do we argue against it. Instead, the critical question for the present discussion is how should a pricing actuary balance social acceptability and the benefit of the firm. When facing such ethical dilemma, principles are usually not enough to solve the problem because they provide little explicit guidance. As a pricing actuary, one should first realize the responsibility of this position and the negative influence on the whole society of any unethical practices. Secondly, as employees, actuaries need to demonstrate their professionalism. If ample evidence supports the use of any assumptions like the one discussed above, the actuary should use them despite possible public controversy, after all inaction is not an option in the actuarial field. No one wants to deal with bankrupt insurance company. Lastly, actuaries need to make their own judgments when they notice any conflicts between professional ethics and what they are told to do.

6.0 Court Requested Testimony
My research leads up to the court requested testimony, which is an issue that talks about people, who are in charge of actuary analysis and practices, are requested to be independent and objective messengers. “An actuary is a professional, trained in the application of knowledge in such areas as mathematics, statistics, and economics, toward the solution of financial problems involving future emerging events” as Mr. Murray A. Segal suggests.Before actuaries get an assignment, they should try to learn enough about it sothey can determine whether they should take the assignment. Then they shouldadhere to the professional standards. As a matter of fact, if one run down the list of the standards, you'll get a checklist of what to do and what not to do. It is usually a good way to get a fix on the problems that a particular actuary may have in dealing with a case.When actuaries volunteer to work on behalf of the Academy, most of the times they will leave their employer’s interest at the door and put the interests of the Academy as the top priority. Instead of being called upon to give expert testimony concerning a broad range of issues, they will build Academy analysis and recommendations around an independent view. As actuaries should work on a committee basis and a consensus basis, in which members should also take their obligations to adhere to the Academy’s conflict-of-interest policy. Ninety percent of the members of that committee work on identification of principle, testimony concerning other relevant testimony and inconsistency with prior statements, perform some cross-examination and discover the error. Although working on a case that directly involves the member’s employer or client, actuaries sometimes provide expert testimony and support the material directly to a legislator, regulator, arbitrator, or judge. Actuaries may find themselves are in an opposite position about opinions, assumptions and conclusions which may be in conflict with other actuaries operating in different fields. Actuarial judgment is another very important thing in what we do and should prevail as long as it is supported. Cross-examination, of course, is the most fun of all: when actuaries encounter the situation of dilemma and actuaries are inclined to obey the interests of parties but is contracted by facts. So they may concede.
7.0 Genetic Information, Insurance, and Actuaries

Actuarial Science is based on the principle of sharing costs associated with risks and on helping all those insured in case of accidents or hospitalization. This section explores the ethical values promoted by insurance practices, as well as some issues introduced by the availability of genetic information. Insurance companies have developed models of handling risk that are beneficial for all customers, because they share the risks. The availability of genetic information can lead to wrong results in actuarial calculations. Some of these errors are categorized as measurement errors, correlation without causation and discrepancies between genetic risks and behavior. Additionally, insurance pricing according to genetic information can cause major ethical problems, and lead to discrimination.

