acturies in india
TRANSCRIPT
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INDEX
SR.
NO.CONTENTS
1. RESEARCH DESIGN
2. INTRODUCTION
3 . EVALUTION OF ACTUARIAL PROFESSION
4. ROLE OF ACTUARY IN INSURANCE
5. ACTURIAL INSURANCE IN INDIA
6. ACTUARIAL SOCIETY OF INDIA
7.GLOBAL INSURANCE SCENARIO & CHALLENGES
FOR ACTUARY
8.RISK AND ACTUARIAL SCIENCE
9. CONCLUSION
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1. RESEARCH DESIGN
"Actuary in Insurance" was for the first time came to be
noticed in Insurance magazine's article a few months back. When
the topic was opened for discussion with couple of persons
associated with insurance industry, the canvass and importance
of the subject was immediately noticed. This was the ignition
point which prompted to undertake the study of "Actuary in
Insurance" as a project.
An actuary is a combination of business executive,
mathematician, financier, sociologist, and investment manager.
Actuaries are the analytical backbone of our society's financial
security programs. The hypothesis of the study of 'Actuary in
Insurance' as with the advent of this new profession in Insurance
industry would competent to minimize risk in superior way.
The nature of study was decided to be of exploratory nature.
The objective of the study was to document detailed information on
Actuary in insurance so that the project report could serve as
the multi dimensional. The geographical limit for the study was
'Mumbai' only. The information was sourced from various articles
on Actuary in Insurance sector which appeared in insurance
journals published by Actuarial society of India and IFCI
university press, both being the premiere institutes in India in the
field of actuarial insurance. Besides having collected the data from
various books, journals and internet sites, an interview with
insurance officials and corporate have added the practical flair
mainly to know the onsite implications and procedural difficulties.
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2. INTRODUCTION
Actuaries are the analytical backbone of our society's
financial security programs. They are the brains behind the
financial safeguards we have implemented in our personal lives,
so we can go about our daily lives without worrying too much
about what the future may hold for us.^ These are the safeguards
that protect us from life's catastrophes. The insight into risk that
actuaries have also helps to ensure that our savings are workinghard for us, so that everything we love and cherish can grow and
flourish.
Actuarial science applies mathematical and statistical
methods to finance and insurance, particularly to risk assessment.
Actuaries are professionals who are qualified in this field through
highly competitive examinations and experience. It includes a
number of interrelating disciplines, including probability and
statistics, finance, and economics. Historically, actuarial science
used deterministic models in the construction of tables and
premiums. The science has gone through revolutionary changes
during the last 30 years due to the proliferation of high speed
computers and the synergy of stochastic actuarial models with
modern financial theory.
Actuarial science became a formal mathematical discipline in
the late 17th century with the increased demand for long-term
insurance coverages such as Burial, Life insurance, and Annuities.
These long term coverages required that money be set aside to
pay future benefits, such as annuity and death benefits many
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years into the future. This requires estimating future contingent
events, such as the rates of mortality by age, as well as the
development of mathematical techniques for discounting the value
of funds set aside and invested. This led to the development of an
important actuarial concept, referred to as the Present value of a
future sum. Pensions and healthcare emerged in the early 20th
century as a result of collect ive bargaining.
Certain aspects of the actuarial methods for discounting
pension funds have come under criticism from modern financial
economics.
Actuaries describe their work as challenging and interesting
and generally enjoy a good working environment. The Jobs
Rated Almanac has consistently rated "Actuary" as one of the top
two or three jobs on a variety of factors. According to several
studies, the profession is more; open than others to women and
members of under-represented minority groups. Actuaries are in
high demand, with starting salaries ranging from $45,000 to
$55,000. In 2002, a Wall Street Journal survey on the best jobs in
the United States listed actuary as the second best job, while in
previous editions of the list, actuaries had been the top rated job.
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3. EVOLUTION OF ACTUARIAL
PROFESSION
The actuarial profession has a rich and varied history dating
back to the seventeenth century when John Graunt, a London
draper, demonstrated that there were regularities to the patterns of
life and death in a group of people, despite uncertainty about the
future life-span of a single individual.
3.1 Risk gives birth...
The basic requirements of communal interests gave rise to
risk sharing since the dawn of civilization. In the ancient world there
was no room for the sick, suffering, disabled, aged, or the poor
these were largely not part of the cultural consciousness of
societies. The need for insurance and pension arrangements
comes from personal risk and uncertainty. If you go on a journey
or voyage, there is the risk of losing any goods entrusted to you, or
your own possessions, or even your life. Your house may catch
fire and leave you and your family without a roof over your heads.
If you are a breadwinner, you run the risk of dying too soon and
leaving your family to starve. You may be unable to get a loan, if
the lender is worried about repayment in the event of your death.
Alternatively, you may live too long after retirement, so that your
savings become exhausted.
