“Clever and successful people don’t wait; the long term starts today…”
So said David Murray, the Chair of the Financial System Inquiry, during question time with the media at the launch of the Institute’s White Paper on retirement incomes: “For Richer, For Poorer” held on 2 September 2015. I’d like to think that he was including actuaries in his group of clever and successful people. Certainly highlighting the long-term implications and risks of today’s decisions is at the core of what actuaries do so that our profession always has one eye on the long-term and one eye on today.
Many of you will already have read or at least skimmed the White Paper – I know that half a dozen people grabbed hardcopies when I was standing in Reception at the Institute the day after the launch. For those of you who have not (yet) read it, by presenting new research and analysis on the assets and income in retirement of different cohorts of the population, the paper contributes further to the ongoing conversation in Australia about the ageing population and the budgetary pressures that funding the income, health and housing needs of this group will have on the governments of tomorrow. It continues our theme of the need for the objectives of the superannuation system to be enshrined in legislation, so that the Government’s recent commitment to this in their formal response to the Financial System Inquiry was the source of some celebration at the Institute.
The White Paper is the latest public policy initiative of the Actuaries Institute. From time to time some members ask why the Institute engages in public policy. From my own perspective there are three main reasons. Firstly, as a profession we strive to act in the public interest which, coupled with our core focus on uncertainty and risk, means that we are well placed to make a really positive contribution to complex discussions by providing objective input that focuses on long-term implications and risks rather than short-term expediencies.
Secondly, it is an important part of promoting the profession and ensuring that actuaries are seen as being relevant and influential in our areas of interest and expertise. Actuaries have an important role in managing a number of important industries and would reasonably be expected to have opinions on the key issues impacting those industries.
We are having some success in raising our profile in terms of positive media coverage and also relationships with government and key policymakers. The outgoing Assistant Treasurer, Josh Frydenberg, wrote to me to thank the Institute for the contribution we made to the Tax White Paper, Financial System Inquiry and the Northern Australia Insurance Premiums Taskforce.
Thirdly, I think that it contributes to our pride in the profession – the feedback that I receive from members on our public policy initiatives is overwhelmingly – albeit not entirely – positive. Of course once you make public comment you need to be prepared for some people to respond with different views; there was an “anti-actuary” letter in the AFR (which we responded to) as well as an article in The Australian that took issue with some of our White Paper recommendations. However, the fear of criticism is not a good enough reason to not publish sound research and opinion pieces.
Another question that I get asked is how the Institute develops and manages its public policy positions. Generally positions are developed either by the various practice committees or through the Public Policy Council Committee (PPCC) and signed-off by Council. Where the Institute makes a public statement which contains no new policy positions it is signed-off by the Convenor of the PPCC (currently Michael Rice), the CEO and the President. The governance process around the “For Richer, For Poorer” paper provides an example of how this works in practice.
Deciding which public policy issues to engage in is governed by the Public Policy Framework developed by the PPCC. The key questions to be answered are –
- Is there a public benefit to business or the broader community?
- Is the profession in a position to provide unique insights?
- Is it a topic of significant importance and reflecting areas where actuaries work and that will increase awareness of the contribution that actuaries can make?
- Does the issue impact a large sector of the community and can our contribution have a meaningful impact?
The PPCC recently identified four long-term themes to assist in directing the Institute’s efforts in public policy and also – as we have seen with the call for papers for next year’s Financial Services Forum – the conversations within the profession. An email went out to all members in September outlining the topics and David Bell and I have commenced a series of lunches with both members and non-members to discuss these themes and develop ideas about where the actuarial profession might focus attention. For those who missed the email I’ve repeated the themes here together with some examples of potential topics for research.
There may be topics included in this list where members query whether the profession should get involved in the public debate. One of those is climate change. Looking at the list of questions posed above I would argue that the answer to all four is yes. Yes, there is a public benefit. Yes, the profession is in a position to provide unique insights – not on the science but on the long term financial risks of changes to the climate on, for example, insurance costs. Yes, it is a topic of significant importance in areas where actuaries work (such as general insurance and investments). And yes, it affects a large proportion of the community and through providing objective and balanced input we can have an impact.
My view is coloured somewhat by my experience as a general insurance actuary, especially my observations of the devastating impact of a lack of insurance on the ability of individuals and communities to rebuild their lives after a severe weather event and the careful, long term planning required to mitigate and adapt to such events.
But this is only my own view. Back in 2014 David Bell posed the question to members – should the Institute consider having a public policy position on climate change? In August 2014, he reported back that based on feedback received from 54 members, 63% supported developing a policy position, while 25% were against doing so. There was consensus that the Institute should not be commenting on the science of climate change, however, there was support for the Institute adopting positions relating to the adaptation and mitigation of the impacts of climate change since this is an area which is already impacting the work of actuaries.
A Climate Change Working Group was established by the PPCC with invitations extended to interested parties through the Superannuation, General Insurance, Life Insurance, Health and Banking Practice Committees. This Group has now developed a draft public policy position for the Institute on climate change focussing on adaptation, mitigation and financial risk which will be distributed to all members shortly for comment. In addition, we will be holding an Insights session in November where members can contribute to the Institute’s position. Member-willing, this consultative process should enable us to get us to a position that has majority support, and with which others can live. Doing so will allow the Institute to make meaningful comment on an important area of public policy debate where our profession should be able to make a unique contribution.
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