Integrity
The current project I'm working on has hit a certain stumbling block. Specifically, a certain individual on the client's side.
The aim of the current project is for the actuary to calculate reserve the client needs to set up with respect to its insurance business, so that there's money to pay claims as and when it arises in future. Besides needing to perform this task professionally, it also need to be done in accordance to the actuaries' organisation professional conduct and relevant professional standards and government regulations.
Our calculated reserve figures are significantly higher than client's and so this individual was not happy about it.
(On a side note, do not automatically assume that client always wants lower reserve figures. I have encountered both kinds i.e. including those who wanted higher reserve).
So we asked for their figures, compared and discovered that the difference were mainly due to
(1) Their choice of parameter for their calculations was based solely on a single data from the year before whereas we relied on data from past few years. Think about it: if you're going to project, say, interest rate for the next 8 years, do you just take last year's rate and that's it?
(2) They were missing some components of the reserve that are required by regulations. At least some of them were required based on actuarial principles.
After we explained to this individual the reasons of the discrepancies, she didn't even want to talk about that. She simply didn't like our reserve figures being much higher than the company's calculated reserve figures. She even threatened to pass the fine (potentially imposed by the regulator for missing deadline) to us. Goodness.
The actuary stood his ground and explained that their company would not be the only one facing such issue within the industry (the regulations are new) and that their calculation simply didn't comply with regulations.
Hopefully this ends well!
The aim of the current project is for the actuary to calculate reserve the client needs to set up with respect to its insurance business, so that there's money to pay claims as and when it arises in future. Besides needing to perform this task professionally, it also need to be done in accordance to the actuaries' organisation professional conduct and relevant professional standards and government regulations.
Our calculated reserve figures are significantly higher than client's and so this individual was not happy about it.
(On a side note, do not automatically assume that client always wants lower reserve figures. I have encountered both kinds i.e. including those who wanted higher reserve).
So we asked for their figures, compared and discovered that the difference were mainly due to
(1) Their choice of parameter for their calculations was based solely on a single data from the year before whereas we relied on data from past few years. Think about it: if you're going to project, say, interest rate for the next 8 years, do you just take last year's rate and that's it?
(2) They were missing some components of the reserve that are required by regulations. At least some of them were required based on actuarial principles.
After we explained to this individual the reasons of the discrepancies, she didn't even want to talk about that. She simply didn't like our reserve figures being much higher than the company's calculated reserve figures. She even threatened to pass the fine (potentially imposed by the regulator for missing deadline) to us. Goodness.
The actuary stood his ground and explained that their company would not be the only one facing such issue within the industry (the regulations are new) and that their calculation simply didn't comply with regulations.
Hopefully this ends well!
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