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

Before running a pricing model, an actuary at a Bengaluru insurer notices that about 8% of records in the policy data set have a missing occupation field. Under the Actuaries' Code principle of communicating appropriately and acting with integrity, what should the actuary do?

The actuary should investigate why the occupation data is missing, choose and document a reasonable treatment, and tell the users of the results about the limitation. Hiding the adjustment or ignoring it would breach openness and integrity expected under the Actuaries' Code.

  1. AQuietly delete the records and not mention it in the report
  2. BFill the field with the most common occupation and not disclose this
  3. CInvestigate the cause, choose and document a treatment, and tell the users of the results about the limitationCorrect
  4. DStop all work until the data is perfect
  5. Assume the missing records are the same as the rest and omit any comment

Explanation

Data limitations should be investigated, handled sensibly and disclosed so users can judge reliance. Silent deletion or imputation lacks transparency. Refusing to proceed is disproportionate, since reasonable approaches exist.

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