Actuaries Project.docx

8/19/2019 Actuaries Project.docx

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OBJECTIVES

1. To understand the concept of Actuarial Science and the role ofActuaries in Insurance business.

2. To analyze the powers, functions and responsibilities and duties ofactuaries.

3. To study the role of actuaries with reference to life insurance andgeneral insurance.

4. To e a!ine the current scenario of Actuarial Science in India.

SCOPE

The scope of study of the pro"ect e tends into both, #ife Insuranceand $eneral Insurance and the %ole of Actuaries in both thesefields. It also tal&s about the role of Appointed Actuary. It tal&s about the 'ortfolio of an Actuary. The study concentrates !a"orly on Actuarial Science in India butalso has certain co!parisons with the sa!e abroad in certain areas.


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LIMITATIONS

The biggest li!itation or drawbac& that rose during the !a&ing of

this pro"ect was the li!ited awareness about the topic. (ot only the general public but also !any insurance related peopleare not aware of this sub"ect.Also, there are only around 2)* Actuaries in India and contactingthe! was a !a"or difficulty.The Actuaries refused to fill in any +uestionnaire as they are notallowed to fill in any +uestionnaire

METHODOLOGY


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EXECUTIVE SUMMARY

Most people will know something about the

professions of accountants, doctor sand lawyers. Buttell someone you’re an actuary and more than likelythey will look at you blankly – never having heard of anactuary.T h e r e a s o n f o r t a ! n " t h ! s t o # ! $ ! s t o % a e e & e r ' o n ea ( a r e o f ( o r o f a$t)ar!es* (h!$h !s %ost !%#ortant !nIns)ran$e Co%#an'+ An a$t)ar' rea,,' # , a ' s a n ! % # o r t a n tr o , e ! n I n s ) r a n $ e + H e - e a , s ( ! t h t h e . ) s ! n e s s

o f !ns)ran$e an- !s res#ons! . ,e for %an ' areas )n-erth e .ro a- $a te "o r' of !ns)ran$e+ He !s res#ons!.,e for$o,,e$t!n" the -ata to fore$ast f)t)re r!s s an- see ho( the#re-!$t!ons (!,, affe$t &ar!o)s as#e$ts of !ns)ran$e+Actuaries also hold a legal responsibility for protecting thebene ts promised by insurance companies. raditionallyactuaries have been associated with insurance sector butin present scenario with the economy opening upactuaries are needed in sectors like non!life insurance,employee bene ts, health insurance, asset!management, reinsurance, insurance broking houses andconsulting companies.


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INTRODUCTION

"ow a days, most of us must have seen, heard andread about companies which p ro v id e i n s u r a n c ec o v e r t o p o l i c y h o l d e r s i n c a s e o f a n yeventuality lik accidents, hospitali#ation, householdha#ards, thefts or death and still others who look afterinvestment schemes, employee bene ts ,ret i rement bene ts and pension schemes. hepolicy holders are re$uired to pay a %edamount as installments at regular intervals and theyget this money back in the event of any untowardincident or upon the maturity of the policy. &ave youever wondered who decides as to what amount ofmoney a policy holder should pay as premium or whatsum should be given as pension amount or returns by thecompany' (ell, this e%actly is what an actuary does.

hey calculate insurance risks and premiums. echnically speaking the )ob of an actuary is toassess the nancial impact of an uncertain futureevent. *oughly speaking they look at the nancial aspectof disasters+ sarcastically speaking they are nancialastrologers. An actuary has to combine the skills of astatistician, economist and nancier and e m p l o y

t e c h n i $ u e s o f p r o b a b i l i t y , c o m p o u n di n t e r e s t , l a w, m a r k e t i n g , management etc topredict the outcome of future contingencies anddesign solutions to lessen the nancial severity of suchevents. Actuar ia l p rofe ssi on was formall yestablished in - - , with the formation


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of /nstitute of Actuaries, 0ondon. /n /ndia, traditionallyactuaries were found only in the life!insurance sectorbut now with the opening up of the economy theyare wanted by non!life insurance companies, banks,stock e%changes, private and government agenciesand this are one eld where demand e%ceeds supply.

he Actuarial 1ociety of /ndia 2A1/3, the only professionalbody of Actuaries in /n di a wa s fo rmed in 4 an dwas admitted as a member of the /nternationalActuarial Association 2/AA3, an umbrella organi#ationto all actuarial bodies across the world, in 454. /t wasregistered in 4-6 under registration of 0iteracy,

1cienti c and 7haritable 1ocieties Act 8/// of 49:./ts ob)ectives include the advan cemen t of Act uar ialprofession in /ndia, providing opportunitiesfor interaction among members of the profession,facilitating research, arranging lect ure s on rel evan tsub)ects and providing faci l i t ies and ;uidance tothose studying for the professional Actuarialaculty of Actuaries of?@. he /nstitut e of Actuaries of /ndia startedconducting


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re c o g n i # e d p ro f e s s i o n a l e%amining body like theActuarial 1ociety of /ndia 2A1/3, Mumbai or the /nstitute ofActuaries, 0ondon. he work of an actuary involves a lotof number crunching and the nature of work is $uitetedious, nevertheless it o ers rewards in termsof intellectual challenge, status, )ob satisfaction andearnings. As their )udgment is the basis of decisionmaking for many business activities, their career pathsoften lead to upper management and e%ecutive positions.

WHAT IS AN ACTUARY?

