Business Management · Professionalism and ethics case studies

Ethical Decision-Making Framework for Actuaries

Updated 11 October 2026 · Fact-checked

An ethical dilemma arises when two or more duties or interests pull in different directions and no option satisfies them all. To solve a case study, identify the facts and parties, name the principles at stake, list options, test each against the principles, choose one, justify it and say what you would do next.

Understand Ethical Dilemmas and Decision-Making Frameworks

An ethical dilemma is a situation where you must choose between options, and each option conflicts with a duty, a value or a stakeholder's interest. It is different from a simple rule breach. In a rule breach the right answer is clear and you just fail to follow it. In a dilemma, reasonable people could disagree, so the marks go to your reasoning.

Actuaries face dilemmas because they serve several parties at once. You may owe a duty to your employer or client, to policyholders or members, to the regulator and to the public. You also owe duties to the profession. Typical pressures are a manager asking you to soften a bad result, a conflict between two clients, a request to share confidential data, or a deadline that tempts you to cut corners.

A framework keeps your thinking orderly. It stops you from jumping to a gut answer. Most frameworks follow the same logic: understand the facts, identify who is affected, identify the principles or professional rules that apply, generate options, test the options, decide, then act and review. You can use your own wording as long as the steps are clear.

The principles you test against are the core values of the profession: integrity, competence and care, impartiality, compliance with law and standards, speaking up when needed, clear communication, and acting in the public interest. In IAI case studies, link your reasoning to the IAI's professional conduct requirements and relevant standards, without quoting rule numbers you are unsure of.

Examiners want a reasoned, defensible decision. A good answer names the conflict, weighs it fairly, picks a course of action that protects the public and the profession, and states practical next steps such as documenting, escalating or seeking advice.

Key rules to remember

Framework sequence: Facts → Parties → Principles → Options → Test → Decide → Act and document; A memory aid, not an official IAI model. Use it to structure any ethics answer.
Test for each option: Option acceptable only if it is lawful, consistent with professional standards, honest, and defensible to the public; If an option fails any one of these, reject it and say why.
Duty hierarchy rule of thumb: Law and professional standards come before employer or client preference; Where they conflict, the professional obligation normally prevails, but explain the reasoning for the facts given.

How to solve Ethical Dilemmas and Decision-Making Frameworks questions

Use the same steps for every ethics case study. Write each step as a short labelled paragraph so the marker can follow it.

1State the issue in one or two sentences: what is the dilemma and why it is hard.
2List the key facts and the parties affected, such as client, employer, policyholders, regulator, colleagues and the profession.
3Name the principles and duties at stake, for example integrity, impartiality, confidentiality, competence and public interest. Note where they conflict.
4Generate realistic options, including doing nothing, and consider consequences for each party.
5Test each option against the law, professional standards and honesty. Reject those that fail and say why.
6Choose the best option and justify it by linking it to the principles. Acknowledge the cost of your choice.
7Give practical next steps: document the facts, raise concerns with the right person, seek advice from the professional body or a peer, and escalate if needed.
8Say what you would do if the first step fails, for example if management ignores your concern.

Quickest way: Issue, Principles, Options, Decision (IPOD)

When to use it: Use when time is short, for example a shorter written part of a case study.

Issue: one sentence on the conflict.
Principles: name two or three that clash, using the facts from the case.
Options: give two or three, rejecting at least one with a reason.
Decision: pick one, justify it, then add two actions such as document and escalate.

Common mistakes in Ethical Dilemmas and Decision-Making Frameworks

Giving a one-line verdict such as 'this is unethical' with no reasoning.
The answer feels obvious, so students skip the analysis.
Fix: Show the steps. Marks go to identifying the conflict, weighing options and justifying the choice.
Ignoring one of the stakeholders.
Students focus on the client or employer and forget policyholders, the regulator or the public.
Fix: Draw a quick list of all parties before you write and check each is addressed.
Copying generic principles without linking them to the facts.
Students memorise a list of values and recite it.
Fix: For each principle, say how this case puts it at risk, using a detail from the scenario.
Choosing the option that pleases the boss or client.
Real-world pressure carries over into the exam.
Fix: Show that professional standards and the public interest come before preference, while staying polite and practical.
Failing to state next steps.
Students think the decision is the end of the answer.
Fix: Always add actions: document, escalate, seek advice, and review. These are easy marks.
Inventing rule numbers or legal provisions.
Students try to sound precise.
Fix: Refer to the principle in plain words unless you are certain of the exact reference.

