Consumer Groups Question Role Of Industry-Employed Actuaries On FACI

Consumer advocates are questioning whether the Treasury Department should include an actuary as a member of the proposed Federal Advisory Committee on Insurance (FACI), citing a potential conflict of interest, among other concerns.

The Consumer Federation of America (CFA) points in particular to a recent letter to Congress written by the American Academy of Actuaries regarding flood-insurance legislation. That group did not disclose that the actuary who wrote the letter is employed by a reinsurer.

In a letter to the Treasury Department, J. Robert Hunter, director of insurance for the CFA, says, “I do not agree that actuaries need to be on the FACI.”

He says he agrees that actuarial expertise is needed, but he adds, “Actuarial expertise is much more suited for subcommittee or staff functional work, for getting into the details under the direction of the members of FACI, than in determining public policy.”

Furthermore, Hunter urges Treasury officials to be “very careful when selecting actuaries for such a purpose.”

He says the “vast majority of actuaries are in the employ, directly or indirectly, of the insurance industry and have a direct conflict of interest when making independent decisions.”

Hunter wrote his letter to Undersecretary of the Treasury for Finance Jeffrey Goldstein. It was in response to a June 8 letter to Goldstein by officials of the American Academy of Actuaries asking that an actuary with insurance expertise be appointed to FACI.

The Treasury Department, in a May 13 Federal Register notice, asked people to apply to be members of the FACI.

According to the notice, appointments to the FACI will be made with the “objective of creating a diverse and balanced body with a variety of interests, backgrounds and viewpoints represented,” and made up of members who possess “relevant expertise.”

The Treasury Department is creating the FACI to implement a provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 that requires the department to set up a Federal Insurance Office.

In its letter to the Treasury, the actuary association said the department's efforts to find committee appointees with the necessary diversity and experience “will not be realized if the committee does not include individuals with direct actuarial expertise.”