Most people wil l know something about t heprof es si on s of ac co un ta nt s, doctors and lawyers. Buttell someone you’re an actuary and more than likely theywill look at you blankly – never having heard of anactuary. /f, however, they are aware of the work thatactuaries do, they are likely to be impressed+ being anactuary carries $uite a reputation. his is partly due tothe diCcult e%ams, but mostly due to the fact thatactuaries are e%perts in a eld that is renowned for itscomple%ity and mathematical powers . An actuary dealswith the business of insurance and is responsible formany are as unde r th e broad ca tego ry ofinsurance. he actuary is an individual who wil lanaly#e important data such as mortality, sickness, in)uryand disability rates and u s e t h a t i n f o rm a t i o n t o a i dt h o s e i n v o l v e d w i t h i n s u r a n c e . A n a c t u a r y i s


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responsible for collecting the data to forecastfu ture ri sk s an d se e ho w th es e predictions will a ectvarious aspects of insurance. Any person with minimum

- years of age and having a high degree of aptitude formathematics and statistics can take up theco ur se an d bec ome an Actuary.

A person with a high degree of aptitude forma th emat ic s and st at is ti cs ca n become an actuary.

he other necessary skills include good communicationskills, abil ity to use comp uter s and relat edtechnology , b usiness sense, a p ractical outlook, a

curious bent of mind, the ability to work on ones ownand also be a team player as the si tuat iondemands and to be self motivated. . &owever anaspirant should have single minded devotion, totaldedication and a systematic approach towardsproblems in order to successfully become an Actuary.

THE ROLE AND RESPONSIBILITIES OF ANACTUARY

he daily )ob duties, which an actuary mustcomplete, are $uite vast and varied. his individualwears many hats and must be adept with completing

various tasks o n a d a i l y b a s i s . A l t h o u g hm a n y i n d i v i d u a l s m a y b e u n a w a r e o f t h eresponsibilities, which an actuary takes on in their )obrole, the position of actuary is one of an important nature.=ne who accepts the role of actuary is responsible for amultitude of items. hey wi ll review st at ist ic al


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information relating to rates dealing withmortali ty, sickness, accidents, disability and retirement.

hey will take the information that t h e y o b t a i n f ro mr e v i e w i n g s t a t i s t i c a l d a t a a n d r e l a y t h ei n f o r m a t i o n t o i n d i v i d u a l s w h o n e e d s u c hi t e m s t o s u c c e s s f u l l y p u r s u e i n s u r a n c e !re l a t e d interests. he general role of the actuary is tocompile the data that they collect in such a manner thatit helps companies deal with payment and coverageissues.

SPECIFIC DUTIES OF AN ACTUARY

here are a variety of speci c duties, which an actuarymust carry out on a daily basis. he rst duty that anactuary must undertake in their )ob role is to review avariety of documents. hese documents relate tostatistical information, insurance plans, annuity plans,pension plans, contracts and company policies. he

overall goal in reviewing these various document is toconstruct guidelines for which the companies can followwith their customers and employees. =nce the actuaryhas reviewed all of the pertinent documents, theindividual must then cons tr uc t conc ise tabl esevidencing the results of the intense documentreview. he tables will diagram the statisticalevidence as well as highlight the recommended

route to pursue with regard to disbursements,premiums and retirement funds. An additionalspeci c duty of an actuary is to determine companypolicy and e%plain such policy and its aspects to thosewho will bene t from it. he actuary may also work on thepolicy so that it ade$uately works to bene t those


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a ected by the policy.An actuary may also doconsulting work and help various companies withtheir statistical needs and company policyconstruction. =ne who is an actuary may work for aspeci c corporation or many di erent companies andcorporations.

Actuaries may also be asked to test ify as e%pertwitnesses in various forms of litigation. heir testimonymost often relates to the lifetime earnings an individualwould have seen based on a variety of factors. =ne who

ful l ls the role of an actuary may also have tote st ify be fore publ ic agencies with regard to newor revised legislation a ecting the companies andcorporations, which it works for. his fre$uently occurswhen a new law is about to be passed or the companywishes a particular piece of legislation to becomelaw. he a ctu ary is al so t he g o to indi vidu al f orany $ues ti ons rel at ing to th ei r )ob responsibilities

asked by the customers of the company. /f the $uestionsare best a n s w e r e d b y t h e a c t u a r y , a n d t h e nh e D s h e w i l l d o s o i n o r d e r t o p r e s e n tstraight forward information to the public. An actuarymust also develop mathematical ideas and formulas sothat the proper da ta can be as se ssed . he ac tu arymust use h isDh er ma them atic al ab ilit ies to formate$uations, which will aid in the resolution of an issue.

TRAITS WHICH ALL ACTUARIES SHOULDPOSSESS


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here are many bene cial t rai t s, which anactuary should possess. >irst and foremost, anactuary needs to possess wonderful mathematical skills.

1ince they wil l be dea lin g a grea t dea l wit hstat is t ical e$uations and data, having suchmathematical skills will help them to e%cel in their )obresponsibilities.

;ood analytical skills are another important trait which anactuary should possess as it will help them in their

)ob role. As they wil l need to analy#e a variety

of documents, having analytical skills, which aremore than ade$uate, will greatly bene t them in thelong run.

An actuary is an individual who should possess goodpublic speaking skills as well. /n their daily )obduties, not only will they need to analy#e documentsand data but they will also have to report such dataresults to company oCcials and members of thepublic. herefore, in order to best get their opinionsand conclusions across in a straightforward, easy tounderstand manner, good public speaking skills should bea prere$uisite to taking on the role of actuary.

7reativity is something, which actuaries should possess.

