Start With the Intended Use
Define intended use, intended user, and materiality before selecting an actuarial model.
The fastest way to improve an actuarial model is to make the decision visible. Decision first A model is a simplified representation of reality. Its value comes from helping a specific user make a specific decision. That is why the first scoping question is not "Which model can I run?" but "What decision will this support?" Materiality follows use A $20,000 rounding issue may be irrelevant for a portfolio view and material for a single large account. Intended use sets the threshold for what needs attention, which assumptions need support, and which limitations need disclosure. Validation follows consequence If the…
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