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IAI Actuarial Core Principles · Business Management · Mission, business strategy, teamwork and time management

Himalaya General Insurance has the mission 'to protect Indian families affordably'. Its sales head sets a target to maximise premium growth by writing high-risk motor policies at low prices, which the chief actuary says will produce large underwriting losses. Which is the most accurate analysis?

The growth target may conflict with the solvency and profitability needed to sustain the mission, so objectives must be reconciled and prioritised. Underwriting losses from underpriced risks threaten the firm's ability to protect families over the long term, whatever the sales department's own goal.

  1. AThe target is consistent because growth always supports a mission
  2. BObjectives conflict with each other only when they are financial, so none exists here
  3. CMission statements are legally binding and the target is therefore void
  4. DThe target may conflict with the need for long-term solvency that supports the mission, so objectives should be reconciled and prioritisedCorrect
  5. The chief actuary should ignore the issue since objectives belong only to sales

Explanation

Objectives across functions can conflict, here growth versus profitability and solvency. Losses endanger the firm's ability to keep serving families, undermining the mission. Management should reconcile and prioritise objectives; a mission statement is not a legally binding instrument.

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