>rom time to time, they will need to aid companyoCcials in the drafting of company policy and makechanges to the policy. (ith a little bit of creativity, anactuary will be able to take the documentation and putsuch a spin on it that it is formed into a proper andvalid policy.


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=ne who is an actuary should also have wonderfulresearch skills. 1ince many of the documents that theyneed to analy#e will not )ust pop into their laps, it is

important that actuaries can do good research and ndout what they need to know with regard to statistics andpertinent documents in an eCcient and e%pedientmanner.

An actuary should also have good working computerskills. 1ince much of their work will involve computers,it is important that the actuary not only be familiar with

computers but know how to maneuver around with themas well.

7omprehension skills are also a necessary component forall actuaries to possess. he actuary is an individual whoin their )ob role will need to analy#e and interpret oftencomple% documents and laws as well. /f one has e%cellentcomprehension skills they will be able to do their )ob thatmuch better.


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What is insurance?

(e face a lot of risks in our daily lives. 1ome ofthese lead to nancial losses. /nsurance is a way ofprotecting against these nancial losses. >ora payment 2premium3, an insurance company will takethe responsibility of compensating your nancial losses.

What is Genera Insurance?

Insurance other than #ife Insurance- falls under the category of $eneralInsurance. $eneral Insurance co!prises of insurance of property againstfire, burglary etc. personal insurance such as Accident and ealthInsurance and liability insurance which co/ers legal liabilities. There arealso other co/ers such as 0rrors and !issions insurance for

professionals, credit insurance etc.


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(on life insurance co!panies ha/e products that co/er property againstfire and allied perils, flood stor! and inundation, earth+ua&e and so on.There are products that co/er property against burglary, theft etc. Thenon life co!panies also offer policies co/ering !achinery against

brea&down, there are policies that co/er the hull of ships and so on. Aarine argo policy co/ers goods in transit including by sea, air and

road. 5urther, insurance of !otor /ehicles against da!ages and theftfor!s a !a"or chun& of non life insurance business./n respect of insurance of property, it is importantthat the cover is taken for the actual value of theproperty to avoid being imposed a penalty shouldthere be a claim. (here a property is undervalued

for the purposes of insurance, the insured will haveto bear a rate able proportion of the loss. >orinstance if the value of a property is *s. :: and it isinsured for %s.)*6 in the e/ent of a loss to the e tent of say%s.)*6 , the !a i!u! clai! a!ount payable would be %s.2)6 2

:E of the loss being borne by the insured forunderinsuring the property by :E 3. his concept is$uite often not understood by most insures.

Fersonal insurance covers include policies forAccident, &ealth etc. Froducts o ering FersonalAccident cover are bene t policies. &ealth insurancecovers o ered by non!life insurers are mainlyhospitali#ation covers either on reimbursement orcashless basis. he cashless service is o ered to

hird Farty Administrators who have arrangementswith various service providers, i.e, hospitals. he

hird Farty Administrators also provide service forreimbursement claims. 1ometimes the insurersthemselves process reimbursement claims.

Accident and health insurance policies are availablefor individuals as well as groups. A group could be a


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group of employees of an organi#ation or holders ofcredit cards or deposit holders in a bank etc. "ormallywhen a group is covered, insurers o er group discounts.

0iability insurance covers such as Motor hird Farty0iability /nsurance, (orkmen’s 7ompensation Folicy etco er cover against legal liabilities that may arise underthe respective statutesG Motor Hehicles Act, he(orkmen’s 7ompensation Act etc. 1ome of thecovers such as the foregoing 2Motor hird Farty and(orkmen’s 7ompensation policy 3 are compulsory bystatute. 0iability /nsurance not compulsory by statute is

also gaining popularity these days. Many industries insureagainst Fublic liability. here are liability covers availablefor Froducts as well.

here are general insurance products that are in thenature of package policies o ering a combination ofthe covers mentioned above. >or instance, there arepackage policies available for householders, shop keepers

and also for professionals such as doctors, charteredaccountants etc. Apart from o ering standard covers,insurers also o er customi#ed or tailor!made ones.

1uitable general /nsurance covers are necessary forevery family. /t is important to protect one’s property,which one might have ac$uired from one’s hardearned income. A loss or damage to one’s property can

leave one shattered. #osses created by catastrophes such as tsuna!i,earth+ua&es, cyclones etc have left many homeless andpenniless. 1uch lo sses can be deva st at ing bu tins ura nce cou ld hel p mit iga te them. Froperty canbe covered, so also the people against Fersonal Accident.A &ealth /nsurance policy can provide nancial


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relief to a person undergoing medical treatmentwhether due to a disease or an in)ury.

/ndustries also need to protect themselves by obtaininginsurance covers to protect their building, machinery,stocks etc. hey need to cover their liabilities as well.>inanciers insist on insurance. 1o, most industries orbusinesses that are nanced by banks and otherinstitutions do obtain covers. But are they obtaining theright covers' And are they insuring ade$uately are$uestions that need to be given some thought. Alsoorganisations or industries that are self! nanced should

ensure that they are protected by insurance.ost general insurance co/ers are annual contracts. owe/er, there few

products that are long ter!. /t is important for proposers toread and understand the terms and conditions of a policybefore they enter into an insurance contract. heproposal form needs to be lled in completely andcorrectly by a proposer to ensure that the cover isade$uate and the right one.


