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

A life insurer in Pune is deciding whether to enter the micro-insurance market. The product head begins by listing the possible entry routes, then collects data on each. Which step in a structured decision-making process should logically come immediately BEFORE the generation of alternative courses of action?

Defining the problem and the objectives comes before generating alternatives. Without clear objectives there are no criteria to judge options against. Selection, implementation, review and communication all follow the generation of alternatives in a structured decision-making process.

  1. AImplementing the chosen option and monitoring results
  2. BDefining the problem and the objectives the decision must meetCorrect
  3. CSelecting the option with the highest expected return
  4. DReviewing the outcome against the original forecast
  5. Communicating the final decision to regulators

Explanation

A structured process starts by identifying the problem and setting objectives. Only then can alternatives be generated and judged against criteria. Selection, implementation and review come later, so they cannot precede generation of options.

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