IAI Actuarial Core Principles · Business Management · Issues and challenges in each main practice area
A senior actuary at a Chennai insurer is asked by the CEO to prepare a report for investors on a new cyber-insurance product. The actuary's own pricing data is thin, and the CEO wants the report to describe the loss projections as 'reliable and robust'. The actuary believes the uncertainty is very high. Which course of action is most consistent with the Actuaries' Code?
The actuary should present the projections with uncertainty, data limits and assumptions stated clearly, and refuse to call them robust if they do not believe that. The Actuaries' Code requires honest, non-misleading communication, so employer pressure or hidden small print is not acceptable.
- AUse the CEO's wording, since the employer decides what is communicated
- BPresent the projections with the uncertainty, data limitations and key assumptions stated plainly, and decline to describe them as robust if that is not the actuary's viewCorrect
- COmit the projections altogether and tell investors nothing
- DDescribe the projections as robust but add a note in small print at the end
- Resign immediately without discussing the matter with the CEO
Explanation
Communication must be clear, not misleading, and reflect the actuary's honest judgement, including limitations. Using wording the actuary does not believe, or hiding it in small print, risks misleading users. Resigning without discussion or withholding everything is disproportionate.
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