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/h' sho),- one !ns)re 0

=ne of th e main reasons one sho uld insure is t o

protec t one’s belo ngin gs and assets againstnancial loss. (hen one has earned andaccumulated property, protecting it is prudent. he lawalso re$uires us to be insured agai nst som e l iab il it ies .

hat is, in case we should cause a loss to anotherperson, that person is entitled to compensation. o ensurethat we can a ord to pay t hat compensation, thelaw re $uire s us to buy liability insurance so that the

responsibility of paying the compensation is transferredto an insurance company.

/ho sho),- .)' "enera, !ns)ran$e0

Anyone who owns an asset can buy insurance toprotect it against losses due to re or theft and soon.


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Ho( %)$h sho),- I !ns)re for0

he amount you insure for is called the sumassured. "ormally a policy should cover the value ofthe asset – either the market value while insuring, or thecost of replacing the asset should it be lost or

dest royed. he premium will depend on the sumassured.

Can I ta e t(o #o,!$!es an- "et $,a!%s )n-er .oth of the%0

/n case of an indemnity cover 2one that seeks tocompensate the actual loss 3!!for in stance, a policythat covers property, if there are two policiesinvogue, the loss shall be shared by both thepolicies. /n no case can an insured get more than theactual pecuniary loss he or she has incurred. =n theother hand, in respect of bene t policies l ike theFer sona l Accident policy, where a %edcompensation is paid, no matter what the actual lossis , one may obtain more than one policy.

Accident policy, where a %ed compensation is paid,no matter what the actual loss is , one may obtain morethan one policy.

On &hat 'asis is c ai( %ai"?


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/n indemnity policies, the upper l imit of a claimis the sum assured and th is usually applies for theperiod of the policy. 7ertain policies, however, allowfor reinstate!ent of the Su! Insured by pay!ent of

proportionate premium for the remaining period ofth e po li cy. he actual claim will be the actuale%tent of nancial loss as validated by documentslike bills. /f the property is underinsured, the insuredshall bear a r ateable proportion of the loss.

here can be more than one claim in the policyperiod but the sum assured is usually the limitfor the policy period unless reinstated. "owadayshealth insurance policies – which coverhospitali#ation costs – have also a cashless settlementof claims. hat is, you don’t have to pay for the treatmentat the hospital and then make a claim for reimbursementof the e%penses. he insurance company has aservice provider called the hird Farty Administrator2 FA3 health services, who liaises with the hospitals anddirectly makes the payment for your treatment as per theterms of your policy and coverage.

Li$e Insurance Un"er&ritin) "egative underwriting factors cost you money. (ecommissioned this study to determine e%actly howmuch. /f you are not able to change your factors to

save some money, at least you will know what they arecosting youI

Un-er(r!t!n" 1a$tor

Co%#an'2

Pre%!)%71,33*


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Total holesterol8 29)

holesterol %atio8 :.*

;lood 'ressure8 1416*?heart or cancer@

Two dri/ing con/ictions in threeyears

33:

1>2)

>:

23

7 :3*71,)3*7 93)

71,29)7 9


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What is the %eri#"icit* #$ %re(iu(

%a*(ents?

ost general insurance policies are annual and the pre!iu! pay!ent isin ad/ance. (o ris& co!!ences unless you ha/e paid the pre!iu!. Inso!e long ter! policies co!panies ha/e the facility of collecting

pre!iu!s periodically.

Wh* "# "i+erent %e#% e ha,e "i+erent%re(iu(s?

The pre!iu! is calculated on the e tent and nature of the co/er youwant. A higher sum insured means a higher rate ofpremium. 1imilarly a higher risk will be charged a


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higher premium. An e%ample of this is that an olderperson will have to pay a higher premium for healthinsurance for the same sum insured. 1ometimes therisk is higher depending on the location of ris& – fore%ample in motor insurance in areas whereaccidents are higher. 1o the premium will vary accordingto the nature and severity of the risk.

/f / buy a policy and don’t make a claim, it is a loss. 1o,why should / buy insurance'

;eneral insurance is not meant to be for savings or

investment returns. /t is meant for protection. (hat youpay for is the protection against a risk. o approach itas something from which returns should be obtained isnot the correct approach as there is a price to pay forprotecting a property worth lakhs for a few hundredrupees.

If there are #ro.,e%s (!th $,a!%s (hat $an I -o0

5irst you should write to the co!pany and gi/e the! sufficient ti!e torespond suitably. If they don-t respond, or it is not a responsesatisfactory to you, then you can approach the appropriate "udicalchannel. 5or co!plaints relating to personal insurance co/ers upto a/alue of %s.2* la&h, you !ay approach the Insurance !buds!an inyour area.

2& &<=MB?J1MA"3.

The !buds!an has a technical tea! that will go into the !erits of your case and gi/e an award. If you are unhappy with the outco!e with the

!buds!an you still ha/e recourse to consu!er courts.


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=e e tended a pre/ious study of life insurance +uote sites. (ote thedifference in pre!iu! for the sa!e factor. Also, one co!pany !ay ha/ethe high pre!iu! for one factor and the low pre!iu! for another. Seethe co!plete study.

ELIGIBILITY

The Actuarial Society of India and Institute of Actuaries, B are professional e a!ining bodies which conduct certificate,associate ship le/el and fellowship le/el e a!inations and on

passing these e a!inations candidates beco!e eligible to bead!itted as an Associate e!ber of the society and can useAASI against their na!e as a registered actuary. n passing all the


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sub"ects up to and including 4** series and upon satisfying the othercriteria specified for the purpose, candidates beco!e eligible to bead!itted as fellow !e!ber of the Society and can use 5ASI againsthis6her na!e as a recognised fellow.

