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

Kaveri Insurance's valuation actuary needs policy-level data from the operations function to complete the year-end reserve. Operations delivers the data two weeks late, with unexplained drops in policy counts compared with the monthly management reports from the finance function. The reporting deadline is fixed. Which course of action is most consistent with sound professional practice and effective cross-functional working?

The actuary should reconcile the data to finance reports as far as possible, raise the discrepancy with operations and finance, document prudent assumptions, and disclose the data limitations and their potential impact in the report. This meets the deadline while keeping the work transparent and professionally sound.

  1. AProceed with the late data, ignore the discrepancy and state no limitations because the deadline is fixed
  2. BReconcile the data to finance reports as far as time allows, raise the discrepancy with operations and finance, apply and document prudent assumptions, and clearly disclose the data limitations and their possible effect in the reportCorrect
  3. CReplace the data with last year's policy counts and not mention the substitution
  4. DRefuse to produce any reserve figure under any circumstances
  5. Ask the marketing function to estimate the missing policy counts

Explanation

Reasonable checks against another source, engagement with the functions involved, documented prudent assumptions and transparent disclosure of limitations meet both the deadline and professional duties. Hiding substitutions or ignoring discrepancies breaches the duty to communicate clearly, while refusing outright is unhelpful.

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