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CAS Seminar on Ratemaking - March, 2005
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The Actuary as Expert Witness
Charles L. McClenahan
10 South Wacker Drive, Chicago, IL 60606
ACTUARIAL CONSULTING
AGENDA

What is an Expert Witness?

Venues for the Actuarial Expert

Issues for the Actuarial Expert

Training for the Actuarial Expert
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AGENDA (Continued)

Professional Standards

Working with Attorneys
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Some Advice
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What is an Expert Witness?
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What is an Expert Witness?

An expert is a person who has
made all the mistakes that can
be made in a very narrow area.”
“
- Niels Bohr
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What is an Expert Witness?

ASOP #17 - Expert Testimony by Actuaries
Expert - One who is qualified by knowledge,
skill, experience, training, or education to render
an opinion or otherwise testify concerning the
matter at hand
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What is an Expert Witness?

Federal Rules of Evidence - Rule 702
Testimony by Experts - If scientific, technical,
or other specialized knowledge will assist the trier
of fact to understand the evidence or to determine
a fact in issue, [an expert witness] may testify
thereto in the form of an opinion or otherwise.
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What is an Expert Witness?

Lay (non-expert) witnesses may not offer opinion
testimony

Expert witnesses may offer opinions based upon
knowledge, skill, experience, training or education
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Venues for the Actuarial Expert

Rate or other administrative hearings

Arbitration, ADR, or other extra-judicial proceedings

Depositions, declarations and affidavits

Testimony in court
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We will focus on rate hearings
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Training for the Actuarial Expert
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Training for the Actuarial Expert

An expert is a person who
avoids small error as he sweeps
on to the grand fallacy.”
“
Benjamin Stolberg
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Training for the Actuarial Expert

Federal Rules of Evidence - Rule 703
The facts or data in the particular case upon
which the expert bases an opinion or inference
may be those perceived by or made known to the
expert at or before the hearing. If of a type
reasonably relied upon by experts in the particular
field in forming opinions or inferences upon the
subject, the facts or data need not be admissible
in evidence.
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Training for the Actuarial Expert
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Three Sources for Facts or Data
– Firsthand observation by expert
– Presentation at the hearing
– Presentation outside of hearing
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Sources for Facts or Data

Firsthand Observation by Expert
– Example - testimony by treating physician
– Actuarial expert testimony generally not firsthand
observation
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Sources for Facts or Data

Presentation at the hearing
– Hypothetical questions, or
– Expert attends hearing, hears testimony
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Sources for Facts or Data

Presentation outside of hearing
– Extends beyond expert’s own perception
– Must be “of a type reasonably relied upon by experts in the
particular field”
– Examples: CAS Textbook, Proceedings
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Training for the Actuarial Expert

Additional Skills Required
– Ability to explain complex issues simply
– Ability to construct logical sequence of questions
– Ability to stand up under cross-examination
– Ability to work quickly under pressure
– Good memory -short/long term- for prior testimony
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Professional Standards
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Professional Standards

Qualification Standards

ASP 17 - Expert Testimony by Actuaries

ASP 9 - Documentation and Disclosure
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Professional Standards
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Qualification Standards
– Code of Professional Conduct - Precept 2
– Qualification Standards for Prescribed Statements of
Actuarial Opinion
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Professional Standards

ASP 17 - Expert Testimony by Actuaries
– Revised effective July 15, 2002
– Standard provides good guidance and useful advice
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Professional Standards
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ASP 9 - Documentation and Disclosure
– Requires documentation whether or not there is a legal
requirement
– Must be sufficient for another actuary to evaluate work
– Incorporates Statements of Principles
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Working With Attorneys
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Working With Attorneys

An expert knows all the
answers - if you ask the right
questions.”
“
- Unknown
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Working With Attorneys
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Q: Now doctor, isn't it true that when a person dies in his
sleep, he doesn't know about it until the next morning?
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Working With Attorneys

Lawyer: "Now, Mrs. Johnson, how was your first marriage
terminated?"
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Witness: "By death."

Lawyer: "And by whose death was it terminated?"
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Working With Attorneys
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Problems Presented by Actuaries
– Threatening Subject
– Personality (or Lack Thereof)
– Complex Issues
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Working With Attorneys
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Threatening Subject
– Hearing officer hates, doesn’t understand math
– Actuary must make it interesting
– Actuary must keep it simple
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Working With Attorneys
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Personality
– “I’m not weird, just unusual”
– “I understand this is difficult”
– “I’m here to help you understand”
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Working With Attorneys

Complex Issues
– Actuary must simplify
– Visual aids where possible
– Do not condescend or patronize
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Working With Attorneys
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Problems Created by Attorneys
– Attempting to paraphrase
– Attempting to stretch or bend opinion
– Attempting to summarize
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Working With Attorneys
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Attempting to Paraphrase
– Language of actuarial science very precise
– Each word can be important
– Ask the question as written

Precise questions yield predictable answers
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Working With Attorneys
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Attempting to Stretch or Bend Opinion
– Expert has obligation to avoid misleading testimony
– Limitations and underlying assumptions must be disclosed
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Working With Attorneys
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Attempting to Summarize
– Lawyers like simple answers
– Rarely are the answers simple
– Expert has obligation to avoid misleading
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Working With Attorneys

Jargon
– Actuaries Have Their Own Language

“Cohort” “Credibility” “Severity” “Convolution”
– Best to Avoid Jargon

“Group” “Weight” “Average Loss” “Possible Event”
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Some Advice

“If the world should blow itself up,
the last audible voice would be that
of an expert saying it can’t be
done.” - Peter Ustinov
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Some Advice

Rate hearing experience before you try it in court

Mock cross-examination
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Read your transcript and those of other experts
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If you don’t love it, don’t do it
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The Actuary as Expert Witness
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“If your mind is empty, it is always ready for
anything; it is open to everything. In the
beginner’s mind there are many possibilities;
in the expert’s mind there are few.”
- Shunryu Suzuli
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