IAI Actuarial Core Principles · Business Management · Professionalism and ethics case studies
Meera Iyer, a pricing actuary at an Indian life insurer, is asked by her chief executive to present lapse assumptions that are clearly more optimistic than the evidence supports, so that a new product looks profitable to the board. Which course of action best reflects the Actuaries' Code and professional values?
She should present assumptions supported by the evidence, explain their basis and limitations, and escalate if pressured. Professional integrity and the duty not to mislead users of her advice override a chief executive's commercial preference, and hidden footnotes or mislabelled estimates would still mislead the board.
- APresent the optimistic assumptions, since the chief executive is her employer and bears the commercial responsibility
- BPresent the assumptions supported by the evidence, explain the basis and limitations, and escalate through appropriate channels if pressure continuesCorrect
- CPresent the optimistic assumptions but add a small footnote in the appendix without informing the board
- DResign immediately without raising the matter with anyone
- Present both sets of assumptions but label the optimistic set as the actuary's own best estimate
Explanation
Integrity and competence require advice to be honest and evidence-based. Meera should state the supportable assumptions, communicate their basis and limits clearly, and escalate if pressured. Following the employer's wishes or burying the caveat misleads the board, and labelling optimistic figures as best estimate is misrepresentation.
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