7.1 Ethical Values Supported by Insurance Companies
Insurance policies aim at promoting ethical values, by helping people to control risks." By pooling, and so transferring risks, those who turn out to suffer antecedently uncertain harms can be assured in advance that they will be helped if those harms arise" (O'Neill 1087). Insurance practices provide ways to ensure the ethical values of mutuality and solidarity. The risks shared by customers, because they all pay certain amounts of money, which are used to help any of them, if in need. Each person insured benefits from the assets gathered from the other customers. Certainly, when calculating risks, some persons are more prone than others to suffer a loss. Actuarial fairness demands that they should be charged more money. Currently, premiums are calculated in such a way as to promote the ethical values of leading a healthy and non-risky life style. As such, people are charged more if they are involved in traffic accidents, smoke or use illicit drugs. Therefore, with pricing, insurance companies encourage people to avoid doing harmful activities.
7.2 Genetics Leading to Erroneous Results
The availability of genetic information due to the evolving technology trends can cause major mistakes in insurance premium calculation. One factor would be measurement error. Things such as false negatives can affect the interpretation of genes. The study of genetic information has begun not long ago, and we do not have sufficient statistics to back up the facts that certain genes surely cause certain diseases in all the people. Genes are assembled in a code-like structure, and as long as we do not fully understand the full meaning of the whole genetic code, we can draw wrong conclusions from it. Another factor leading to wrong results is that of correlation without causation. Medical doctors, statisticians or actuaries may develop statistical models that show a high correlation between a certain gene and a disease, but this does not always imply a causation relationship between the two. Genetic information surely helps us better understand the human body, but it cannot be held as the only factor responsible for disease. Behavior has an important impact on health. In many cases, people have a natural predisposition to a disease, and that makes them lead a balanced life which will, in the end, cause them to be healthier than others who do not have the "faulty" genes.
7.3 Unacceptable Discrimination
The use of genetic information in insurance policy introduces new ethical issues, related to unfair treatment of people. Actuarial "fairness" is described as charging people money directly proportional to their risk level. "It is readily imaginable that people with certain adverse genetic factors would be denied insurance of certain sorts, or priced out of it, if this policy were followed"(O'Neill 1088). The availability of health insurance is a basic factor that people need in order to live." It can be a social disaster, indeed a human tragedy, if people are priced out of health insurance"( 1088). By using genetic information to calculate premium pricing, actuaries would discriminate against people in unacceptable ways, because genes are something people are born with, not something they choose. Consequently, those born with genetic predispositions to certain affections, which, as shown above, are not sure indicators of future disease, would be condemned to be refused or to pay unusually large amounts of money for health insurance, which is not fair.
Even though insurance actuaries aim at calculating their prices on a basis that promotes fairness, equality and solidarity, the advent of using genetic information for premium estimation introduces new ethical issues. Differentiating among individuals on the basis of behavior motivates them to change and avoid health risks. On the other hand, splitting prices according to genetic code would leave some more unfortunate persons without health insurance, leaving them, in some cases, unable to live. As if this was not enough, measurement error, correlation without causation and faulty genes backed by healthy behavior are sure signs that future health cannot be fully predicted by genetic factors. Finally, it follows that, in order to continue to promote ethical values, actuaries "have no unrestricted right to receive or use genetic information for actuarial purposes" (O'Neill 1093).

8.0 Regulatory Bodies and Watchdogs
One of the hardest things in life is making decisions especially if it involves a 30-minute presentation and a recommendation to the CEO of a company on the company finances. That is what we call pressure, and an actuary has to face this often because conflict arises while making such influential decisions. By conflict we mean ethical issues such as if we are meant to play by the rules or to please our employer. Thus, these decisions are often manipulated by one’s self-interest and emotions. This is where the “Watchdogs” come into play to assure ethical practices and decisions are carried out. This part of the project discusses the roles of external auditors from regulatory bodies known as ‘watchdogs’ and their importance.
8.1 Roles and Responsibilities
Regulatory bodies are either government or private bodies which can be hired by companies or at times required by companies to perform inspection and auditing on the financial reports and statements prepared. Why the hassle? These regulatory bodies have qualified auditors to thoroughly inspect the credibility of the documents and to ensure professional actuarial standards and ethical guidance are adhered to. An auditor will detect reports breaching the laws or regulation, fraud, dishonesty, and decisions that risk the interest of the insurer and the public. These actuarial standards are set by individual actuarial associations at a national level such as Actuarial Standards of Practice issued by the US Actuarial Standards Board and by the Actuarial Standards Board of the Canadian Institute of Actuaries for the US and Canada and Actuarial Standards issued by the UK Board for Actuarial Standards.
8.2 Necessities of Watchdogs
The actuarial profession has grown substantially in the last decades. In the past, a job of an actuary was not as challenging as it is today fraught with extra responsibilities. Decisions were not as consequential and devastating to the extent of causing the entire company to crumble into bankruptcy. However, the actuary today finds himself in a whole new situation, with more variables, greater risk, and a whole lot more decision making. Because of the power given to an actuary, certain ethical practice may be breached for a certain motive and their job should always be carried out in a regulated environment. This is where the Watchdogs come in to ensure a regulated environment.
Secondly, the responsibilities of these regulatory bodies must not be underestimated. They play various roles at different levels to ensure that the entire process of preparing reports adhere to the professional standards and conduct. Consider the Canadian Institute of Actuaries and also the Office of Superintendent of Financial Institutions (OFSI) in Canada.
Canadian Institute of Actuaries (CIA)
The CIA, a professional organization is responsible for developing and enforcing the professional Standards of Practice of actuaries. The CIA is made of up three distinct bodies: the secretariat, Actuarial Standards Board (ASB) and the Actuarial Standards Oversight Council (ASOC). The ASB is responsible for ensuring and maintaining the Standards of Practice in Canada. The ASOC on the other hand is responsible for overseeing and providing input to the work of the ASB.
OFSI also does regulatory practices which involve auditing actuarial work for pension plans. We can see that these regulatory bodies play a distinct but huge role in every aspect of ensuring proper professional and ethical standards are practiced, from setting standards to managing disciplinary cases. Thus, it is important that these regulatory bodies do exist.

