Ethical considerations in the practice of actuarial science

For Canadian businesses considering hiring actuaries, it is essential to understand not only their technical qualifications but also the professionalism and ethical framework that governs their profession.

Imagine a mid-sized Canadian insurance company preparing to launch a new product aimed at young families. The company’s leadership was eager to hit the market quickly. To support the rollout, they turned to their in-house actuary, Daniel, to validate the pricing model.

As Daniel reviewed the assumptions, he noticed that the projected claim costs had been set unusually low. When he dug deeper, it became clear that management had “adjusted” the figures to make premiums more appealing. The company would look profitable in the short term, but in reality, it risked underfunding claims and jeopardizing the financial security of its policyholders.

He should flag the issue to the senior leadership team, knowing it could delay the launch and disappoint the board. It wasn’t an easy decision, but it was the ethical one.

Why actuaries must be ethical

Actuaries deal in probabilities, risk, and financial consequences that affect people’s lives. Their work influences everything from whether an insurance company can pay claims in a catastrophe to whether pensioners receive their retirement benefits in full.

For businesses, hiring an ethical actuary is about trust just as much as it is about compliance. Without ethical conduct, actuarial work can distort reality, mislead decision-makers, and ultimately expose companies to reputational harm.

This article explores the ethical considerations actuaries must uphold and why businesses should demand the highest standards when engaging actuarial services.

Key principles of actuarial ethics

Canadian actuaries are bound by the Rules of Professional Conduct issued by the Canadian Institute of Actuaries (CIA). Members of the CIA who violates these rules risks investigation, disciplinary action by the Professional Conduct Board or expulsion from the profession.

The professional and ethical framework for Canadian actuaries is set out in the Rules of Professional Conduct. These principles ensure that actuaries maintain high professional integrity, avoid conflicts of interest and serve the public interest.

Professional integrity

Integrity is the cornerstone of actuarial work. In practice, this means exercising judgment with skill, care, honesty and fairness, even under pressure.

An example of an integrity failure includes the misrepresentation of results, such as understating reserves at the request of a client to make financial statements look stronger. Another may be working outside one’s expertise.

For businesses, this principle means you should seek actuaries who are candid, transparent, and not afraid to give unwelcome but necessary advice.

Qualification Standards

Actuaries must only take on assignments within their area of expertise and are required to keep their knowledge current. In practical terms, this ensures that Canadian businesses receive advice from actuaries who are both technically competent and up to date.

Standards of Practice

The CIA’s Standards of Practice are detailed guidelines governing actuarial work in Canada. They cover a wide range of areas, from insurance valuation to pension funding.

This means you can expect reports and recommendations qualified actuaries that are consistent and generally comparable across the industry. It also reassures regulators and stakeholders that the work meets the highest professional standards.

Control of Work Product

Actuarial work is sometimes shared beyond its intended audience. To prevent the risk of misuse or misinterpretation, actuaries must ensure their reports are clear and fairly presented, and correctly identify their scope, intended audience and authorship.

For example, if an actuary includes a reserve estimate in a report for financial reporting at a specific valuation date, they must explicitly state that purpose. Without this clarification, others may mistakenly assume that this figure is suitable for other purposes.

Disclosure and Conflict of Interest

Faire appel à des experts ne devrait pas être un exercice de « case à cocher ». Les conseils d’administration devraient périodiquement évaluer si les conseils fournis améliorent réellement la prise de décision et la gouvernance.

Les discussions du conseil sont-elles plus pertinentes, mieux informées et plus tournées vers l'avenir grâce à l'apport des experts ? Le conseil a-t-il pu éviter des erreurs coûteuses, saisir des opportunités plus tôt ou naviguer plus efficacement dans la complexité réglementaire ?

Les conseils peuvent ainsi affiner la façon dont ils utilisent les experts pour garantir une valeur continue.

Other obligations

Actuaries also must maintain confidentiality, including disclosing information only when legally required to ensure that client data and financial strategies remain held in a secured environment.

Courtesy and cooperation are also essential. Actuaries must treat colleagues, clients and regulators with respect, engaging objectively and professionally when differences of opinion arise.

Further, in advertising, actuaries must avoid false or misleading claims, ensuring that their qualifications and services are presented truthfully. This extends to the correct use of titles and designations such as Fellow of the Canadian Institute of Actuaries (FCIA), which signify full qualification under rigorous national standards. Misrepresenting credentials is a serious ethical breach.

Finally, actuaries have collateral obligations including disclosure of criminal convictions, cooperation with disciplinary bodies and addressing any observed material non-compliance in other actuaries’ work, including reporting it if unresolved to the Professional Conduct Board.

Looking for an ethical actuary for your organization?

For Canadian businesses, hiring an actuary is always going to be about trust, transparency and accountability.

The Rules of Professional Conduct and Standards of Practice of the Canadian Institute of Actuaries ensure actuaries maintain integrity, avoid conflicts of interest and protect confidential information.

But businesses will also play a role. Those who choose fully qualified actuaries who demonstrate a commitment to ethics, safeguard not only their own interests but also those of their clients and the public.

When evaluating actuaries, ask questions like:

How do you stay current with professional standards?

Can you provide examples of situations where you upheld ethical principles under pressure?

How do you handle potential conflicts of interest?

Make ethics a core criterion in your hiring process to ensure your business decisions are grounded in honesty and sound judgment.

When hiring an actuary, you’re placing trust in someone who will guide decisions that shape your company’s financial security, risk management, and long-term strategy.

At Axxima, our team of experienced insurance actuaries not only meets the highest technical standards but also upholds the Canadian Institute of Actuaries’ Rules of Professional Conduct in every assignment.

Whether you need support with pricing, reserving, risk modeling or regulatory compliance, we bring both professional expertise and ethical accountability to the table.