CIA (e)Bulletin/(e)Bulletin de l'ICA
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November 2018
 
 

Serving the Public Interest in Setting Standards of Practice

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By Conrad Ferguson, FCIA

I thought that it may be of interest for members to get some insight as to how the Actuarial Standards Board (ASB) addresses its objective of serving the public interest. The comments here are my own, having served over five years on the ASB and now sitting as chair.

The mission of the ASB is to support informed economic decision-making by actuarial report users. The ASB serves the public interest by developing, establishing, and maintaining high-quality standards of practice for actuarial reporting in Canada (my emphasis).

During my time on the ASB, I struggled with trying to find a clear definition of what serving the public interest means. Last April, the ASB discussed the topic. One ASB member identified a really good document that provides both a historical perspective and a discussion of a wide array of potential views on the needs and demands of the public. I encourage those who may be interested to delve further into the topic by clicking the link.

Defining “public interest” is very challenging, and discussing the topic naturally involves consideration of uncertain future outcomes. Therefore, it is inevitable that views will differ. In some instances one may achieve/reach agreement on what the public interest is on an issue, but disagree on the means to serve it. To make matters more challenging, it is not a concept that is anchored in time. One could conclude that the public interest is largely an abstract concept that evolves over time. In a world where positions seem to be increasingly firm and polarized, reaching consensus on what the public interest is on virtually any issue is very challenging indeed.

Advance or Serve the Public Interest

All professional standard setting bodies have to grapple with this issue and seek to advance or serve the public interest with high quality standards of practice. The words “advance or serve” are very important here. “Serving the public interest” should not be taken to mean “defining the public interest”. It is not the role of the ASB to define what “the public interest” is. Our role is to understand how our publics (regulators, legislators, consumers) are affected by our work based on considering as wide a range of views as possible, on a particular topic. This is achieved by following our due process, the responses to our notices of intent and exposure drafts, and correspondence received from time to time.

Individual vs. Collective

We must also consider the “individual needs and expectations” versus “the collective needs and expectations”. Sometimes, the majority of responses we receive are from the collective. In those circumstances, we still need to consider the impact on individuals who rely on our profession to arrive at a fair outcome. In a sense, we need to be aware of, and appropriately weigh, the interest of the weakest individual in a financial transaction. That said, we are also aware that human nature tends to discount future contingent events more heavily than it probably should and to favour the present, particularly if an issue means giving up something today to improve chances of a better tomorrow. Similarly, what is in the interest of one population cohort may not be in the interest of another and vice versa.

The ASB has the responsibility of formulating a view as to what actions, within our standards of practice, better serve the public interest. This requires applying judgment based on all inputs and our own knowledge and experience. Each practice area requires different considerations because the public we serve may be different. Sometimes this results in inconsistency in our standards across practice areas, for justifiable reasons.

Sound Judgment and Due Consideration

In fulfilling its responsibility, the ASB needs to apply and be seen to apply sound judgment based on due consideration of all the input received from our publics and our membership. Our due process needs to be logical, and in the case of conflicting views, our publics and the membership deserve a clear explanation of how we arrived at our decision. We cannot successfully design standards that meet all conflicting needs at all times. In addition, the result may not be optimal for a variety of reasons, or for one group or another, and criticism is part of the reality. In that context, transparency is an absolute key.

In my view, the keys to a sound standard-setting process that serves our publics and allows our members to act in the public interest must include the following:

  • Oversight of the work of the ASB by a largely non-actuarial body with sufficient expertise and experience to ensure the ASB is meeting its mission;
  • Diverse membership on the ASB with different backgrounds, experiences, and expertise who are individual thinkers;
  • Input from all of our publics and membership to allow consideration of a broad view on each standard; and
  • A clear and transparent due process than can be explained and justified and allows for input from as wide a range of publics as possible.

I hope these few comments are helpful in understanding how the public interest is served in standard setting. I also want to take this occasion to thank all our publics and our members who take the time to respond to our publications. This input is essential to the development of professional standards that allow our members to act in the public interest and to preserve the trust our publics place in us as a self-regulated profession.

Conrad Ferguson, FCIA, is Chair of the Actuarial Standards Board.

 

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