What Would You Do? Are Reserves Too High?

By John West Hadley

The Stepping Stone, June 2025

Here is our next entry in the “What Would You Do?” series. Write to me at John@JHACareers.com to tell me what you would do. In a future issue, I’ll compile the responses received (preserving your anonymity, of course), along with what actually happened in the real-life situation.

Help me craft future case studies. Write to me about your own challenging, surprising or nightmarish situations involving business, leadership, management, or any of the topic areas covered by The Stepping Stone, and what lessons you learned from them. I’ll collaborate with you on turning your situation into a simple case study, being careful to ensure no one is identifiable. And share your own thoughts (pro and con) on the series as a whole at John@JHACareers.com.

Are Reserves Too High?

Randy was promoted to chief actuary of Middling Insurance, after his former boss was let go, in large part because he was perceived as acting too slowly to adjust reserves for current circumstances.

One of Middling’s key product lines, making up a large portion of Middling’s reserve liability, is group disability, an area in which their parent company has considerable expertise. It has received a lot of attention over the past few years, with resultant reserve strengthening. In late December, the parent company’s claims experts complete a detailed review of all large outstanding disability claims at Middling, and present their final report at a meeting with Randy, Middling’s president and VP of claims, and the head of the parent’s disability operation. The report highlights substantial opportunities to close, reduce or settle a sizeable number of claims with long tails.

Randy is asked to consider the impact of the report on Middling’s disability reserves, which all but the current VP of claims feel are overly conservative. In reviewing the report, Randy feels the report is thorough and credible, and wonders how much of the VP’s attitude may be a reaction to others sticking their nose into her business. They are in the midst of the year end reporting cycle, and any adjustment would need to be made quickly.

What would you do?

Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the newsletter editors, or the respective authors’ employers.

John Hadley was an FSA for many years, and now works with job seekers frustrated with their search. He can be reached at John@JHACareers.com, 908-725-2437 or via LinkedIn. Find his free Career Tips newsletter and other resources at www.JHACareers.com.