The Actuarial Evidence Area of Practice

By Craig A. Allen, FCIA

Actuaries are well-known as experts in financial evaluations involving future contingent events, like mortality, retirement, disability, and economic discounting. A fascinating and influential application of this expertise is Actuarial Evidence (AE)—where actuaries assist the parties and the court in resolving financial disputes. Approximately 85 actuaries across Canada engage in this area of practice.

AE actuaries have an entrepreneurial streak—usually operating as sole practitioners, or in small firms—and often enter the practice area after several years in one of the larger practice areas. AE is one of the few practice areas to deal directly with consumers, offering immediate feedback on the relevance and value of actuarial practice. AE practitioners occupy a resilient and adaptable segment of the profession, one that has shown the capacity to innovate and reach out to new markets for their expertise.

AE actuaries are usually retained by lawyers, and in every case provide an expert, independent opinion. The actuary’s opinion is delivered in the form of a report used by the parties to attempt a pre-trial settlement of their dispute. Where the dispute does not reach settlement before trial, the AE actuary may also present his or her findings as oral testimony at trial.

The Major Areas of Activity

Civil Litigation

Actuaries provide expert opinions on economic damages in personal injuries and fatalities, including motor vehicle accidents and medical malpractice. In this area, Actuarial Evidence has an interest in common with the property/casualty area of practice, which uses estimates of the costs of resolving such proceedings. This is a relationship that the September 2015 Actuarial Evidence Seminar explored in some depth, in the context of Ontario’s recent auto insurance reforms.

A second high-profile area of involvement in litigation arises from the prohibition in Canada’s Criminal Code on loans with an effective interest rate exceeding 60 percent. In evaluating a given transaction, the Criminal Code considers a certificate from an FCIA to be proof of the effective rate of annual interest. The expertise of actuaries in these proceedings was recognized in May 2015 when Actuarial Evidence practitioners were called to appear before the Senate Committee on Banking, Trade and Commerce to assist the senators in weighing a proposal to reduce the criminal interest rate.

Other areas of civil litigation practice include wrongful dismissal litigation, estate issues, and commercial litigation.

Family Law Proceedings

Actuarial Evidence practitioners are actively involved in family law matters—most frequently in valuing pension entitlements in marital breakdown proceedings. Other valuation functions in the family law context include the valuation of life interests, stock options, and lump-sum support arrangements.

Pension and Insurance Litigation

Disputes that involve pension issues, such as plan wind-ups, entitlements to plan surplus, and the rights of plan members, call upon the subject-matter expertise of actuaries with experience in the pension area of practice. Similarly, insurance disputes such as those involving policyholder rights are aided by the knowledge of actuaries in the various insurance areas of practice. In these matters, actuaries are subject matter experts, as well as financial experts.

Role in the Civil Justice System

At a time when the costs and objectivity of expert witnesses are under increasing scrutiny, the rigorous skill base and conceptual perspective of actuaries, along with the CIA standards of practice and disciplinary processes, have earned the confidence of the justice system.

The Committee on Actuarial Evidence

Established in 1979, the AE Committee has eight members and represents and supports the AE practice area within the CIA. Stay tuned for future articles, which will expand on the activities of the AE Committee.

Craig A. Allen, FCIA, is Chair of the Committee on Actuarial Evidence.

Canadian Institute of Actuaries/Institut canadien des actuaires