A !e!ber of uni/ersities are offering graduate and postgraduate coursesin actuarial science. ere co!pletion of such courses does not !a&e oneeligible to practice as an actuary, but such courses gi/e students betterconceptual clarity and training by e perts in a classroo! en/iron!entwhich !a&es the! better e+uipped than if they directly write papers ofASI through self study. To +ualify as an Actuary, a candidate has to passall e a!inations in the prescribed sub"ects conducted by the

professional e a!ining body such as the Actuarial Societyof India and the Institute of Actuaries, B.

THE ACTUARIAL SOCIETY O1 INDIA

The Actuarial Society of India was established in 1


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OBJECTS

D To pro/ide a entral rganisation for the !e!bers of the actuarial profession in India for the purpose of ele/ating the attain!ent andstatus and for pro!oting the general efficiency of all who are engagedin occupations connected with the pursuits of an actuaryE

D To e tend and i!pro/e the data and !ethods of the Science whichhas its origin in the application of the doctrine of probabilities to theaffairs of life and to consider all !onetary +uestions in/ol/ing,separately or in co!bination, the !athe!atical doctrine of

probabilities and the principles of interestED To plan, pro!ote and pro/ide for interaction a!ongst the

!e!bers, to arrange facilities for the reading of papers, thedeli/ery of lectures, the discussion of topics and for theac+uisition and disse!ination by other !eans of usefulinfor!ation and &nowledge connected with Actuarial Scienceand other allied sub"ects with special reference to IndianconditionsE

D To pro!ote or to conduct wor& or research of interest to ActuarialScience or to the practice of the ActuaryE

D To prescribe syllabus of studies and hold e a!inations in sub"ects pertaining to principles and practice of Actuarial Science with particular refer of ade+uate standard can be tested and to awardcertificates, diplo!as and other distinctions to successfulcandidatesE

D To pro!ote or to conduct wor& or research of interest to ActuarialScience or to the practice of the Actuary.

D To disse!inate infor!ation on Actuarial Science and other alliedsub"ec t s by under ta&ing and p ro / id ing fo r pub l i ca t iono f " o u r n a l s , r e p o r t s , pa!phlets, research papers, boo&s andother literatureE

D To for! and !aintain either by itself or in collaboration withso!e other rganization or organizations a library or libraries foruse by !e!bers of the SocietyE

D To confer honorary awards and other distinctionsE


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D To institute and award scholarships, prizes, !edals and certificatesED To !aintain liaison with ni/ersities and other educational and

professional bodies in India or abroad for the purpose of pro!otingthe ob"ects of the societyE

D To !aintain contact and co operate with other institutions inany part of the world ha/ing ob"ects wholly or partly si!ilarto those of the Society including by way of pay!ent ofsubscription, enroll!ent as a !e!ber thereof, and generally insuch a !anner as !ay be conducti/e to the furtherance of theco!!on ob"ects as the Society !ay dee! necessary.

D To discuss and co!!ent on the ac tuar ia l aspects of publ ic, social and econo!ic and financial +uest ions

wh ic h fr o! ti !e to ti !e !a y be th e sub"ect of public interestED To consider the actuarial aspects of legislation, e isting and proposed,and to ta&e such action as is considered desirableE

D To arrange for the co!pilation and publication of statisticaldata and of actuarial tables based thereonE

D To raise funds by subscriptions fro! the !e!bers of theSociety and to accept donations and be+uests for all or any ofthe purposes of the SocietyE and

Genera,,' -o a,, s)$h th!n"s as fro% t!%e to t!%e %a' .e ne$essar'to e,e&ate the stat)s an- #ro$)re a-&an$e%ent of the !nterest of the#rofess!on+

ROLE O1 ACTUARIES IN INSURANCE

Actuaries are e perts who perfor! actuarial analysis of insurance rates,

rating procedures, rating plans and schedules of insurance co!panies.These are professionals who are e perienced in re/iewing and analyzinginsurance operations, reser/es and underwriting procedures and pro/idetechnical assistance regarding actuarial !atters to policy e a!iners andother technical staff. In other words they are the people who ascertain in


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ad/ance the uncertain e/ents that could ta&e place in future and co!e toa financial conclusion.

Actuaries are in/ol/ed in pricing, product design, financial !anage!entand corporate planning. They use their professional e pertise in sol/ingco!plication financial proble!s by co!bining their theoretical as wellas practical &nowledge.

Actuaries also hold a legal responsibility for protecting the benefits pro!ised by insurance co!panies. Their role de!ands the higheststandards of personal integrity and application of professional s&ills.Actuaries balance their role in business !anage!ent with responsibility

for safeguarding the financial interests of the public.

APPOINTED ACTUARIES2

'rocedure for Appoint!ent of an Appointed ActuaryF

1. An insurer registered to carry on insurance business in India shall,sub"ect to sub regulation, appoint an actuary, who shall be &nownas the Appointed Actuary- for the purpose of the Act.


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2. A person shall be eligible to be appointed as an appointed actuaryfor an insurer, if he or she shall be

a. ordinarily resident in IndiaE b. a 5ellow e!ber of the Actuarial Society of IndiaEc. an e!ployee of the life insurer, in case of life insurance businessEd. an e!ployee of the insurer or a consulting actuary, in case of

general insurance businessEe. a person who has not co!!itted any breach of professional

conductEf. a person against who! no disciplinary action by the Actuarial

Society of India or any other actuarial professional body is pendingE

g. not an appointed actuary of other insurerEh. a person who possesses a ertificate of 'ractice issued by theActuarial Society of IndiaE and

i. not o/er the age of se/enty years.

