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From the Readers
Revise Precept 1
Dear Editor:I appreciate the Ethical Issues column, "Cruising for an Ethical Bruising" (The Actuarial Review, November 2002).
Joe Fellows probably crossed the line and conducted himself in a "professionally inappropriate" manner. I cannot define "professionally inappropriate" in a way that can be applied objectively and consistently to other cases, but I know what is inappropriate when I see it.
Joe Fellows probably crossed the line and violated Precept 1, although I am not absolutely sure which criteria he violated. Was he being dishonest? Was he acting without integrity? Was he being incompetent? Is there any difference between acting honestly and acting with integrity? I cannot define any of these criteria so that they can be applied consistently and objectively. I believe Joe Fellows violated Precept 1 because my gut tells me he did.
Joe Fellows's obvious defense to a charge of violating Precept 1 is that the criteria are vague and ambiguous and can only be enforced in an arbitrary and subjective manner. It is as though our government were to pass a law that said, "All citizens must conduct their life in an honest and upright manner." Can you imagine the jury trials that would ensue if such a law were allowed to stand? Democrat D.A.s would be putting Republicans in jail and vice versa.
I predict that an unprecedented number of actuaries will be forced to defend their work in courts in the next ten years. Solid, reputable actuaries will be unjustifiably driven from our profession with ruined reputations because of the vagueness of our own Precept 1. Juries (with the help of plaintiff lawyers) will put their own interpretations on the Precept 1 criteria.
Probably the most dangerous criteria in Precept 1 are the "skill and care" criteria in Annotation 1-1. Do you know that an actuary can practice within every Standard of Practice and still be disciplined by our profession for failure to practice with "skill and care?" Our profession cannot define those terms objectively, but we apparently know a lack of skill when we see it. How can it be discerned when a difference of opinion between two actuaries is just that, a difference of opinion, and when the difference is because one is exhibiting a lack of skill?
If I were a lawyer intent on "lynching" a reputable actuary in front of a jury, I would focus on Precept 1, Annotation 1-1.
Can you imagine an actuary trying to explain to a jury that loss reserves are prospective and that, even though the reserves turned out to be egregiously wrong, reasonableness can only be judged based on the data and information available when the reserves were set? Then imagine the lawyer turning to the jury and saying, "Mr. Fellows, are you trying to tell us that even though your reserve estimates were wrong by millions and millions of dollars that you calculated those reserves skillfully?"
That actuary you see twisting in the wind could be any one of us and will be too many of us.
I recommend that our profession immediately consider revisions to Precept 1. As a starter, I recommend Annotation 1-1 be revised to read, "An Actuary shall perform Actuarial Services in accordance with published Standards of Practice."
Michael J. Miller, FCAS
Expand the Vision
Dear Editor:I applaud Michael A. Walters' piece, "A Global Profession" (The Actuarial Review, November 2002), in which he envisions international exam-giving bodies for the different practice areas, along with country-specific organizations to administer country-specific exams. This is the type of visionary thinking we need if we are to move forward as a profession.
I would expand Walters' idea to encompass more than just exams. In addition to global exams, why not global continuing education offerings and global research publications? Also, Walters states that, "exposure to techniques in different areas of practice can be enlightening to the actuarial student." This is no less true for the experienced actuary, especially if we are to branch out into new areas such as enterprise risk management. The international bodies would need to have sufficiently close ties so that synergies among the practice areas could be exploited.
As we move forward in this era of globalization, I believe that a change in the political structure of our profession is needed if we are to take full advantage of our opportunities. There will be differing views on exactly what this change should be, but the first step is to explore different ideas. Walters has provided us a valuable contribution toward this end.
Clive L. Keatinge, FCAS
Oil Shortages Premature
Dear Editor:I take issue with Curtis Gary Dean's article "Cheap Oil for How Long?" (The Actuarial Review, November 2002). Dean states that, "For oil to be created, organic-rich source rocks had to be buried for a million years or more..." Actually, in the Guaymas Basin in the Gulf of California there is oil forming now which is dated from 1,240 to 4,240 years old1. Researchers have found that, "... oil was obtained under laboratory conditions by the long heating of vegetation and water, and it also came out recently under natural conditions"2. One can easily consult the literature to find experiments where organic-rich shales under pressure with water produce oil quickly.
Jay Hall
1 from "Youngest Oil Deposit Found below Gulf of California," New Scientist, p. 19, Apr. 6, 1991, referenced in "Baby Oil" at www.science-frontiers.com/sf076/sf076g09.htm
2 "Oil was Obtained under Laboratory Conditions" at www.cnt.ru/users/chas/oil.htm, translated from the Russian by babelfish.altavista.com.