IAI Actuarial Core Principles · Business Management · Professional negligence
Arjun, an actuary one year post-qualification, advises a Pune pension fund on a valuation assumption. The assumption falls below what a reasonably competent actuary would adopt, and the fund suffers loss. Arjun argues that he was inexperienced and did his honest best. How will this argument most likely fare?
The argument fails. The standard of care is objective and measured against a reasonably competent actuary, so inexperience or honest effort does not lower it. A professional who undertakes the work must meet that standard regardless of personal limitations.
- AIt succeeds, because the standard is lowered for newly qualified professionals
- BIt succeeds, because honesty removes liability in negligence
- CIt fails, because the standard is objective and does not shrink for inexperienceCorrect
- DIt succeeds only if the fund did not ask about his experience level
- It fails only if Arjun was also in breach of a written contract
Explanation
The test is objective: the standard is that of a reasonably competent actuary holding himself out as qualified. Inexperience and good faith do not reduce it. Contract is not required for negligence liability, so the last option is wrong.
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