Actuarial Standard of Practice No. 17

Expert Testimony by Actuaries

STANDARD OF PRACTICE

TRANSMITTAL MEMORANDUM

June 2018

TO: Members of Actuarial Organizations Governed by the Standards of Practice of the Actuarial Standards Board and Other Persons Interested in Expert Testimony by Actuaries

FROM: Actuarial Standards Board (ASB)

SUBJ: Actuarial Standard of Practice (ASOP) No. 17

This document contains the revision of ASOP No. 17, Expert Testimony by Actuaries.

History of the Standard

The ASB originally adopted ASOP No. 17, Expert Testimony by Actuaries, in 1991. Since that time, actuarial practice in this area has evolved. Under the direction of the ASB, the Expert Witness Task Force revised ASOP No. 17 in 2002 to be consistent with the then current ASOP format and to reflect current practices in the area of expert testimony. ASOP No. 17 was further updated for deviation language, effective May 1, 2011. In 2015, the ASB concluded that this ASOP should be revised to reflect applicable law and regulation.

Exposure Draft

The exposure draft was issued in April 2017 with a comment deadline of June 30, 2017. Eleven comment letters were received and considered in making changes that are reflected in this final ASOP. For a summary of issues contained in these comment letters, please see appendix 2.

Notable Changes from the Exposure Draft

Changes made to the exposure draft include the following:

1. Section 1.2, Scope, was reworded to provide additional guidance regarding the circumstances under which the standard applies.
2. The definition of expert in section 2.4 was clarified.
3. Section 3.2, Reliance Upon Attorney or Other Representative of the Principal, was clarified.
4. Section 3.8, Hypothetical Questions, was clarified.

The ASB thanks everyone who took the time to contribute comments and suggestions on the exposure draft.

The ASB voted in June 2018 to adopt this standard.

ASOP No. 17 Task Force
David R. Godofsky, Chairperson
James P. Galasso	Lawrence J. Sher
Carl M. Harris	Margaret Tiller Sherwood
Adam Reese

General Committee of the ASB
Margaret Tiller Sherwood, Chairperson
Shawna S. Ackerman	Susan E. Pantely
Ralph S. Blanchard III	Judy K. Stromback
Andrew M. Erman	Hal Tepfer
Dale S. Hagstrom	Christian J. Wolfe

Actuarial Standards Board
Beth E. Fitzgerald, Chairperson
Christopher S. Carlson	Darrell D. Knapp
Maryellen J. Coggins	Cande J. Olsen
Robert M. Damler	Kathleen A. Riley
Mita D. Drazilov	Barbara L. Snyder

 

The Actuarial Standards Board (ASB) sets standards for appropriate actuarial practice in the United States through the development and promulgation of Actuarial Standards of Practice (ASOPs). These ASOPs describe the procedures an actuary should follow when performing actuarial services and identify what the actuary should disclose when communicating the results of those services.

Section 1.  Purpose, Scope, Cross References, and Effective Date

1.1 Purpose

This actuarial standard of practice (ASOP) provides guidance to actuaries providing expert testimony.

1.2 Scope

This standard applies to actuaries who are qualified as experts under the evidentiary rules applicable in a forum when they provide testimony in court hearings, dispute resolutions, depositions, rate hearings, legislative hearings, or other similar proceedings.

This standard does not apply to an individual whose testimony and qualification as an expert are unrelated to the individual’s education, training, experience, or employment as an actuary.

This standard supplements the Code of Professional Conduct (Code) and is intended to provide specific guidance with respect to the actuary providing expert testimony. Reference should also be made to other actuarial standards of practice concerned with the actuarial substance of the assignment.

Nothing in this standard is intended to discourage reasonable differences of actuarial opinion, or to inhibit innovation in advancing the practice of actuarial science. Further, this standard is not intended to restrain the selection of actuarial assumptions or actuarial methods, the communication of actuarial opinions, or the relationship between the actuary and a principal. Nothing in this standard is intended to prevent the actuary from challenging the application or a particular interpretation of existing precedent, law, or regulation where such application or interpretation would, in the opinion of the actuary, be inconsistent with otherwise appropriate actuarial practice.

Nothing in this standard is intended to require any communication or action that is inconsistent with the rules of evidence or procedure of any court or other judicial body, legislative forum, administrative forum, arbitral forum, or other forum in which the actuary testifies. To the extent that the standard is inconsistent with the evidentiary and procedural rules applicable in the forum in which the actuary offers expert testimony, the actuary should follow the forum’s rules of evidence and procedure and any other applicable rules in the forum.

If the actuary departs from the guidance set forth in this standard in order to comply with applicable law (statutes, regulations, and other legally binding authority), or for any other reason the actuary deems appropriate, the actuary should refer to section 4.

1.3 Cross References

When this standard refers to the provisions of other documents, the reference includes the referenced documents as they may be amended or restated in the future, and any successor to them, by whatever name called. If any amended or restated document differs materially from the originally referenced document, the actuary should consider the guidance in this standard to the extent it is applicable and appropriate.

1.4 Effective Date

This standard will be effective for all expert testimony provided by the actuary on or after December 1, 2018.