3.2 Initiate by the charity...
These risks existed from the earliest times, when the
usual method of relieving poverty was by charity. Destitute people
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used to beg on the streets. Nearby monasteries might have
provided them with left-over food and drink, or the monks' cast-off
clothing. Under this method of protection; religious organizations or
neighbors would collect for the destitute and needy. However,
charity was never very satisfactory, because it provided inadequate
and uncertain relief, with a social stigma.
Hence people tried to protect themselves financially against
the risks of life and death. They developed elementary insurance-
type arrangements, which often failed because of a lack ofknowledge and understanding. Pensions were granted even in
ancient Greece, and burial societies were formed in both Greece
and Rome to meet members' funeral expenses. In England in the
Middle Ages it was sometimes possible to pay a lump sum to a
monastery and receive board and lodging (known as a 'corrody')
there for the rest of your life.
3.3 Development of theory...
The 17th century was a period of extraordinary advances in
mathematics Li Germany, France, and England. At the same
time there was a rapidly growing desire and need to place the
valuation of personal risk on a more scientific basis.
Independently from each other, compound interest was studied
and probability theory emerged as a well understood mathematical
discipline. Compound interest was studied, which was important
later in establishing how much investment income could be earned
by the assets of insurance and pension funds. Probability theory
emerged with a publication in 1657 by the Dutch mathematician,
Christian Huygens. He showed that, in order to have p chances of
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obtaining a sum of money A and q chances o: obtaining a sum of
money B, it is worth paying a sum equal to (pA+qB) divided by
(p+q).
Another important advance came in 1662 from a surprising
source, a London draper called John Graunt who showed that
there were predictable patterns of longevity and death in a
defined group, or cohort, of people, despite the uncertainty about
the future longevity or mortality of any one individual person. This
study became the basis for the original life table. It was now-
possible to set up an insurance scheme to provide life insurance or
pensions, for a group of people, and to calculate with some degree
of accuracy how-much each person in the group should contribute
to a common fund assumed to earn a fixed rate of interest. His
great achievement was to show the regularities of the patterns of
life and death in a group of people, despile uncertainty about thefuture lifetime of only one person. He had the original idea of
making a statistical analysis of the London Bills of Mortality. These
had been published for many years, week by week, to warn
wealthy householders when the plague was increasing, so that
they could leave London in time.
Although the age at death was not recorded in the Bills
Graunt analyzed, every Bill did record the number of people dying
from each cause of death. Since some causes of death applied
mainly to young children, he deduced that about 36% of the total
number of deaths related to children dying before age six. This was
the starting point for his famous 'life table', which showed how many
of every 100 babies survived until ages 6, 16, 26, 36, 46 ... etc.
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Unfortunately the table did not give a realistic representation of true
survival rates, because the figures for ages after 6 had to be
guessed. Graunt also estimated the population of London, which
was often said to run into millions, as 384,000. This is thought
nowadays to have been quite accurate -another remarkable
achievement.
3.4 Creation of actuarial science...
It now became possible for the first time to envisage setting
up an insurance scheme providing life assurance or pensions for agroup of people, where it could be worked out how much money
each person in the group should contribute to a common fund
assumed to earn a fixed rate of interest.
The first person to demonstrate publicly how this could be
done was Edmond Halley, the famous mathematician andastronomer, after whom the comet is named. The Royal Society in
London asked Halley to analyze some data collected by Caspar
Neumann, a clergyman of Breslau in Germany, relating to the
births and deaths in that city between 1687 and 1691. Unlike the
London data, the Breslau data were classified by age, and this
enabled more accurate survival rates at each age to be obtained.
Halley used the data in 1693 to construct his own life table (for
individual ages, not just age groups), which was found to give a
reasonably accurate picture of survival and became well known
throughout Europe.
Most important, however, was the method which Halley
demonstrated of using his life table to work out how much money
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someone of a given age should pay to purchase a life-annuity.
Halley examined each future annual installment of the annuity
separately and used his life table to estimate the probability that the
person would survive to receive that installment. The resulting
probability was multiplied by the sum (obtained from a compound
interest table at a specified rate of interest) which would need to be
invested now in order to pay for that installment if one were
certain to receive it. Halley then went on to do likewise for the
next installment, and so on. Summing these present values for all
future installments up to the end of life then gave the value of the
whole annuity. Actuarial science had been created.
3.5 Early actuaries...
The first life assurance company to use premium rates which
were calculated scientifically for long-term life policies was The
Equitable, founded in 1762. The techniques used to calculatethese premiums were developed from Halley's method by
James Dodson, a London mathematician. Janes Dodson's
pioneering work on the level premium system led to the formation
of the Society for Equitable Assurances on Lives and Survivorship
(now commonly known as Equitable Life) in London in 1762.
