IAI Actuarial Core Principles · Business Management · Communicating strategy; culture and structure in decision making; strategy case studies
Vistara Re has a matrix structure in which pricing actuaries report both to a product head and to the Chief Actuary. Two quarters of friction have followed: the product head wants a lower rate to win business, while the Chief Actuary insists on a technical rate. A junior actuary is asked to follow the product head's number. Which course of action is most consistent with professional responsibility and sound decision making?
She should document the technical basis, escalate the conflict through the agreed governance route, and avoid signing off an inadequate rate without proper authority and disclosure. Yielding to commercial pressure, staying silent, resigning or averaging the rates would neither resolve the dual-reporting conflict nor satisfy professional responsibility.
- AFollow the product head because commercial targets prevail
- BFollow the Chief Actuary silently and avoid telling the product head
- CDocument the technical basis, escalate the conflict through the agreed governance route, and not sign off a rate that she believes is inadequate without proper authority and disclosureCorrect
- DResign immediately without raising the matter
- Adopt the average of the two rates to end the dispute
Explanation
A matrix creates dual reporting and conflicting priorities, which should be resolved through clear escalation and documented reasoning. Professional duty means not simply yielding to commercial pressure or compromising arbitrarily. Averaging has no technical basis, and silence or resignation does not resolve the issue.
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