Section 2. Definitions

The terms below are defined for use in this actuarial standard of practice.

2.1 Actuarial Assumption

The value of a parameter or other actuarial choice having an impact on an estimate of a future cost or other actuarial item under evaluation.

2.2 Actuarial Method

A procedure by which data or assumptions are analyzed or utilized for the purpose of estimating a future cost or other actuarial item.

2.3 Data

Numerical, census, or classification information, or information derived mathematically from such items, but not general or qualitative information. Actuarial assumptions are not data, but data are commonly used in the development of actuarial assumptions.

2.4 Expert

One who is qualified under the evidentiary rules applicable in the forum to testify as an expert, whether explicitly or by acceptance of the actuary’s testimony. An actuary who has been engaged to testify, or permitted to testify, with the expectation that the actuary will ultimately qualify as an expert is treated as an expert for purposes of this standard, even if the actuary does not testify or is later determined not to qualify as an expert.

2.5 Principal

Subject to the rules of evidence and procedure and any other rules applicable in the forum, the client or employer of the actuary with regard to the expert testimony, depending on the facts and circumstances surrounding the engagement.

2.6 Testimony

Communication of opinions or findings presented in the capacity of an expert witness at trial, in hearing or dispute resolution, in deposition, by declaration or affidavit or by any other means through which testimony may be received. Such testimony may be oral or written.

Section 3. Analysis of Issues and Recommended Practices

3.1 Overview

An actuary providing expert testimony performs an important service to the forum, the finder of fact in the forum, and the public by providing information that can be critical to resolution of disputes. This may include explaining complex technical concepts so they can be understood by the audience to whom the testimony is directed. Actuaries may differ in their conclusions even when applying reasonable actuarial assumptions and appropriate actuarial methods, and a mere difference of opinion between actuaries does not suggest that an actuary has failed to meet professional standards. However, an actuary providing expert testimony should, subject to the rules of evidence and procedure and any other rules applicable in the forum, comply with the requirements of the Code.

3.2 Reliance Upon Attorney or Other Representative of the Principal

An expert will ordinarily work closely with the attorney or other representative of the principal. An actuary serving as an expert may reasonably rely upon the advice, information, or instruction provided by an attorney or other representative of the principal concerning the meaning and requirements of the rules of evidence or procedure and any other rules applicable in the forum. An actuary relying on such advice, information, or instruction is not in violation of this standard for having complied with the advice or instruction, or used the information, even if a judge, arbitrator, hearing examiner, or other authority of the forum charged with ruling on procedural, evidentiary, or other matters subsequently determines that the advice, information, or instruction is inconsistent with or violates the rules of evidence, procedure, or any other rules applicable in the forum.

3.3 Review and Compliance

In offering expert testimony, the actuary should comply with all rules of evidence and procedure and any other rules applicable in the forum. In addition, the actuary should review and comply with any applicable actuarial standards of practice, the Qualification Standards for Actuaries Issuing Statements of Actuarial Opinion in the United States, and the Code.

3.4 Conflict with Laws and Regulations

If the actuary believes that a relevant law or regulation contains a material conflict with appropriate actuarial practices, the actuary should disclose the conflict, subject to the requirements of the forum, including without limitation all rules of evidence and procedure.

3.5 Conflict of Interest

The actuary should be aware of the possibility of conflict of interest, and should address any real or apparent conflict of interest in accordance with Precept 7 of the Code.

3.6 Advocacy

In those circumstances where it is consistent with the rules of evidence and procedure, and any other rules applicable in the forum, an actuary may act as an advocate for a principal when giving expert testimony. Acting as an advocate does not relieve the actuary of the responsibility to comply with the Code, and to use reasonable actuarial assumptions and appropriate actuarial methods (unless using actuarial assumptions or actuarial methods prescribed by law or selected by others that may not be reasonable and appropriate, and so disclosing in accordance with section 3.7).

3.7 Actuarial Assumptions or Actuarial Methods Prescribed by Law or Selected by Others

If the actuary performs calculations using actuarial assumptions or actuarial methods prescribed by law or selected by others, the actuary should disclose, subject to the rules of the forum, and to the extent material and relevant, whether the results are consistent with the actuary’s own expert opinion.

3.8 Hypothetical Questions

The actuary may be asked to answer hypothetical questions. Hypothetical questions may fairly reflect facts in evidence, may include only a part of the facts in evidence, or may include actuarial assumptions the actuary believes to be unreasonable. If permitted by the rules of evidence and procedure and any other rules applicable in the forum, and by the rulings of a judge or other official charged with overseeing the forum, the actuary may refuse to answer hypothetical questions based upon what the actuary believes in good faith to be unreasonable actuarial assumptions.

3.9 Testifying Concerning Other Relevant Testimony

Subject to the rules of evidence and procedure of the forum, when the actuary provides expert testimony concerning other relevant testimony, including opposing testimony, the actuary should testify objectively, focusing on the reasonableness of the other testimony and not solely on whether it agrees or disagrees with the actuary’s own opinion.

3.10 Cross Examination

During cross-examinations, subject to the rules of the forum, the actuary is not required to volunteer information that is not fairly encompassed within the scope of the question.