After Dodson's death, Edward Rowe Mores took over theleadership of the group that eventually became the Society for
Equitable Assurances in 1762. It was he who specified that the
chief official should be called an 'actuary'. Previously, the use
of the term had been restricted to an official who recorded the
decisions, or 'acts', of ecclesiastical courts, in ancient times
originally the secretary of the Roman senate, responsible for
compiling the Acta Senatus. Other companies which did not
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originally use such mathematical and scientific methods most
often failed or were forced to-adopt the methods pioneered by
Equitable. Many other life assurance companies and pension
funds were created over the following 200 years. It was The
Equitable which first used the term 'actuary' for its chief executive
officer in 1762.
3.6Development of the modern profession...
In the eighteenth and nineteenth centuries, computational
complexity was limited to manual calculations. The actualcalculations required to compute fair insurance premiums are
rather complex. The actuaries of that time developed methods to
construct easily-used tables, using sophisticated approximations
called commutation functions, to facilitate timely, accurate, manual
calculations of premiums. Over time, actuarial organizations were
founded to support and further both actuaries and actuarialscience, and to protect the public interest by ensuring competency
and ethical standards. However, calculations remained
cumbersome, and actuarial shortcuts were commonplace.
In 1848 the actuaries of a number of life assurance companies
established the Institute of Actuaries. Its objects were stated to be
the development and improvement of the mathematical theories
upon which the practice of life insurance is based, and the
collection and arrangement of data connected with the subjects of
duration of life, health and finance. Another object was the
improvement and diffusion of knowledge, and the establishment
of correct principles relating to subjects involving monetary
considerations and probability. Thus even so long ago, the
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Institute's objectives were by no means confined to life
assurance. It was clearly envisaged that actuarial science would
have wider applications, as has proved to be the case.
Non-life actuaries followed in the footsteps of their life
compatriots in "he early twentieth century. The 1920 revision to
workers compensation rates took over two months of around-the-
clock work by day and night teams of actuaries. In the 1930s and
1940s, however, rigorous mathematical foundations for
stochastic processes were developed. Actuaries could now begin
to forecast losses using models of random events instead of
deterministic methods. Computers further revolutionized the
actuarial profession. From pencil-and-paper to punchcards to
microcomputers, tie modeling and forecasting ability of the actuary
has grown exponentially.
Another modern development is the convergence of modem
financial theory with actuarial science. In the early twentieth
century, actuaries were developing many techniques that can be
found in modem financial theory, but for various historical reasons,
these developments did not achieve much recognition.
However, in the late 1980s and early 1990s, there was a
distinct effort for actuaries to combine financial theory and
stochastic methods into their established models. Today, the
profession, both in practice and in the educational syllabi of many
actuarial organizations, combines tables, loss models, stochastic
methods, and financial theory, but is still not completely aligned
with modern financial economics.
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4. ROLE OF ACTUARY IN INSURANCE
Most actuaries are employed in the insurance industry,
specializing in life and health insurance or property and casualty
insurance. About two-thirds of actuaries work for life, health, and
property / casualty insurance companies. At this time, the majority
of actuaries work in careers that are associated with the
insurance industry, though growing numbers work in other fields.
They are heavily involved in insurance because that is society's
most powerful answer for managing risk.
Each type of business assumes financial risks for people
and pays their claims as incurred. Actuarial responsibilities in
these fields will generally include making sure that one's company
properly defines and carefully evaluates the insurance risk;charges a fair price to assume the risk; and has an efficient system
to pay claims and expenses as they occur while operating profitably
as a business. These responsibilities are important because when
the actuary calculates the cost of insurance contracts for his
company, he is committing it financially for many years. This
commitment is why a Company's financial solvency depends to alarge extent on the actuary's calculations and judgment.
Thus, One of the main functions of actuaries is to help
businesses assess the risk of certain events occurring and to
formulate policies that minimize the cost of that risk. For this
reason, actuaries are essential to the insurance industry.Actuaries assemble and analyze data to estimate the probability
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and likely cost of the occurrence of an event such as death,
sickness, injury, disability, or loss of property. Actuaries also
address financial questions, including those involving the level of
pension contributions required to produce a certain retirement
income and the way in which a company should invest resources
to maximize its return on investments in light of potential risk.
Using their broad knowledge of statistics, finance, and business,
actuaries help design insurance policies, pension plans, and other
financial strategies in a manner which will help ensure that the
plans are maintained on a sound financial basis.
Actuaries play a key role to design insurance plans,
determine the premium, monitor the profitability of insurance
companies and recommend corrective action when appropriate.
Actuaries are involved in pricing, product design, financial
management and corporate planning. Actuaries working in
insurance companies also ensure that insurance companies have
set aside enough funds to pay claims and provide advice on
how to invest tie insurance companies' assets. They use their
professional expertise in solving complication financial problems by
combining their theoretical as well as practical knowledge.