Next, we have numerous scandals in the past that involves actuaries breaching the professional code of conduct. Actuaries are also human and there could be hidden motives behind certain actions. Thus, maybe with a certain fee some of these ethical conducts can be overlooked. Some examples of scandals that caused disastrous consequences are the bankruptcy of AIG and Mercer involved in a pension scandal. In the case involving Mercer, the largest actuarial firm in the United States, “Mercer failed to warn the county of the potentially high costs of the backdrop lump sum pension benefit, as well as a provision allowing retirees to get cash for unused sick time” (Umhoefer and Milwaukee 2). That is why we need these Watchdogs to ensure the safety of the public interest considering the past scandals.
Lastly, to add to the reasons on why ‘watchdogs’ are needed, the Canadian Institute of Actuaries (CIA) is introducing a peer evaluation processes where actuaries will review each other’s performance according to a certain set standards. If reviewing the work of actuaries by an independent source is not important, why would the CIA introduce such practice? The CIA had to set certain code of conduct as a guideline for evaluation and also introducing a committee. Thus, this shows how important a regulatory body is in the work of an actuary (Lewis 4).

9.0 Conclusion
To sum everything up, actuaries face ethical conflicts in their everyday work. This is a broad range including dealing with genetic factors, testimony in court, external watchdogs and financial impacts on the future. This continues to show that actuaries must always be alert and prepared to deal with these ethical conflicts. They must be aware that their actions can have an impact on the financial future of a company, the insurance rates of an individual, or otherwise could result in a problem for themselves. Actuaries must also be aware that there are external watchdogs in place to make sure they are not forging numbers but are instead making informed decisions. Overall, actuaries must do more than the specifications that their profession states. They must go out of their way to inform themselves on the issues at hand so they can make informed and ethically sound decisions that will not jeopardize their careers, but help them succeed.

10.0 Recommendations * With respect to health insurance, we recommend that the students who intend to get into Actuarial Science think more about behavioural factors rather than genetic predisposition in pricing health insurance. * With respect to pricing property and casualty insurance, actuaries should balance socially acceptable practices with the benefit of the firm. * We recommend that students should not just focus on numbers because a correlation factor does not necessarily imply causality. * We recommend that students who intend to pursue actuarial studies take a course called Introduction to Actuarial Practice (MTHEL 131). We also recommend that the faculty should modify this course to put more weight on professionalism and ethics to emphasise the importance of the subject. * We recommend preparing the students using an interactive tool (like the PD1 course for co-op students) where students are taught how to behave in the workplace. The faculty should implement such a program for Actuarial Science students from an ethical and professional perspective. This Program should include real life scenarios.

11.0 References

“About Actuarial Science.”University of Waterloo.Web. 9 Nov. 2010 <http://www.stats.uwaterloo.ca/stats_navigation/AboutActSci.shtml>

Accounting Subcommittee.“Issues Paper on the Roles of and Relationship between the Actuary and the External Auditor in the Preparation and Audit of Financial Reports.”International Association of Insurance Supervisiors. 2009. Web. 15 Nov. 2010. <http://www.iaisweb.org/__temp/Issues_paper_on_the_relation_between_the_actuary_and_auditor__October_2009.pdf>

Actuarial Standards Oversight Council. “History and Purpose.” Actuarial Standards Oversight Council. 2007. Web. 20 Nov. 2010. <http://www.asoc-csna.ca/>

Beider, Perry. “Sex Discrimination in Insurance.”Journal of Applied Philisophy. (1987): 65-74. Web.

