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IAI Actuarial Core Principles · Business Management · Using data, company functions, people skills, influence and clear communication

An actuary at an Indian insurer is asked by the marketing head to produce a report showing that a new savings product is popular. The only available data come from an online survey in which respondents chose to take part, and 80% of them are existing customers who already own the product. The actuary is preparing the report for the board. Which course of action best meets the Actuaries' Code and good practice in using data?

The actuary should use the data but clearly state its limitations, namely self-selection and a customer-heavy sample, and suggest what further data are needed. This respects integrity and clear communication. Overstating representativeness, hiding details or silently reweighting would mislead the board.

  1. APresent the survey percentages as representative of the whole market since the sample is large
  2. BOmit the survey details from the report to avoid confusing the board
  3. CUse the data but state that the self-selected, customer-heavy sample limits the conclusions, and explain what further data would be neededCorrect
  4. DRefuse to produce any report because survey data can never be used
  5. Reweight the results silently until they match the marketing head's expectation

Explanation

A self-selected sample dominated by existing owners suffers selection bias, so it cannot show market popularity. The Code requires work to be honest and clearly communicated, including limitations. Using the data with clear caveats and suggesting better data is the proportionate response; silent manipulation or concealment would breach integrity.

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