Actuaries produce probability tables which determine the
likelihood that a potential future event will generate a claim. From
these tables, they estimate the amount a company can expect to
pay in claims. For example, property and casualty actuaries
calculates the expected amount payable in claims resulting from
automobile accidents, an amount that varies with the insured
person's age, sex, driving history, type of car, and other factors.
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Actuaries ensure that the price, or premium, charged for such
insurance will enable the company to cover claims and other
expenses. The premium must be profitable, yet competitive with
other insurance companies. Within the 1ife and health insurance
fields, actuaries are helping to develop long-term-care insurance
and annuity policies, the latter a growing investment tool for many
individuals.
Actuaries are not only experts who perform actuarial analysis
of insurance rates, rating procedures, rating plans, and schedules
of insurance companies but also professionals who are
experienced in reviewing and analyzing insurance operations,
reserves and underwriting procedures and provide technical
assistance regarding actuarial matters to policy examiners and
other technical staff. In other words they are the people who
ascertain in advance the uncertain events that could take place in
future and come to a financial conclusion. Actuaries also hold a
legal responsibility for protecting the benefits promised by
insurance companies. Their role demands the highest standards of
personal integrity and application of professional skills. Actuaries
balance their role in business management with responsibility for
safeguarding the financial interests of the public.
Actuaries' insurance discipline may be classified as life
insurance, health insurance, pensions; annuities, asset
management, social welfare programs, property insurance,
casualty insurance, liability insurance, general insurance; and
reinsurance. Life, health, and pension actuaries deal with mortality
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risk, morbidity, and consumer choice regarding the ongoing
utilization of drugs and medical services risk, and investment risk.
Products prominent in their work include life insurance, annuities,
pensions, mortgage and credit insurance, short and long term
disability, and medical, dental, health savings accounts and long
term care insurance. In addition to these risks, social insurance
programs are greatly influenced by public opinion, politics, budget
constraints, changing demographics and other factors such as
medical technology, inflation and cost of living considerations.
Whereas casualty actuaries, also known as non-life or
general insurance actuaries, deal with catastrophic unnatural risks
that can occur to people or property. Products prominent in their
work include auto insurance, homeowners insurance,
commercial property insurance, workers' compensation, title
insurance, malpractice insurance, products liability insurance,
directors and officers liability insurance, environmental and
marine insurance, terrorism insurance and other types of liability
insurance. Reinsurance products have to accommodate all of the
previously mentioned products, and in addition have to properly
reflect the increasing long term risks associated with climate
change, cultural litigiousness, acts of war, terrorism and politics.
On both the life and casualty sides, the classical function of
actuaries is to calculate premiums and reserves for insurance
policies covering various risks. Premiums are the amount of
money the insurer needs to collect from the policyholder in order
to cover the expected losses, expenses, and a provision for profit.
Reserves are provisions for future liabilities and indicate how much
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4.1 Actuary in Life Insurance
Actuaries have traditionally worked in life insurance, and their
role and responsibilities have evolved as life insurance itself has
developed external relations. Their traditional areas of activity
include designing and pricing contracts, monitoring the adequacy
of the funds to provide the promised benefits and recommending
the fair rate of bonuses to be added to with-profit policies. While
the main function of an actuary in life insurance has remained thesame, viz. assessment and valuation of mortality risk apart from
other risks.
In life insurance, actuarial science focuses on the analysis of
mortality, the production of life tables, and the application of
compound interest to produce life insurance, annuities andendowment policies. Contemporary life insurance programs
have been extended to include credit and mortgage insurance,
key man insurance for small businesses, long term care insurance
and health savings accounts.
Nowadays, actuaries employed by life insurancecompanies may also provide expert advice on investment,
planning and marketing of products, strategic risk measurement
and almost any aspect of the work of the company. The Life
Board oversees the profession's concern with all actuarial matters
related to life insurance business. Because of the wide range of
these matters, the Board is supported by a number of committees
dealing with Supervision, Conduct of Business Regulation,
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Education and CPD, and Research. The work of the Continuous
Mortality Investigation Bureau is also a major contributor to
actuarial practice in this area.
Duties of an actuary in life insurance business...
In case of the insurer carrying life insurance business the
actuary shall perform the following duties...
Certify the actuarial report, abstracts and other
returns;
Comply with provisions of section 112 of the Act,
1938 in regard to further information required by the authority and
recommendation of interim bonus or bonuses payable by life
insurer to policyholders whose policies mature for payment by
reason of death or otherwise during the inter-valuation period;
Comply with provisions of section 40B of the Act,
1938 in regard to the bases of premium;
Ensure that premium rates of insurance products are
fair;
Certify that the mathematical reserves have been
determined taxing into account the guidance not issued by the
Actuarial Society of India and any directions given by the Authority;
Ensure that the policyholders reasonable
expectations have been considered in the matter of valuation of
liabilities and distribution of surplus to the participating
policyholders who are entitled for a snare of surplus; and Submit
the actuarial advice in the interests of the insurance industry and
the policyholders.
