Inconsistency and omitance

During a recent actuarial project (valuation of general insurance reserve), auditor pointed out to client the inconsistency of recognising a component of premium (let's call it "CP1") in the total premium but not using it in calculating unearned premium reserve (UPR). So they asked client to include CP1 in their calculation of UPR.

Please bear in mind that due to the choice of words the client used, it probably complicated the actuary's and my understanding of what the changes were.

I determined which part of our workflow that was affected and looked at the relevant spreadsheets. I pointed out an inconsistency where within the same formula, one parameter excluded CP1 whereas another included it and we multiplied them to obtained estimation of another parameter.

I tried my best to explain it to the actuary but first 3 attempts failed. I was frustrated and running out of idea of how else to present this point, when the actuary used a specific example using the data. I then took the opportunity to point out that data's figure is 50 whereas it is 45 in the working spreadsheet because CP1 was left out.

He was in transit and so didn't have access to the spreadsheets. He didn't comment on my huge arrow sign  highlight of the obvious difference in figures. Instead, he said he would look at them the next day, when fortunately he finally agreed with me that there was inconsistency. Goodness! I told Ban that if he couldn't see that 50 is not the same as 45, then I would give up.

Another issue was that client all this time didn't exclude a reinsurance component when calculating UPR net of reinsurance. So, we've been estimating this figure all these years. However, the auditor said that since this cannot be split on a per policy level (under IFRS 17 accounting standard), they asked to leave it out entirely. Wth?!

We know there has to be a figure for it. So they rather have none than accept an estimation that is based on the older accounting standard? Mind-boggling.