Professionalism Counts, March 2026
Today’s Code of Professional Conduct requires actuaries to ensure that actuarial services they perform, as well as those that are performed at their direction, satisfy applicable standards of practice. But this was not always the case. In fact, the profession did not have standards of practice until the early 1970s, when the Academy began to introduce Financial Reporting Recommendations and Interpretations. These early standards applied only to certain opinions and were developed by various Academy committees largely in response to external pressures.
It was not until the early 1980s that a drive to create a standards-setting body for the profession began and culminated in the establishment of today’s Actuarial Standards Board (ASB) in 1988.
Why was it necessary to create standards of practice? The reasons go to the heart of professionalism—integrity and competence are needed to protect the public. The development of more complex products, changes in the economy, and advancing technology meant the profession was changing rapidly. Standards were needed to ensure that actuaries were keeping up and providing high-quality services, and that insurance companies and pension plans would be able to provide the promised benefits when they were needed.
‘Applicable’ standards
Precept 3 requires actuaries to follow “applicable standards of practice.” “Applicable” here has two aspects: first, standards must be applicable for the jurisdiction where the actuarial services are being rendered; and second, they must be applicable to the subject of the work.
How do you know whether a standard is applicable to your work? First, you may need to determine the jurisdiction in which you are rendering actuarial services. For most U.S. actuaries, the jurisdiction is the United States, and the actuarial standards of practice (ASOPs) adopted by the ASB apply. But if you are rendering actuarial services in another jurisdiction, the standards issued by the recognized actuarial organization for that jurisdiction apply. Some jurisdictions may not have their own standards. In that case, the actuary must use professional judgment to determine which standards apply.
Let’s say you are rendering actuarial services in the United States. Before starting an assignment, you might want to review the Applicability Guidelines, which list common actuarial tasks in each practice area and the standards that might apply. “Might” because it is ultimately up to the actuary to determine which standards apply to the work at hand. As annotation 3-2 states, “Where a question arises with regard to the applicability of a standard of practice, or where no applicable standard exists, an Actuary shall utilize professional judgment, taking into account generally accepted actuarial principles and practices.” Once the actuary has determined which standards might apply, a review of the scope section of the relevant ASOP will help the actuary determine which ASOPs do apply to the task at hand.
Principle-based—flexible
The ASOPs are principle-based. That is, they do not give step-by-step instructions, but rather tell actuaries what they should consider or take into account. Even in new or developing situations, ASOPs that apply to all actuarial work1 provide guidance. For example, the advent of artificial intelligence (AI) has raised the question of whether a new ASOP on AI is needed. So far, the guidance provided in the general ASOPs, particularly ASOP No. 56, Modeling, has been considered appropriate and adequate for actuaries using AI in their work. Of course, ASOPs related to the subject of the work being performed will likely also apply.
Because the ASOPs are principle-based, actuaries must use professional judgment in deciding when and how to apply them. Precept 3 recognizes that sometimes it may not be appropriate to follow the standard. In such cases, Precept 3 requires the actuary to be prepared to justify the use of alternative procedures. Each ASOP provides further guidance on what to do when deviating from an ASOP.
Actuaries who adhere to standards of practice not only protect the public; they protect themselves as well. But the ASOPs are not set in stone and are revised from time to time. Precept 3 requires you to keep current with changes to the standards, to protect the public and yourself.
[1] ASOP No. 1, Introductory ASOP; 23, Data Quality; 41, Actuarial Communications; and in most cases ASOP No. 56, Modeling.