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IAI Actuarial Core Principles · Business Management · Business and consumer needs, the industry value chain and competitive forces

Bharat General, a listed insurer, proposes to raise motor premiums sharply to lift profit. Policyholder groups protest and some brokers threaten to switch insurers. Using stakeholder analysis, which action is most appropriate for the actuary advising the board?

The actuary should assess each stakeholder's power and interest and present the board with the trade-off between higher profit and the risk of lost volumes and reputation. Neither ignoring brokers and policyholders nor automatically giving them priority is sound; the decision needs an evidenced balance of interests.

  1. AIgnore the protest because only shareholders fund the firm
  2. BProceed, since brokers have no influence on business volumes
  3. CAssess the power and interest of each group, and show the board the trade-off between profit and loss of volume and reputationCorrect
  4. DCancel the increase because policyholders' interests always take precedence
  5. Delegate the issue entirely to the marketing team with no actuarial input

Explanation

Stakeholder analysis weighs each group's power and interest. Brokers are a distribution channel with power over volumes, and policyholders affect retention and reputation. The actuary should quantify the trade-off rather than favour one group absolutely or ignore the issue.

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