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4.2 Actuary in Health Insurance
In health insurance, including insurance provided directly by
employers, and social insurance, actuarial science focuses on
the analyses of rates of disability, morbidity, mortality, fertility and
other contingencies. The effects of consumer choice and the
geographical distribution of the utilization of medical services and
procedures, and the utilization of drugs and therapies, is also of
great importance. Actuarial science also aids in the design of
benefit structures, reimbursement standards, and the effects of
proposed government standards on the cost of healthcare.Health
insurance sector offers the most exciting opportunities and yet
poses the biggest problems for the actuaries in India. This is
because...> The country has very little experience of his own in this
field to rely upon, except in the case of medical insurance
sold by GJC subsidiaries; and
> The types of covers provided under this generic term
in western countries is quite large, viz. private medical insurance
(PMI), critical illness cover (CIC), long term care insurance (LTCI)and permanent health insurance (PHI). Even within each type the
variety of terms and benefits can be large, leading to different
rating methods, valuation assumptions, solvency margins,
investment strategy, etc.
So, where do the actuaries look for the designing health
covers suitable for Indian conditions? As far as medical insurance
and public health insurance (PHI) are concerned, the experience of
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GIC and Employee State Insurance Scheme (ESIS) respectively
can provide useful initial guide. We can draw on the long
experience of the US health business in general. The US
economy spends 15 per cent of its GDP on health care.
With the persistent weakening of joint family system in
urban areas and growing proportion of aged population, the need
for insurance for the elderly is likely to grow. Hence, the insurers
and the actuaries must prepare themselves well in advance to
exploit this potential demand. The first challenge to actuaries in
this field will be designing of different types of health covers,
keeping in view the objectives of...
A need-based approach;
Simplicity of benefits and administration, and
Avoidance of fraud and anti-selection.
Their role would also include collection and analysis of
morality data and advising the government on an effective
regulatory mechanism, so as to protect the interests of the
policyholders.
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4.3 Actuary in Non Life Insurance...
Although it is still true that only a relatively small part of
the actuarial profession works in general insurance, there has
been a significant growth in recent years. The role of actuary in
non-life insurance is as follows...
Estimating the reserves for the future claims of.
Helping a company identify its
management information requirements
Helping a motor insurer establish the relative rate
levels for different rating groups.
Advising a building society on the capital requirements
for its captive insurance company.
Advising a reinsurance company on its rates for
Catastrophe Excess of Loss reinsurance.
One area that has seen major involvement of actuaries in
general insurance is the estimation of claims reserves (that is,
future claims). This is not in automated procedure, as there is a
significant amount of judgment involved in the estimation of
general insurance reserves.
Management information is an example of an area that is
not typically actuarial, but where a general insurance actuary
has a lot to offer. By applying his or her knowledge of the various
aspects of the business, -in actuary can help a company to identify
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the key indicators that management should monitor so as to control
the business.
Actuarial science is also applied to short term forms of
insurance, referred to as Property & Casualty or Liability insurance,
or General insurance. In these forms of insurance, coverage is
generally provided on a renewable annual period, (such as a yearly
contract to provide homeowners insurance policy covering damage
to a house and its contents for one year). Coverage can ~)e
cancelled at the end of the period by either party.
In the property & casualty insurance fields, companies tend
to specialize because of the complexity and diversity of risks. A
convenient division is to organize around personal and commercial
lines of insurance. Personal lines of insurance include the familiar
fire, auto, homeowners, theft and umbrella coverages. Commercial
lines would include business continuation, product liability, fleet
insurance, workers compensation, fidelity & surety, D&3 insurance
and a great variety of coverages required for businesses.
. Actuaries do not always attempt to predict aggregate future
events. Often, their work may relate to determining the cost of
financial liabilities that have already occurred, called retrospective
reinsurance or the development or re-pricing of new products.
Actuaries also design and maintain products and systems.
They are involved in financial reporting ofcompanies' assets and
liabilities. They must communicate complex concepts to clients
who may not share their language or depth of knowledge.
Actuaries work under a strict code of ethics that covers their
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communications and work products, but their clients may not
adhere to thoses same standards when interpreting the data or
using it within different kinds of businesses.
Beyond these, the industry needs to provide catastrophe
insurance for weather related risks, earthquakes, patent
infringement and other forms of corporate espionage, terrorism and
all its implications, and finally coverage for the most unusual risks
sometimes associated with Lloyds of London. In all of these
ventures, actuarial science has to bring data collection,
measurement, estimating, forecasting, and valuation tools to
provide financial and underwriting data for management to
assess marketing opportunities and the degree of risk taking that is
required. Actuarial science needs to operate at two levels...