Worked examples

Example 1

Illustrative practice question: You are a pricing actuary at a general insurer. Your analysis shows that the proposed premium rates for a new health product are likely to be inadequate. The sales head asks you to sign off on the lower rates to meet a launch date, saying the rates can be fixed later. Discuss how you should respond.

Show the solution

Issue: you are pressured to approve rates you believe are inadequate. This conflicts with integrity and competence against loyalty to the employer's commercial goals.
Parties: policyholders, who may face future premium increases or insurer failure; shareholders; the sales head; the regulator; the profession's reputation.
Principles at stake: integrity (do not give advice you do not believe in), competence and care (rely on sound analysis), compliance with regulation, and public interest.
Options: (a) sign off as asked; (b) refuse and explain; (c) propose alternatives such as a phased launch, lower volume limits, or reinsurance; (d) escalate to senior management or the appointed actuary.
Test: option (a) fails honesty and standards, so reject it. Options (b) to (d) are acceptable and can be combined.
Decision: do not sign off at the inadequate rates. Present the analysis, quantify the shortfall and offer alternatives that meet the launch goal safely.
Next steps: record the discussion, escalate if pressure continues, and seek guidance from the professional body if needed.

Answer: Refuse to sign off the inadequate rates. Explain the analysis, offer practical alternatives, document the exchange and escalate if pressured, because integrity, competence and the interests of policyholders outweigh the launch deadline.

Example 2

Illustrative practice question: You are an actuarial consultant to a pension scheme. While working for another client, you learn confidential information showing that the scheme's sponsoring employer, who is also your client, is in serious financial difficulty. The scheme trustees have not been told. What should you do?

Show the solution

Issue: your duty of confidentiality to the source client conflicts with your duty to give the scheme trustees honest, non-misleading advice. Members may be harmed if advice ignores the employer's position.
Parties: the trustees, scheme members, the employer, the other client who is the source of the information, and the profession.
Principles: confidentiality, integrity, impartiality, avoiding conflicts of interest, and public interest.
Options: (a) disclose the information to the trustees; (b) say nothing and carry on as normal; (c) seek the source client's consent to disclose; (d) if consent is refused, do not use or disclose the information and consider whether you can still act for the scheme without being misleading or compromised; (e) withdraw from the scheme engagement if you cannot.
Test: (a) breaches confidentiality unless consent or a legal duty exists. (b) risks misleading the trustees and compromising your advice. (c) is lawful and honest. (d) and (e) protect confidentiality and keep your advice from being misleading.
Decision: first seek consent from the source client to disclose. If consent is refused, do not use or disclose the information. Then judge whether you can continue to act for the scheme without being misleading or compromised. If you cannot, withdraw from the scheme engagement and keep the confidential details secret. Withdrawal may itself hint at a problem, so take advice on what you say about leaving.
Next steps: take advice from the professional body or legal counsel, document your reasoning, and check whether any legal duty to report applies.

Answer: Do not disclose or use the confidential information without consent or a legal duty. Seek consent first. If it is refused, keep the details secret and decide whether you can continue to act for the scheme without being misleading or compromised. If you cannot, withdraw from the scheme engagement without revealing the details, after taking advice and documenting your steps.

Exam tips

Label each step of your framework in the answer. Markers reward visible structure.
Use details from the case in every paragraph. Generic answers score low.
Always give at least two options and explain why you reject one.
End with practical actions: document, escalate, seek advice. Do not leave the answer at the decision.
In multiple-choice questions, pick the option that protects the public and follows professional standards, not the one that pleases the employer.

Practice questions from Professionalism and ethics case studies

Ethical Dilemmas and Decision-Making Frameworks in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Ethical Dilemmas and Decision-Making Frameworks: frequently asked questions

What is an ethical decision-making framework for actuaries?

It is a structured series of steps for working through a dilemma: establish facts, identify parties and principles, list options, test them, decide and act. It keeps your reasoning clear and defensible. You can use your own wording as long as the logic is complete.

How do I answer ethics case study questions in the actuarial exam?

State the dilemma, identify the people affected and the principles in conflict, compare options, then justify one. Finish with practical next steps. Tie every point to facts in the case.

Is there only one correct answer to an ethical dilemma?

Often there are several defensible answers. Marks depend on the quality of your reasoning and whether your decision follows professional standards and the public interest. An answer that breaks the law or standards will not score well, however well argued.

Should I quote sections of the Code or the Act?

Only if you are certain of them. It is safer and usually enough to describe the principle in plain words and link it to the case. A wrong reference can cost marks.