IAI Actuarial Core Principles · Business Management · Professional negligence
Vikram, an actuary, advises a client, Deccan Mutual, on a reinsurance structure. The assignment ends and the final invoice is paid. Six months later Vikram becomes aware that one of his assumptions was materially wrong, which could cause the client loss. Which statement best reflects the position on his duty?
Vikram should promptly inform the client of the error. Ending the engagement and receiving payment does not remove professional responsibility; integrity and reasonable care point to disclosure, and staying silent while the client relies on flawed advice could expose him to liability.
- ANo duty remains because the contract has ended and payment is made
- BA duty arises only if the client first discovers the error and complains
- CLiability can arise only for errors made during the contract period, and knowledge afterwards is irrelevant
- DThe Actuaries' Code and ethical principles, along with the care expected of a professional, point towards him drawing the error to the client's attention promptly, and failing to do so may expose him to a claimCorrect
- He must refund the fee but has no further obligation of any kind
Explanation
A professional who discovers that earlier advice was materially wrong should not stay silent. Professional integrity and the care expected of a reasonable actuary favour prompt disclosure, and silence while the client keeps relying on the advice may support a negligence claim. Termination of the contract and payment of fees do not cleanse the position.
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