The role of actuaries is crucial in the general insurance industry.
An actuary acts as the guiding light and influences important financial decisions in an insurance company. He uses his analytical skills to dissect the past and accordingly model the future after assessing the risks involved.
An important part of an actuary’s role is to clearly communicate the financial implications of the results. His mathematical expertise, statistical knowledge, economic and financial analyses and problem solving skills are indispensable to insurers to help evaluate the long-term financial implications of their decisions which could impact individuals as well as a wider community.
Historically, in India, actuarial involvement in general insurance was limited because most of the products’ benefits and premiums were prescribed by an industry-wide tariff. But following the de-tariffication in 2007, actuaries were able to help insurers design new products, determine the appropriate premiums and implement the necessary portfolio management controls.
One such area is health insurance. Currently, very few people have health insurance and the potential target market is vast. The provision and funding for healthcare is complex (think: patient – General physician – specialist - hospital – third party administrator – insurance company – policyholder).
Historically, the few healthcare products available were mostly unprofitable for general insurers. Actuaries are well placed to assist companies to develop sustainable health insurance products that address the needs of the policyholder at affordable prices.
Actuarial expertise is used across a spectrum of roles such as designing and pricing of a product, financial reporting, financial management and corporate planning. Currently, most actuaries in Indian general insurance companies are involved in activities prescribed by regulations relating to the development and pricing of new products, and the provisions for claims on the balance sheet and the investments of assets. Actuaries use the past claims payment and settlements statistics to project how much money the company needs to put aside to meet claims that could be reported and settled in the future.
Future prospects
Looking towards the future, actuaries will be able to assist in other areas of the company like setting reinsurance strategies, determining risk based economic capital required and assist in the management of the company’s capital base.
In addition to his role as an actuary, he may also have a role as a manager or management consultant to advise an insurer’s board and management, to help them meet their obligations to shareholders and potential shareholders and to define and quantify their their corporate financial objectives and to control the company’s financial operations to meet these objectives. This counsel can also be provided to auditors, legal representatives, supervisory authorities and others who may have an interest in the insurer’s operations.
Many may not be aware but there is a code of professional conduct that identifies the professional and ethical standards required of actuaries. This code of conduct demands the highest standards of personal integrity from its members.
Akin to the Hippocratic oath taken by the medical profession to pledge to work towards to ethical practice of medicine, the actuarial professional code of conduct seeks to balance the role of the actuaries in business management with responsibility for protecting the financial interests of the public promised by insurance companies. Hence it is not a surprise that the strapline of the Institute of Actuaries of India is “serving the cause of public interest”.
It is not easy to become a qualified actuary. This is a long hard journey. Those choosing to pursue a career in this profession need to pass 15 examinations – usually only after completing their degree and while working. The level of knowledge required is set very high hence success in the examinations is not guaranteed, even for the sharpest mathetimatical minds!
Who can become an actuary?
To become an actuary one must be a Fellow of a recognised professional examining body like the Institute of Actuaries of India (IAI) or the Institute of Actuaries, London. Any person with a minimum 18 years of age and having a high degree of aptitude for mathematics and statistics can take up this course and become an Actuary. Generally, first class graduates or postgraduates in Mathematics, Statistics or Econometrics will be in a better position than others to qualify as actuaries.
Those choosing to pursue a career in this profession need to pass 16 examinations – usually only after completing their degree and while working. In addition, he has to comply with other criteria such as experience requirement and attendance at a professionalism course prescribed for the purpose.
Career Opportunities
Actuaries work in a wide range of areas which include Life, general & health insurance; reinsurance companies, pension funds, risk management etc.
The following universities offer courses with actuarial science as a subject at the degree & post graduate level
- Goa University- B.Sc. with actuarial science as a subject
- University of Mumbai- B.Sc. with actuarial science as a subject
- Kurukshetra University, Haryana - BA actuarial science
- University of Delhi - BA with insurance as a subject and BA (vocational) with insurance economics and commerce as subjects
- The Dept of Statistics, University of Madras - M.Sc. actuarial science
- Bishop Herber College (Autonomous), Tiruchirapalli - M.Sc. and postgraduate diploma courses in actuarial science
- The Amity School of Insurance and Actuarial Science, New Delhi- M.Sc. actuarial science
- Narsee Monjee Institute of Management Studies (NMIMS University) - a one-year fulltime postgraduate diploma course in actuarial science (PGDAS)
- Madras School of Economics, Chennai offers Post-Graduate Diploma in Actuarial Economics.
The career opportunities for actuaries in India are steadily growing. Today, all the insurance companies employ at least two to three actuaries. In other fields, there is still a limited awareness in India about the importance of the role of actuaries.
This phenomena is slowly undergoing a change and there is a great potential for growth for actuaries in India.
The work of an actuary involves a lot of number crunching and the nature of work is quite tedious, nevertheless, it offers rewards in terms of intellectual challenge, status, job satisfaction and earnings. The journey to become a qualified actuary is a long and hard one, but one cannot underestimate the crucial role they play in the general insurance industry. In a nutshell, actuaries make financial sense of the future, thereby enabling the industry to make better informed decisions about the future with more confidence.
The author is Managing Director, Royal Sundaram Allianz Insurance Co Ltd