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

A newly qualified actuary at an Indian life insurer is asked by a senior executive, who is known to be highly risk-seeking, to present a pricing analysis that shows only the optimistic scenario so a risky product can be approved. Under the Actuaries' Code, what is the most appropriate response?

The actuary should give a balanced analysis that includes adverse scenarios and clearly communicates the risks. The executive's appetite for risk may shape the final decision, but it cannot justify one-sided advice, which would breach the integrity and communication duties in the Actuaries' Code.

  1. AComply, as the senior executive's risk attitude determines the content of advice
  2. BPresent only the optimistic case but add a verbal caveat later if asked
  3. CDecline to work on the product to avoid any involvement
  4. DPresent a balanced analysis including adverse scenarios and communicate the risks clearly, even if the executive prefers otherwiseCorrect
  5. Pass the analysis to a colleague to avoid personal responsibility

Explanation

The Actuaries' Code requires integrity and clear, fair communication that does not mislead. A decision maker's risk attitude affects the decision, not the honesty of the advice. Showing only the optimistic case would mislead, and a later caveat does not cure that.

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