Brown, R., Charters, D., Gunz, S., and Haddow, N. Age as an Insurance Rate Class Variable.Waterloo, Canada: University of Waterloo, Graphics, 29 Dec. 2004. Web.

Brown, Robert. Introduction to Actuarial Practice. 2009. Waterloo, Canada: University of Waterloo, Graphics, 2009. 16-19. Print.

Chiu-Cheng, Chang.“An Ethical Decision-making Framework for Appointed Actuaries.”
Graduate Institute of Management, Chang Gung University, Taiwan. Web. 10 Nov. 2010.

Feldblum, Sholom. “Professional Ethics and the Actuary.”Casualty Actuarial Society.Web. 9 Nov. 2010. <http://www.casact.org/pubs/dpp/dpp93/93dpp001.pdf>

Gunz, Sally, John McCutcheon, and Franck Reynolds."Independence, Conflict of Interest and the Actuarial Profession." Journal of Business Ethics. (2009): 77-89. Print.

Instance, Caroline. Regulatory Environment of the UK Actuarial Profession.International Actuarial Association. 2006. Web. 15 Nov. 2010.

Lewis, James. “Actuaries move to peer review.” Industry.Benefits Canada. June 2003. Web. 20 Nov. 2010.

Marples, William. Actuarial Aspects of Pension Security. Homewood, Illinois: Richard D. Irwin Inc, 1965. 175-83. Print.

McCauslan, George. “Actuarial Expert Testimony.”Society of Actuaries.17-20 Oct. 1999. Web. 12 Nov. 2010.

McDonald, Michael. “Must “Nice Guys” Always Finish Last?” Society of Actuaries.1995. Web. 9 Nov. 2010. <http://www.soa.org/library/proceedings/record-of-the-society-of-actuaries/1990-99/1995/january/rsa95v21n3a1.pdf>

Milbourne, Walter. “Sex Discrimination by Insurers in the Rating of Policies: A Post-Norris Examination.”Insurance Counsel Journal. (April, 1985): 264 – 273. Web.

Milburn-Pyle, P. “The Actuary in the new South Africa.” Actuarial Society of South Africa.3 Nov. 1992. Web. 16 Nov. 2010.

Onora, O’Neill. “An Ethical Decision-making Framework: Some Ethical Issues.” Newham College, Cambridge, UK. Web.10 Nov. 2010.

Umhoefer, Dave and Milwaukee, Steve. “County Board settles with Mercer for $45 million in pension scandal.” All Business. 20 May. 2009. Web. 17 Nov. 2010.

White, Charles and Richard V. Atkinson."The Ethical Development of Actuaries."Casualty Actuarial Society.Web. 12 Nov. 2010. <http://www.casact.org/pubs/dpp/dpp93/93dpp053.pdf>

Cover page picture, http://down1.sucaitianxia.com/psds2/p68/psds9879.jpg

12.0 Appendices
Table 1 Sensitivity Analysis of Present Values of pensionsSituation: A company has a pension plan which employees join at age 30 with a salary of $4000 per month. The pension is 50% of final year’s income with payments in form of a life annuity with a guarantee of 5 years of payments. If the employee dies before the retirement age of 65 years, contributions are returned with interest. There are three males employed who are currently 35, 45 and 55 years of age | | Interest rate | Inflation | Salary scale from age 30 | Present Value (PV) | Case 1-males | 6% | 2.5% | n/a | $235,308 | Case 2-males | 6% | 3% | n/a | $263,258 | Case 3-males | 6% | 2.5% | 1% | $333,339 | Case 4-females | 6% | 2.5% | n/a | $258,019 | Case 5-males | 6% | 2.5% | n/a | $313,125 |

Individual Sections
Martin Brandt: 1.0 Introduction and 3.0 Background
Moise Ojong: 4.0 Pension and Reserve
Jocelyn Pang: 5.0 Pricing
Echo Chen: 6.0 Testimonies
Susan Wang: 7.0 Health Insurance
Avin Low: 8.0 Government Watchdogs