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

A Mumbai-based life insurer's pricing team has been asked to recommend whether to launch a new savings product. The head of the team says the group has already agreed that the objective is to raise new-business margin without breaching solvency targets. Which step should logically come next in a structured decision-making process?

The next step is identifying and generating alternative courses of action. Once the objective is agreed, the decision maker must build a range of options before evaluating and choosing between them, and only afterwards implement and monitor. Jumping to implementation or selection skips essential stages.

  1. AImplement the product at once and review results after a year
  2. BIdentify and generate the alternative courses of action availableCorrect
  3. CCommunicate the final decision to distributors
  4. DSelect the option with the highest projected sales volume
  5. Archive the objective and begin monitoring outcomes

Explanation

A structured process runs from defining the objective, to generating alternatives, to evaluating them, choosing, implementing and then monitoring. With the objective settled, the next step is to develop the range of options. Selecting or implementing before alternatives exist skips stages, and choosing on sales alone ignores the stated margin and solvency objective.

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