3. An insurer shall see& the appro/al of the Authority for theappoint!ent of appointed actuary, sub!itting the application in 5or!I%GA AA 1.

4. The Authority shall, within thirty days fro! the date of receiptof application, either accept or re"ect the sa!e. 'ro/ided that

before the re"ecting the application, the Authority shall gi/e anopportunity of being heard to the insurer.

). If an insurer does not recei/e appro/al within thirty days of thereceipt of such application by the Authority, the insurer shall dee!that the appro/al has been granted by the Authority.

>. An insurer , who is unable to appoint an appointed actuary inaccordance with sub regulation ?2@, shall !a&e an application to theAuthority in writing for rela ation of one or !ore conditions!entioned in sub regulation ?2@.


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:. The authority, on receipt of the application referred to in subregulation ?>@, co!!unicate its decision to the insurer within thirtydays of receipt of such application.

9. The appoint!ent of an appointed actuary shall ta&e effect fro! thedate of appro/al by the authority.

CESSATION O1 APPOINTMENT O1 APPOINTEDACTUARY+

1. An appointed actuary shall cease to be so, if he or she has been gi/ennotice of withdrawal of appro/al by the Authority on the followinggroundsE

a@ that he or she ceases to be eligible in accordance with subregulation ?2@ of regulation ?3@, or


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b@ That he or she has, in the opinion of the Authority, failed to perfor! ade+uately and properly the duties and obligations of anappointed actuary under these regulations.

2. The authority shall gi/e an appointed actuary a reasonable opportunityof being heard, if he or she has been gi/en a notice of withdrawal ofappro/al by it.

3. If a person ceases to be an appointed actuary of an insurer otherwisethan on the grounds !entioned in sub regulation ?1@, the insurer and theappointed actuary shall inti!ate the Authority the reasons thereforewithin fifteen days of such a cessation.

PO/ERS O1 APPOINTED ACTUARY2

1. An appointed actuary shall ha/e access to all infor!ation ordocu!ents in possession, or under control, of the insurer if such accessis necessary for the proper and effecti/e perfor!ance of the functionsand duties of the appointed actuary.


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2. The appointed actuary !ay see& any infor!ation for the purpose ofsub regulation ?1@ of this regulation fro! any officer or e!ployee of theinsurer.

3. The appointed actuary shall be entitled,a. to attend all !eetings of the !anage!ent including the directors of theinsurer,

b. to spea& and discuss on any !atter, at such !eeting,i. that relates to the actuarial ad/ice gi/en to the directorsEii. that !ay affect the sol/ency of the insurerEiii. that !ay affect the ability of the insurer to !eet the reasonablee pectations of policyholders orE

i/. on which actuarial ad/ice is necessaryEc. to attend,i. any !eeting of the shareholders or the policyholders of the insurer, orii. any other !eeting of the !e!bers of the insurer at which the insurer-sannual accounts or financial state!ents are to be considered or at whichany !atter in connection with the appointed actuary-s duties isdiscussed.

DUTIES AND OBLIGATIONS

In particular and without pre"udice to the generality of the foregoing!atters, and in the interests of the insurance industry and the

policyholders , the duties and obligations of an appointed actuary of aninsurer shall include H


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1. rendering actuarial ad/ice to the !anage!ent of the insurer, in particular in the areas of product design and pricing, insurance contractwording, in/est!ents and reinsurance.2. ensuring the sol/ency of the insurer at all ti!es.3. co!plying with the pro/isions of the section >4 of the Act in regardto certification of the assets and liabilities that ha/e been /alued in the!anner re+uired under the said section.E4. co!plying with the pro/isions of the sections >4 A of the act inregard to !aintenance of re+uired sol/ency !argin in the !annerre+uired under the sectionEe. drawing the attention of !anage!ent of the insurer, to any !atter onwhich he or she thin&s that action is re+uired to be ta&en by the insurer

to a/oidJ ?i@ any contra/ention of the ActE or ?ii@ pre"udice to the interests of policyholdersE). co!plying with the Authority-s directions fro! ti!e to ti!eE>. in the case of the insurer carrying on life insurance businessE ?i@ to certify the actuarial report and abstract and other returns asre+uired under section 13 of the ActE ?ii@ to co!ply with the pro/ision of section 21 of the Act in regard to

further infor!ation re+uired by the AuthorityE ?iii@ to co!ply with the pro/isions of section 4* ; of the Act in regardto the bases of pre!iu!E ?i/@ to co!ply with the pro/isions of the section 112 of the Act inregard to reco!!endation of interi! bonus or bonuses payable by thelife insurer to policyholders whose policies !ature for pay!ent byreason of death or otherwise during the inter /aluation periodE ?/@ to ensure that all the re+uisite records ha/e been !ade a/ailable tohi! or her for the purpose of conducting actuarial /aluation of liabilitiesand assets of the insurerE ?/i@ to ensure that the pre!iu! rates of the insurance products are fair. ?/ii@ to certify that the !athe!atical reser/es ha/e been deter!inedta&ing into account the guidance notes issued by the Actuarial Society of India and any directions gi/en by the AuthorityE


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?/iii@ to ensure that the policyholder reasonable e pectations ha/e beenconsidered in the !atter of /aluation of liabilities and distribution ofsurplus to the participating policyholders who are entitled for a share ofsurplusE ?i @ to sub!it the actuarial ad/ice in the interests of the insuranceindustry and the policyholders.:. in the case of the insurer carrying on general insurance business toensure, ?i@ that the rates are fair in respect of those contracts that are go/erned

by the insurers in house tariff. ?ii@ that the actuarial principles, in the deter!ination of liabilities, ha/e

been used in the calculation of reser/es for incurred but not reported

clai!s ?I;(%@ and other reser/es where actuarial ad/ice is sought by theAuthorityE9. infor!ing the Authority in writing of his or her opinion within areasonable ti!e, whether, ?i@ the insurer has contra/ened the Act or any other Acts. ?ii@ the contra/ention is of such a nature that it !ay affect significantlythe interests of the owners or beneficiaries of policies issued by theinsurer.

