Professional Judgment: Use it Wisely
Professionalism Counts, May 2025
“…[M]ore and more in the modern world, large business rests on rectitude and honor as well as on good judgment.” — Charles William Eliot[1]
Though this quote is from a late nineteenth-century reformer of American higher education, it still rings true today. In fact, it pithily describes why actuaries have a Code of Professional Conduct. It also hints at why the profession provides for the exercise of professional judgment within a principle-based framework that requires honesty, integrity, and competence.
A quick internet search finds quotes about judgment along the lines of “good judgment comes from experience, and a lot of that comes from bad judgment.”[2] Or as Benjamin Franklin apparently said, “At twenty years of age the will reigns; at thirty, the wit; and at forty, the judgment.”[3]
An essential element of good judgment, then, is experience. Professional judgment takes it a step further, requiring specialized training and experience, which combine to form expertise. The actuarial profession is not the only profession to rely heavily on the judgment of its practitioners—expert professional judgment also plays a significant role in the medical, legal, and auditing professions.
For the actuarial profession, Actuarial Standard of Practice (ASOP) No. 1, Introductory Standard of Practice, discusses actuarial professional judgment, which is informed not only by “highly specialized training, but also the broader knowledge and understanding that come from experience.”[4]
Noting that the ASOPs are principles-based and do not try to dictate every step in an actuarial assignment, ASOP No. 1 says that ASOPs provide “an analytical framework for exercising professional judgment, and identify factors that the actuary typically should consider when rendering a particular type of actuarial service.”[5]
Actuaries are constantly called upon to use professional judgment in their work. Many ASOPs call for the actuary to take “reasonable” or “appropriate” steps, or to select “reasonable” or “appropriate” assumptions, methods, or models to reach “reasonable” results. It is up to the actuary, using professional judgment, to determine what constitutes “reasonable” or “appropriate” in each case.
ASOP No. 1 also recognizes that there are times when an actuary “applies professional judgment and concludes that complying with the guidance may be inappropriate, … or that under the circumstances it would not be reasonable or practical to follow the practice.”[6] In such cases, the actuary is permitted to deviate from the guidance but must disclose the “nature, rationale, and effect of such deviation.”[7]
Determining which ASOPs apply to a particular assignment also requires professional judgment. While the Academy’s Applicability Guidelines are a useful tool for this task, actuaries are responsible for determining which ASOPs apply and how to apply them. When it is unclear which ASOPs might apply to a particular assignment, the actuary uses professional judgment to determine what guidance to follow.
Professional judgment also plays an important role in qualifications. Actuaries must use judgment to determine whether they are qualified for an assignment and whether continuing education offerings are relevant to their work. Injudicious determinations related to qualifications can cause serious trouble if actuaries provide actuarial services when they are not qualified (just ask the Actuarial Board for Counseling and Discipline).
With professional judgment playing such a large role in the provision of actuarial services, it is essential that actuaries exercise it with skill and care. While the professionalism framework gives actuaries quite a bit of leeway to use their professional judgment, it doesn’t give actuaries a carte blanche.
In all of their work, actuaries are bound by the Code of Professional Conduct, the U.S. Qualification Standards, and the ASOPs. By exercising professional judgment with honesty, integrity, competence, skill, and care, actuaries help fulfill their responsibilities to the public, clients and employers, and the actuarial profession.
Members are always welcome to send your professionalism thoughts, comments, and questions to professionalism@actuary.org.
[1] Eliot, Charles William. Speech to the New York City Chamber of Commerce 1890. In Thomas B. Reed, ed.1923. Modern eloquence, 4: 94-98. New York: Stationers’ Hall, London. Cited in “Blending Liberal Arts and Business Education” in Liberal Education, Winter 2004 (https://files.eric.ed.gov/fulltext/EJ728535.pdf)
[2] Commonly attributed to Will Rogers. https://www.brainyquote.com/topics/judgment-quotes
[3] https://www.brainyquote.com/topics/judgment-quotes
[4] Section 2.9
[5] Section 3.1.4
[6] Section 2.1
[7] ASOP No. 41, Actuarial Communications, Section 4.4.