You want the best possible service provider for your business needs. Property and casualty insurance is a complicated and dynamic industry. Companies need more than just a consultant. They need a strategic and experienced advisor that asks questions, listens to your answers and helps you make Better Business Decisions. 

At Pinnacle, we believe in asking questions. Our questions help us understand your business. We also encourage those seeking actuarial services to ask their own questions. Getting thoughtful and deliberate answers can ensure that the work of the actuary is as solid as it possibly can be. We’ve compiled just a few of those questions that insurance companies, large or small, captive or NAIC-regulated, can and should ask when working with an actuary or evaluating an actuary’s work product.

1. What is IBNR and why is it necessary?

Incurred but not reported (IBNR) reserves are a core component of an actuarial reserve evaluation. IBNR consists of two primary components: a provision for late reported claims (i.e pure IBNR) and a provision for development on known claims. It is an essential part of the actuary’s work and ensures that the insurance company has set aside a reasonable provision to cover all claims incurred by the entity.

2. What changed from our prior actuarial analysis?

It is very important to understand the key drivers impacting changes in an actuarial analysis. The study should be thorough and accurate and should indicate changes in reserve and forecast estimates directly and transparently. That may include the presence or absence of large claim activity, changes in case reserve adequacy and/or the rate in which claims are settled, etc.

3. What assumptions are driving this analysis?

We recommend that clients ask about the material assumptions that an actuary makes when preparing an analysis. That is because every actuarial model is built on assumptions—such as development on future claims, changes in interest rates or inflation, and other key assumptions. Understanding these underlying factors helps clients interpret the results more accurately and anticipate how changes in assumptions could impact outcomes.

4. What would happen if the assumptions were changed?

The best way to view how changes to an actuary’s assumptions impact the actuarial analysis is through a sensitivity analysis. A sensitivity analysis helps a company understand what is driving the actuarial estimates by using variances and shifts in the assumptions. A responsive actuarial partner can and will provide a thorough sensitivity analysis as part of the actuarial analysis.

5. What are the key risks we should be aware of?

The key risks an organization faces depend on its specific circumstances. A skilled actuarial partner can uncover a wide range of potential threats—financial, operational, or regulatory—that may not be immediately visible. Actuaries go beyond the numbers to identify these hidden vulnerabilities and help organizations develop strategies to manage them effectively.

6. What data did you use, and how reliable is it?

The strength of any actuarial analysis depends on the quality of the underlying data. Actuaries play a critical role in ensuring that data is accurate, relevant, and robust by testing the data for consistency and reasonableness, confirming outliers, and asking thoughtful questions about how the data is presented. While some studies rely primarily on client-specific data, others depend heavily on industry benchmarks—particularly when internal historical data is limited. High-quality benchmarks can offer valuable insights, and experienced actuaries know how to identify and apply the most credible sources.

7. How does our company data compare to industry benchmarks?

Depending on the line of business, there can be a wealth of benchmark data to help assess risk. Therefore, it is critical to know how the depth and quality of your data compares to the broader insurance industry. Benchmarking can highlight strengths, expose weaknesses, and uncover opportunities to improve your risk assessment practices.

8.  How often should we revisit an actuarial analysis?

Markets and risks evolve. Models need regular updates to stay relevant and accurate. The frequency of revisiting an analysis remains commensurate with market, industry, company and other conditions. Your actuary can provide you with a recommendation based on your particular circumstances.

9. Are we retaining the right amount of risk?

Ultimately, this is one of the most important questions for a company to ask. Having a keen understanding of the appropriate levels of insurance risk enables firms to manage exposure while optimizing capital deployment. Actuaries support this process by analyzing the underwriting profile of risk-bearing entities. Through tools such as Total Cost of Risk (TCOR) analysis, they help determine whether the level of risk retention is appropriate.

10. What actions would you recommend based on the analysis?

Actuaries should not simply provide a report, even if that's the full scope of their engagement. They should be viewed as strategic partners. To add real value, they must understand the business they serve. Their analyses can drive meaningful outcomes, helping companies make smarter, more strategic decisions. Don’t just accept the numbers—ask for their insights.