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IAI Actuarial Core Principles · Business Management · Skills and knowledge for working as an actuary in financial services

An actuary in Mumbai is asked to price a new health rider. In the developing-the-solution stage of the Actuarial Control Cycle, which activity is most appropriate?

The appropriate activity is building a model with documented assumptions and testing how sensitive the results are to them. That is the core of developing the solution, whereas defining objectives and comparing actual experience belong to the specifying and monitoring stages respectively.

  1. ABuilding a model with documented assumptions and testing the sensitivity of results to themCorrect
  2. BDeciding the client's objectives from scratch without consulting anyone
  3. CComparing the actual claims with expected claims after two years of sales
  4. DFiling a complaint with the regulator about the competitor's prices
  5. Waiting until the claims arrive to choose any assumptions

Explanation

Developing the solution involves modelling, choosing and documenting assumptions, and testing sensitivity. Defining objectives belongs to specifying the problem, and comparing actual with expected experience is monitoring.

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