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

Kaveri General Insurance's mission stresses fair treatment of policyholders, yet its sales team is rewarded solely on premium volume, and mis-selling complaints are rising. What is the most appropriate diagnosis?

The problem is that objectives and incentives are misaligned with the mission. Rewarding only premium volume encourages behaviour contrary to fair treatment of policyholders, so complaints rise. A mission is effective only when targets, controls and rewards reinforce it, not merely when it is written down.

  1. AThe mission statement is too long and should be shortened
  2. BCompetitors have simply lowered prices
  3. CObjectives and incentives are misaligned with the stated missionCorrect
  4. DThe vision should be replaced by a budget
  5. Shareholders should be excluded from setting objectives

Explanation

A mission only guides behaviour when objectives, controls and rewards support it. Volume-only rewards push staff against the fairness commitment, causing mis-selling. Length of the statement or competitor pricing does not explain this conflict.

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