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

Ms Iyer, an appointed actuary, finds that her valuation result depends heavily on a long-term lapse assumption which is highly uncertain. The CFO asks her to report a single figure with no mention of this uncertainty, to keep the board paper short. What should she do?

She should give the figure but state the key assumption and its uncertainty concisely, perhaps with a sensitivity. Professional standards require material limitations to be communicated clearly so users are not misled, while still keeping the paper short and usable.

  1. AReport a single figure as asked, since the CFO is her client and decides the content
  2. BReport the figure but clearly state the key assumption and the uncertainty, perhaps with a sensitivity, conciselyCorrect
  3. COmit the figure entirely until the uncertainty is resolved
  4. DInclude the uncertainty only in a verbal remark so nothing is written down
  5. Present a wide range of twenty scenarios with no central estimate

Explanation

The Actuaries' Code requires communications to be clear and to disclose material uncertainty so users can understand the limitations. A concise sensitivity meets this without bloating the paper. Option 4 and 5 fail clarity; option 0 omits material information.

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