At the product level to facilitate politically correct
equitable pricing and reserving; and
At the corporate level to assess the overall risk to the
enterprise from catastrophic events in relation to its underwriting
capacity or surplus
Actuaries, usually working in a multidisciplinary team must
help answer management issues... Is the risk insurable;
Does the company have effective claims
administration to determine damages;
Does the company have sufficient claims
handling to cover catastrophic events;
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And the vulnerability of the enterprise to uncontrollable risks
such as inflation, adverse political outcomes; unfavorable legal
outcomes such as excess punitive damage awards, and
international turmoil.
4.4 Actuary in general insurance
business
With the growing complexity of business operations and
increasing technological development, individuals and companies
are coming face to face with newer and greater risks, e.g. risks
of computer breakdowns, satellite communication failures,
financial losses suffered by professionals from client litigation, etc.
these risks provide increased opportunities of profitable businessfor insurance companies and thus open up additional career
avenues for actuaries.
Risk management has become an important managerial
function in large business houses, where a professional risk
manager assesses the nature and extent of the company'sexposure to a specific mix of risks and decides whether to retain
the risk in house or to transfer it to an insurance company.
Nevertheless, even in case of risk retention, companies do
seek other services such as underwriting, actuarial and risk
management advice from insurers. It is here that the general
insurance actuary has to demonstrate his competence not only in
accurate risk appraisal, but also in understanding the needs of the
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business manager, so as to build up a mutually beneficial ind
long lasting relationship between the insurers and the business
community.
4.5 Actuary in Reinsurance
In the reinsurance fields, actuarial science is used to
design and price reinsurance and retro-reinsurance schemes, andto establish reserve funds for known claims and future claims and
catastrophes. Retro-reinsurance, also known as retrocession
occurs when a reinsurance company reinsures risks with yet
another reinsurance company.
Reinsurance can be used to spread the risk, to smoothearnings and cash flow, to reduce reserve requirements and
improve the quality of surplus, Reinsurance creates arbitrage
situations, and retro-reinsurance arbitrage can create Spirals
which can lead to financial instability and bankruptcies A spiral
occurs (as an example) when a reinsurer accepts a retrocession
which unknowingly contains risks that were previously reinsured.
Some reported cases of arbitrage and spirals have been found to
be illegal. The Equity Funding scam was built on the abusive
use of financial reinsurance to transfer capital funds from the
reinsurance carrier to Equity Funding. In the broadest sense of the
word, reinsurance takes many forms...
Declining a risk;
Requiring the insured to self insure part of the
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contingent or investment risk;
Limiting the coverage through deductibles,
coinsurance or exclusionary policy language;
Placing a policy in a risk pool with a cohort of
competitors to achieve a social objective;
Ceding or transferring a percentage of each
policy to another insurance company (i.e. the reinsure);
Ceding or transferring excess amounts or excess
coverages to the reinsure;
Purchasing stop loss insurance;
Purchasing umbrella coverages for a basket of risks;
Purchasing catastrophe insurance for specific
contingent events.
Reinsurance is complex. Company management and their
actuaries need to deal with all the known insurable contingent
events, as well as underwrite the quality of their cadent
companies, and maintain the information tools and auditing
practices to identify arbitrage and spirals.
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4.6 Actuary in Investment Policies...
Actuaries need to be closely associated with framing ofinvestment policies of insurance companies, since better than
average investment return is often the biggest source of surplus,
particularly in life insurance. It is also the unique selling
proposition in unit-linked business, which is growing in popularity
worldwide, in relation to the traditional life insurance policies.
The basic objective of investment policy in an insurance
company remains unchanged, viz. to match the cash flows (both in
terms of timing and amount from assets to those from liabilities,
i.e. insurance contracts, so as to minimize the 'actuarial risk', i.e.
the probability of not being able to meet the liabilities when due, and
subject to the above goal, to maximize the return on assets,
especially in the long-term.
However, it is the balance between these two objectives of
risk and return and the precise methods of achieving the goal that
is undergoing a radical change, with the evolution of ever-new
investment products.
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5. ACTURIAL INSURANCE IN INDIA
The opening of the insurance sector has also thrown a great
challenge to the actuarial profession in India. The demand for
actuarial skills and knowledge is growing up exponentially and the
actuarial profession in India is gearing up its activities to meet this
demand.
The actuary is a specialist who combines an understanding
of risks and mathematical technique to develop financial products
to manage these risks (insurance policies), price these product
(calculate insurance premium rates) and compute reserves to be
held for liabilities of companies undertaking these financial risks.
An actuary may also be described as an applied mathematician
responsible for the financial mathematics in insurance policies.
In a broader sense, actuaries have been described as the
professionals to call whenever money and probability interact.
The actuary helps in designing insurance plans and then
evaluates the financial risk of the company which it takes while
selling an insurance policy. The responsibilities as an actuary
include making sure that the company properly defines and
carefully evaluates the insurance risk; charge a fair price to suit
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the risk; and has an efficient system to pay claims and expenses
as and when they occur. Actuaries must understand the entire
operation of insurance field because their evaluations often
influence organization policies and practices.