?iii@ the directors of the insurer ha/e failed to ta&e such action as isreasonably necessary to enable hi! to e ercise his or her duties andobligations under this regulation.?i/@ an officer or e!ployee of the insurer has engaged in conductcalculated to pre/ent hi! or her e ercising his or her duties andobligations under this regulation.

ABSOLUTE PRIVILEGE O1 APPOINTEDACTUARY

?1@ An appointed actuary shall en"oy absolute pri/ilege to !a&e anystate!ent, oral or writers, for the purpose of the perfor!ance of his


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functions as appointed actuary. This is in addition to any other pri/ilegeconferred upon an appointed actuary under any other %egulations.

?2@ Any pro/ision of the letter of appoint!ent of the appointed actuary,which restricts or pre/ents his duties, obligation and pri/ileges underthese regulations, shall be of no effect.

A##,!$a.!,!t' to re!ns)ran$e .)s!ness 3 These regulation shall apply to reinsurers carrying on reinsurance

business in India.


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GRO/TH RATE

According to %. Bannan, 'resident, Actuarial Society of India, theopening up of insurance sector in the country has pushed up the de!andfor +ualified and senior actuarial students. K About 2,*** candidatesenroll with the ASI as students e/ery year. ;ut the total nu!ber ofactuaries a/ailable in India is only about 22). f these there are "ust 4*

people in the 2* >* age group,L says Bannan. K n the other hand, eachof the 1) life insurance and 1) non life insurance co!panies needs at

least two or three +ualified actuaries.L=hile there is no concrete forecast on what the de!and for actuarieswill be, 0 ;ala"i, , a 5oi anage!ent onsultants, a hu!anresource consulting and recruit!ent fir! that signed up about 4*actuaries for a single ;' client in end 2**), says that there is generallya 2* 2) per cent shortfall in supply.

% Brishna!urthy, !anaging director ?distribution consulting@, =atson=yatt Insurance onsulting, agrees that insurance liberalisation hase posed a big gap in the de!and and supply ratio of actuaries. K =henthe #ife Insurance orporation of India was the !onopoly player andgeneral insurance was sub"ect to a tariff regi!e, opportunities wereli!ited and there was no incenti/e to +ualify as actuaries,L he says.K(ow there is de!and for freshly +ualified actuaries, especially in thee!ployee benefit sector. Till now, this sector was largely handled bychartered accountants, but changes will call for professional actuarial/aluation.L

At the !o!ent, +ualified actuaries find the going good. onsider AnilSingh, 3:. e started out as an actuarial trainee with #I in 1


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after co!pleting his aster-s in Statistics fro! #uc&now ni/ersity.=hile wor&ing with #I , he studied with the ASI and, in 1


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NE/ AVENUES

• #ow supply, high de!and FThere are only 22) actuaries in India, Industry feels there is 2*2)M shortfall.

• #arger profile FApart fro! the traditional areas of life and general insurance,

pension and re insurance, actuaries now act as consultants,in/est!ent ad/isers and ris& !anagers as well.

• ands onFASI fellowship can be co!pleted in ) > years- ti!e. Actuarialstudies can be pursued alongside a full ti!e "ob.

• oney !agicF=ith about >years of e perience, a fellowship and wor& at a senior

position, you can earn %s.)* la&h a year.


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DRIVING 1ORCE

The growth in the Indian financial !ar&et is the !a"or reason for thespurt in the de!and for actuaries. Apart fro! the traditional areas of lifeand general insurance, pension and reinsurance, actuaries are nowneeded to play the roles of consultants, in/est!ent ad/isers and ris&!anagers as well. A nu!ber of ban&s are planning "oint /entures to setup insurance co!panies fro! to 1> or !ore than 2*. The nu!ber ofgeneral insurance co!panies is also e pected to increase fro! 12 toaround 1).

The health insurance sector is also e pected to get a big dose of growth. Naganathan, !anaging director of Star ealth Insurance, says there is

huge potential for the sector in a populous country li&e India. Apolloospital, for instance, is close to establishing a health insurance

co!pany. %efor!s in pension funds, whene/er they happen, are alsoe pected to add to the de!and.

India has the potential to e!erge as a &ey actuarial bac& office in the;' sector as well. A few co!panies are already in the business of lowle/el calculations. nce the supply pool e pands, India can ta&e up !oreco!ple and !ore lucrati/e bac& office wor&, says Brishna!urthy.


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JOB PROSPECTS 4 CAREER OPTIONS

Traditionally actuaries ha/e been associated with insurance sector but in present scenario with the econo!y opening up actuaries are needed insectors li&e non life insurance, e!ployee benefits, health insurance,asset !anage!ent, reinsurance, insurance bro&ing houses and consultingco!panies.

