IAI Actuarial Core Principles · Business Management · Skills and knowledge for working as an actuary in financial services
An Indian general insurer's motor portfolio shows claim frequency 15% above the pricing assumption for three consecutive quarters. The appointed actuary investigates whether the deviation is a random fluctuation or a trend and then updates the pricing assumptions. Which feature of the Actuarial Control Cycle does this best illustrate?
This illustrates monitoring experience and feeding the results back into the next cycle. The Actuarial Control Cycle is continuous, so persistent deviations between actual and assumed claim frequency prompt investigation and revised pricing assumptions rather than ending the process at launch.
- AMonitoring experience and feeding the findings back into the next cycleCorrect
- BEnding the cycle because the product is already sold
- CReplacing the professional judgement with the regulator's assumptions
- DLimiting the work to the first year after launch only
- Transferring the responsibility to the sales department
Explanation
The control cycle is continuous: monitoring compares actual and expected experience, and the findings lead to revised assumptions and a new specification of the problem. It does not end at product launch, nor is it handed to sales or replaced by regulator assumptions.
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