Essay about Actuarial Malpractice
Actuaries are recognized for using mathematics in certain ways to estimate the financial obligations of a company. These approximations directly affect the company’s financial situation and outlook for the year. As any other professional occupation, standards must be followed to ensure the validity of the work being done. Risks of malpractice may arise if actuarial principles are not followed carefully. Actuarial malpractice has become a rising concern in holding actuaries liable for their work, where in previous years it was unheard of.
For most professionals, designations must be acquired through a series of training and schooling. In the United States, actuarial candidates have the opportunity to be a part of …show more content…
Like a doctor, the actuary is responsible for telling the client of any risks or changes that may occur with their investments. According to Hager, “a professional does not guarantee correct judgment, only that in formulating his judgment and work product he exercise reasonable skill and competence in good faith without fraud”.
Similar to the accounting occupation, generally accepted principles are used to define the accuracy of an actuary’s work. These are taken from actuarial textbooks and literature from actuarial journals. These principles are the backbone of the actuarial profession and guide actuaries in their everyday work. These principles are also used when actuaries are defendants in court. They are expected to follow these principles to their best ability when assessing a client’s work.
ERISA is a government law created in 1974, which requires an enrolled actuary to approve all work associated with pension plans. According