Actuaries should put consumer interests first, the chairman of the life insurance industry’s ethical watchdog organization said at the spring meeting of the American Academy of Actuaries.
Gary Eisenbarth, president and CEO of MTL Insurance Co. and chairman of the Insurance Marketplace Standards Association (IMSA), which promotes ethical standards for the life insurance, long-term care insurance and annuity products industry, said while “an actuary has an obligation to the company or client to make sure the promises made with a product can be met,” actuaries should look at a complex product to be sure that not only is it technically fair and ethically correct, but also “transparently fair to the consumer.”
He added, “If there is a possibility of misunderstanding, it’s prudent for the professional, ethical actuary to raise these questions as early as possible.”
While fulfilling their most important job, calculating reserves, actuaries must remember that their primary obligation is to the public, not to the company, Eisenbarth said. In choosing the method of calculation and the assumptions to be made as well as in determining the premium, “an actuary needs to be focused on the consumer at the end of the process.”
Eisenbarth said, “Actuaries should become more involved in considering compliance implications when developing products and take on the task of promoting full disclosure of surrender charges or other penalties associated with their life insurance and annuity products.” Actuaries also should sign off on materials disclosing the basic features of a life insurance product consistent with IMSA standards, which require “advertising and sales materials that are clear as to purpose and honest and fair as to content.”
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