The "ob of an actuary in/ol/es for!ulating policies and calculating the pre!iu! to be charged. 5or this they asse!ble and analyse data toesti!ate the probability of such e/entualities as death, sic&ness, in"ury,disability and property loss and for!ulate a su! which is ad/antageousto the custo!er as well as the co!pany. In areas where e!ployee

benefits and retire!ent6 pension sche!es are dealt, the actuaries ha/e tocalculate the a!ount of !oney to be paid as contribution to pension fundin order to generate a certain inco!e le/el post retire!ent. Actuaries inad!inistrati/e positions ha/e to e plain technical !atters to e ecuti/es,go/ern!ent officials, shareholders, policyholders. Actuaries wor&ing in

tande! with go/ern!ent6 go/ern!ent agencies are responsible fordesigning social security and edicare plans. any of these

professionals wor& as independent consultants pro/iding actuarial ad/iceto clients for a fee. So!e also pro/ide in/est!ent ad/ice. Actuaries ha/escope for career growth not only in India but also in countries li&e SA,

B, anada and Australia where they already ha/e the necessaryinfrastructure and support syste! a/ailable.


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So!e of the potential e!ployers are F

#ife Insurance

1. A ' San!ar #ife Insurance o #tdE2. Allianz ;a"a" #ife Insurance o #tdE3. ;irla Sun #ife ?Gistributor o #td@4. A/i/a #ife Insurance o #tdE). G5 Standard #ife Insurance o #tdE

>. I I I 'rudential #ife Insurance o #tdE:. ! Bota& ahindra #ife Insurance o #tdE9. I($ ysya #ife Insurance o #tdE. %oyal Sundara! $I E:. hola!andal! $I E9. TATA AI$E


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12. $eneral Insurance orporationE13. (ew India Assurance o!pany

Actuarial Apprentices with #I

The #ife Insurance orporation of India ta&es in candidates who are$raduates6 'ostgraduates with athe!atics and Statistics as !ainsub"ects with >*M or !ore !ar&s in aggregate and co!ing in the agegroup 19 2) years. The selection is based on a written test conducted by#I which consists of two papers. 'aper I includes 0ssay =riting ? indior 0nglish@ and 'aper II co!prising of athe!atics or Statistics orActuarial Science. andidates who ha/e passed one or !ore

e a!ination of the ASI or Institute of Actuaries ?#ondon@ or thoseha/ing '$ Giplo!a in Actuarial Science with !ore than )*M !ar&s inaggregate are e e!pted fro! appearing for the e a!s.


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REMUNERATION

If you can sur/i/e the grilling tests, there is a payoff the !edianannual salary for an actuary is handso!e. Actuaries are globally inde!and and can co!!and hefty pay pac&ets, salaries and per&s. (owonder then that this profession has been rated a!ong the best "obs inthe S.

In India the trend is slowly pic&ing up. Stipend for an actuary trainee per !onth in India is around %s. 2),*** per !onth. Insurance co!paniesand consulting fir!s gi/e !erit to e perience and +ualifications withsalary pac&ets ranging fro! 9 lacs per annu! for beginners to around 4*lacs per annu! for those in senior positions. In B a +ualified actuarycan earn 2* lacs per annu!.


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CONCLUSION

An actuary is an indi/idual who has !any duties and responsibilitiesconco!itant to their position. If one in this "ob role has e cellentanalytical, co!prehension , !athe!atical and public spea&ing s&ills,they will !ost li&ely be indi/iduals who e cel at their "ob and producethe highest +uality wor& product possible. If one has all of theseafore!entioned s&ills, the position of actuary !ay be the perfect one tofill.

An actuary is the technical e pert on life insurance !atters studying the!orality of the insuring public, e/aluating the financial condition of theinsurer, deter!ining the policies to be offered and the pre!iu! to becharged, deter!ining the policies to follow in underwriting anin/est!ents of its funds, deciding on the bonus that can be declared onthe participating policies and so on. A ggod actuary is a good econo!ist,

a good statistician and a good security analyst.

0/ery well !anaged insurance co!pany will ha/e an actuary tocontinuously study its operations and ad/ice the !anage!ent on theappropriateness of their policies. The periodical /aluation of a lifeinsurance co!pany, re+uired to be conducted as per the pro/isions of theInsurance Act, is the responsibility of the actuary. The pre!iu!

proposed to be charged by the insurer, has to be certified by the actuary

before they are sub!itted for the appro/al of the I%GA.


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BOO5S2

Pr!n$!#,es of Ins)ran$e Pra$t!$e of L!fe Ass)ran$e

Pra$t!$e of Genera, Ins)ran$e

Re"),at!ons of Ins)ran$e B)s!ness

L!fe Ass)ran$e Un-er(r!t!n"

Hea,th Ins)ran$e

1o)n-at!on of A$t)ar!a, S$!en$e

Genera, Ins)ran$e Un-er(r!t!n"

1!re Ins)ran$e Un-er(r!t!n" Conse6)ent!a, Loss Ins)ran$e 71!re8

1!re Ins)ran$e C,a!%

1!re 4 Conse6)ent!a, Loss Ins)ran$e

1!re Ins)ran$e Co&era"e

1!re Rat!n" 4 Un-er(r!t!n"


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Mar!ne Ins)ran$e C,a!%s

Mar!ne Ins)ran$e

A"r!$),t)ra, Ins)ran$e Motor Ins)ran$e

L!a.!,!t' Ins)ran$e

En"!neer!n" Ins)ran$e

Re!ns)ran$e Mana"e%entM!s$e,,aneo)s Ins)ran$e

L!a.!,!t' 4 En"!neer!n" Ins)ran$e

Gro)# Ins)ran$e 4 Ret!re%ent Benef!t S$he%es

La( 4 E$ono%!$s of Ins)ran$e

Ins)ran$e Sa,es%ansh!#

Documents

Actuaries Project.docx