IAI Actuarial Core Principles · Business Management · Decision-making process, attitude to risk and competition

A Chennai insurer's leadership team spent months analysing every possible pricing structure for a new health product, seeking the mathematically best one, while competitors launched. Management later accepted a solution that met minimum targets given limited time and information. Which concept does the later approach illustrate, and what weakness did the earlier approach show?

The later approach is satisficing, accepting a good-enough solution meeting minimum criteria. The earlier approach suffered analysis paralysis: pursuing a fully optimal answer under limited time and information delayed action while competitors moved ahead, which bounded rationality makes impractical.

1. ASatisficing; the earlier approach showed analysis paralysis from pursuing optimisation under bounded informationCorrect
2. BGroupthink; the earlier approach showed excessive consensus
3. COptimising; the earlier approach showed insufficient data gathering
4. DSatisficing; the earlier approach showed too little analysis of alternatives
5. Anchoring; the earlier approach showed overreliance on the first estimate