Skip to content

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

After a Bengaluru insurer launched a new health rider, the monitoring report shows claims are 30% above the assumptions used when the decision was made. According to a sound decision-making process, what should management do?

Management should use the monitoring feedback to review the underlying assumptions and, if necessary, revisit or adjust the decision. Comparing actual outcomes with expectations is the final stage of the decision process, and a 30% deviation signals that corrective action should be considered promptly.

  1. AIgnore the result because the decision was already approved
  2. BTreat the feedback as input to review assumptions and, if needed, revisit the decisionCorrect
  3. CBlame the analysts and close the project
  4. DStop collecting data to avoid further negative findings
  5. Wait until the next financial year before looking at it

Explanation

Monitoring and review close the decision loop: actual outcomes are compared with assumptions, and deviations prompt re-examination of the assumptions and possibly the decision itself. Ignoring or delaying feedback defeats the purpose of the process.

Did you get it right without looking?

One question tells you little. A timed set on Decision-making process, attitude to risk and competition shows your real accuracy, how long you take and where you lose marks.

Practise Decision-making process, attitude to risk and competitionFree diagnostic mock

More Decision-making process, attitude to risk and competition questions