3.11 Consistency with Prior Statements

When giving expert testimony, the actuary should be mindful of statements the actuary may have made on the same subject. If the actuary employs different actuarial assumptions or actuarial methods in the current situation, the actuary should be prepared to explain why.

3.12 Discovery of Error

If, after giving expert testimony, the actuary discovers that a material error was made, the actuary should make appropriate disclosure of the error to the forum or to the principal or the principal’s representative as soon as practicable. Any such disclosure should be made in accordance with the rules of evidence and procedure and any other rules applicable in the forum.

3.13 Limitation of Expert Testimony

The actuary should present expert testimony in a manner appropriate to the nature of the forum and consistent with the rules of evidence and procedure and any other rules applicable in the forum. If any constraints are imposed or expected to be imposed on the actuary’s ability to comply with the Code or other professional standards, the actuary should consider whether it is appropriate to serve or continue to serve as an expert.

Section 4. Communications and Disclosures

4.1 Written Testimony

When providing expert testimony in writing, the actuary should provide testimony in accordance with the rules of evidence and procedure and any other rules applicable in the forum and describe the scope of the assignment, including any limitations or constraints. The written testimony should, to the extent appropriate to the forum and intended audience, include descriptions and sources of the data, actuarial assumptions, and actuarial methods used in the analysis.

4.2 Oral Testimony

When providing expert testimony orally, the actuary should provide oral testimony in accordance with the rules of the forum and in a manner appropriate to the intended audience. In addition, the actuary should, to the extent practicable and subject to the rules of evidence and procedure and any other rules applicable in the forum, be prepared to provide documentation supporting the oral testimony.

4.3 Communication and Disclosure

When providing expert testimony, the actuary should comply with ASOP No. 41, Actuarial Communications, and, in addition, disclose the following items, as applicable, and as permitted by the rules of evidence and procedure and any other rules applicable in the forum, and to the extent material to the testimony:

a. material conflicts between laws and regulations and appropriate actuarial practices, as described in section 3.4;

b. if the actuary performed calculations using actuarial assumptions or actuarial methods prescribed by law or selected by others, whether the results are consistent with the actuary’s own expert opinion, as described in section 3.7; and

c. any material errors discovered after giving expert testimony, as described in section 3.12.

4.4 Additional Disclosures

The actuary should also include the following, as applicable, in an actuarial communication:

a. the disclosure in ASOP No. 41, section 4.2, if any material assumption or method was prescribed by applicable law (statutes, regulations, and other legally binding authority);

b. the disclosure in ASOP No. 41, section 4.3, if the actuary states reliance on other sources and thereby disclaims responsibility for any material assumption or method selected by a party other than the actuary; and

c. the disclosure in ASOP No. 41, section 4.4, if, in the actuary’s professional judgment, the actuary has otherwise deviated materially from the guidance of this ASOP.

Appendix 1

Background and Current Practices

Note: The following appendix is provided for informational purposes, but is not part of the standard of practice.

Background

Since the standard was first adopted, actuaries have become increasingly active as expert witnesses, appearing in a greater variety of venues and addressing an expanding range of topics. As actuaries have become more knowledgeable about providing expert testimony, the need for educational material has lessened to some degree.

Current Practices

Actuaries may be called upon to give expert testimony concerning a broad range of issues. These include, without limitation, matters such as the following:

a. actuarial present values of retirement or other benefits;

b. actuarial values incident to a divorce;

c. adequacy or appropriateness of reserves, premium rates, pricing or underwriting procedures, or provision for administrative costs;

d. cost impact of claims-made or claims-paid financing;

e. cost impact of risk classification systems, tort liability decisions, or legislative/regulatory proposals;

f. actuarial reviews of provider reimbursement amounts, provider network adequacy, provider comparison studies, provider quality reviews, and contractual provisions for various health care services;

g. lost earnings of a decedent or injured person and the actuarial present value of such lost earnings;

h. malpractice of an actuary;

i. actuarial equivalency or other technical provisions in the design or administration of defined benefit pension plans;

j. faulty design, administration or communication of amendments to defined benefit pension plans;

k. financial impact on a defined benefit plan of alternative interpretations of, or amendments to, disputed plan provisions;

l. relationships between risk and return on investments;

m. value of an insurance company or other entity; and

n. withdrawal liability assessments under multiemployer benefit plans.

Appendix 2

Comments on the Exposure Draft and Responses

The exposure draft of this revision of ASOP No. 17, Expert Testimony by Actuaries, was issued in April 2017 with a comment deadline of June 30, 2017. Eleven comment letters were received, some of which were submitted on behalf of multiple commentators, such as by firms or committees. For purposes of this appendix, the term “commentator” may refer to more than one person associated with a particular comment letter. The Task Force carefully considered all comments received, and the General Committee and ASB reviewed (and modified, where appropriate) the proposed changes.

Click here for a summary of the significant issues and questions contained in the comment letters and the responses to each.

The term “reviewers” includes the Task Force, General Committee, and the ASB. Unless otherwise noted, the section numbers and titles used below refer to those in the exposure draft.