IAI Actuarial Core Principles · Business Management · Communicating strategy; culture and structure in decision making; strategy case studies
A chief actuary of an Indian insurer is preparing a communication to policyholders and the press about a strategic decision to reduce bonus rates on participating policies because of a prolonged low-yield environment. Some senior managers suggest emphasising only the company's strong solvency position and not mentioning the bonus reduction until policyholders ask. Which response is most consistent with professional and ethical obligations?
The actuary should disclose the bonus reduction and the reasons clearly and promptly together with the solvency position. Presenting only favourable facts would mislead by omission, breaching the Actuaries' Code duties of integrity and clear, fair communication, and would harm policyholders' trust.
- AAgree, as the solvency position is accurate and there is no legal duty to volunteer bad news
- BDisclose the bonus reduction and its reasons clearly and in good time, alongside the solvency position, so that the overall picture is not misleadingCorrect
- CDefer the matter to the marketing team, since communication with the press is outside an actuary's responsibility
- DDisclose the reduction only to the regulator and leave the insurer to decide whether policyholders need to be informed
- Communicate the reduction in technical terms that only specialist readers can interpret, to protect the company's reputation
Explanation
Selective disclosure that creates a misleading impression breaches the duty to communicate honestly and with integrity, and policyholders' interests must be considered. A true statement about solvency alone is misleading by omission if the material bonus cut is hidden. Obscure language or passing the issue on does not discharge the duty.
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