In fact, actuaries' calculations and judgment can commit
organizations financially sound for future years. Because of many
phases of organization's business such as general management,
marketing, research, investments, accounting, underwriting,
administration and long range planning, the actuaries gave great
role to play in the insurance industry.
Most actuaries working in insurance sector are mainly in life
insurance. They are found in high responsible management
positions making decisions that are vital to the company's
success. Insurance is a highly competitive business and
actuaries are constantly making commercial decisions, which
nevertheless must have a sound theoretical basis. The actuary's
day-to-day tasks involve fixing premium rates and surrender
values for policies and designing new types of policies. Actuaries
have to make calculations also such as what funds will be
needed to cover the company's long-term liabilities and advice
on how profits should be distributed to policyholders and
shareholders.
5.1 Appointed Actuary in India...
An insurance company has to take the assistance of an
actuary in conducting the business of insurance. The IRDA in
consultation with the Insurance Advisory Committee has made
regulations for appointment of actuary. Regulation 5 of the IRDA
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(appointed actuary) Regulations, 2000 provides that a life insurer
shall not carry on business of insurance without an appointed
actuary. The term 'appointed actuary' is a designation.
5.2 Eligibility...
A person shall be eligible to be appointed as an appointedactuary for an insurer, if he or she shall be...
Ordinarily resident in India;
Fellow member of the actuarial society of India;
An employee of the insurer or a consulting actuary in case
of general insurance business:
An employee of life insurer in case of life insurance business;
A person who has not committed any breach of
professional misconduct;
A person against whom no disciplinary action by the Actuarial
Society of India or any disciplinary action pending with any other
actuarial professional body:
Not an appointed actuary of another insurer;
A person who possesses a certificate of practice
issued by the Actuarial Society of India; and
Not over the age of seventy years
5.3 Approval of IRDA...
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An insurer shall seek the approval of the Authority for the
appointment of appointed actuary by submitting the application in
prescribed Form IRDA-AA-1. The authority shall, within thirty
days of the receipt of such application either, accept or reject the
same, however, before rejection of the application the authority
(IRDA) shall give the insurer an opportunity of being heard.
Where an insurer does not receive approval within thirty days of
the receipt of such application by the Authority, the insurer shall
deem that the approval has been granted by the Authority.
5.4 Relaxation of Qualification of Actuary..
Where an insurer is unable to appoint an actuary in
accordance with the regulations prescribed for qualifications of an
appointed actuary (sub-regulation (2) of regulation 3 of IRDA
(appointed Actuary) regulations, 2000) he may make anapplication to the Authority in writing for relaxation of one or more
conditions mentioned therein. The Authority shall on receipt of the
application communicate its decision to the insurer within 30 days
of receipt. The appointment of an appointed actuary shall take
effect from the date of approval by the Authority.
5.5 Cessation of Appointment of Appointed
Actuary...
An appointed actuary shall cease to be so, if he or she has been
given notice of withdrawal of approval by the Authority on the
following grounds...
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That he/she ceases to be eligible in accordance with the sub
regulation (2) of regulation 3 of IRDA (appointed actuary)
regulations, 2000 (sub-regulation (3) prescribes the
qualifications for an appointed actuary) or
That he/she has in the opinion of the Authority, failed to
perform adequately and properly the duties and obligations of
an appointed actuary.
The Authority shall give an appointed actuary a reasonable
opportunity of being heard, if given a notice of withdrawal ofapproval. If a person ceases to be an appointed actuary otherwise
than on grounds of ineligibility or failure to perform duties, the
insurer and appointed actuary is required to inform the Authority the
reasons thereof within fifteen days of such a cassata
5.6 Powers of Appointed Actuary...The appointed actuary has been vested with substantial powers;
the powers having enormous significance in insurance business
are listed below...
An appointed actuary shall have access to all
information or documents in possession, or under control of the
insurer if such access is necessary for the proper and effective
performance of functions and duties of the appointed actuary;
He may seek any information for the purpose of fulfilling his
duties of an appointed actuary from any officer or employee of the
insurer
He is entitled to attend all meeting of the management
including that of the directors of the insurer;
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He is empowered to speak and discuss matter relating to the
actuarial advice given to the directors, matters affecting solvency of
the insurer, matters that may affects the ability of the
insurer to meet the reasonable expectations of policyholders; and
He may attend any meeting of the shareholders or the
policyholders of the insurer or any other meeting of members of
the insurer at which the insurers' annual accounts or financial
statements are to be considered or at which in connection with
the appointed actuary's dutie
5.7 Duties and Obligations of an Actuary...
The duties and obligations of an actuary shall include...
Rendering actuarial advice to the management of the
insurer, in particular in the areas of the product design and
pricing, insurance contract wording , investments and
reinsurance;
Ensuring the solvency of the insurer at all times;
Complying with the provisions of section 64VA of the Act, 1938 in
regard to certification of assets, liabilities that have been
valued accordingly and maintenance of required solvency
margin in the manner required under that provisions;
Drawing the attention of management of the insurer, to any
matter on which he/she thinks that action is required to be taken
prejudice to the interests of the policyholders;
Complying with the Authority's directions from time to time;
Ensuring in general insurance business...
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That the rates are fair in respect of those contracts that are
governed by the insurer's in-house tariff; and
That the actuarial principles, in the determination of
liabilities, have been used in the calculation or reserves for
incurred but not reported (IBNR) and other reserves where
actuarial advice is sought by the Authority;
Informing the Authority in writing of opinion, within a
reasonable time, whether... The insurer has contravened the
insurance act, 1938 or other related statutes; The contravention
is of such a nature that may affect significantly the interests of
the owners or beneficiaries of policies issued by the insurer;
The directors of the insurer have failed to take such action
as is reasonable necessary to enable him to exercise his or her
duties and obligations; or An officer or employee of the insurer
has engaged in conduct calculated to prevent him/her
exercising his/her duties and obligations.
5.8 Absolute Privilege of Appointed Actuary
The appointed actuary shall enjoy absolute privilege to make
any statement, oral or written for the purpose of performance of hisfunctions as appointed actuary. This is, in addition, to any other
privilege conferred upon an appointed actuary under any other
regulations framed by the IRDA. Any provision in the letter of
appointment of the appointed actuary which restricts or
prevents his duties, obligations and privileges shall have no
effect.
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Effects of rejection of the application: the insurer shall, within four
weeks of rejection of the application referred to under regulation
3, apply to the authority for the appointment of a person other
than the one rejected by it under regulation 3 as an appointed
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6. ACTUARIAL SOCIETY OF INDIA
The Actuarial Society of India, known as the ASI, is the sole
professional body of actuaries in India. The Actuarial Society of
India was established in 1944 to provide a central organization
for members of the actuarial profession in India for the purpose
of elevating the attainment and status as also promoting the
general efficiency of all who are engaged in the pursuits of an
Actuary. It is the Indian counterpart of the Institute of Actuaries,
London. Any person with a high degree of aptitude for
mathematics and statistics can become an Actuary. Generally, first
class graduates or postgraduates in mathematics or statistics or
those who had Actuarial Science as an optional subject at the
degree level will be in a better position to qualify as Actuaries. To
become a full-fledged Actuary, one has to clear, through self-study,
a series of examinations by the Actuarial Society of India,
Mumbai.
Since almost all actuaries in India qualified from Institute of
Actuaries, London, the bond between the London Institute and
Indian Society became stronger day-by-day. The Institute of
Actuaries, London always lends full support to the Actuarial Society
of India.
The traditional field for actuaries was life insurance. But
actuaries gradually entered into wider fields like pension, general
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insurance, health insurance and investment. The basic subjects
taught in the actuarial courses are mathematics, statistics and
finance. At the higher level, particularly at fellowship level, a
student has to learn and master application of the basic actuarial
techniques. The method of training helps an actuarial student to
acquire skill for analyzing any type of complex problems. To
become an actuary one must obtain a fellowship by completing
the examinations through one of the following professional
bodies...
Institute if actuaries of England and Wales
Institute of actuaries of Australia
Societies of actuaries of north America
Faculty of actuaries of Scotland
6.1 Registration of the ASI
In 1979, it was admitted to the International Actuarial Association
as a member. On 14th December 1982, it was formally
registered under Registration of Literary, Scientific and
Charitable Societies Act XXI of 1960. A certificate of registration
of the ASI under section XII AA of Income Tax Act was received
on the 14th March 1984. ASI is also registered under Public
Charitable Trust Act 1950.
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6.2 Educational and Ethical Goals of the ASI
To prepare "actuaries of tomorrow" who are adequately
qualified and competent in the global context.
To keep the level of competence on a continuing basis
for fully qualified Actuaries at a high in the global context
through CPD (Continuing Professional Development) and other
programs.
To serve the cause of public interest through Professional
Code of Conduct and Disciplinary Procedures
6.3 Objectives
Advancement of the Actuarial profession in India.
Providing opportunities for interaction among members
of the profession.
Facilitating research, arranging lectures on relevant subjects
Providing facilities and guidance to those studying for the
Actuarial exams.
6.4 History
The ASI was initially started as a non-examining .body when
Actuaries used to get qualified from Institute of Actuaries or
Faculty of Actuaries of the United Kingdom. The actuarial
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profession in India saw a downward trend in the early years of
nationalization of the Indian insurance industry. This had to a
reduction of actuarial input in both life insurance and general
insurance management, and insignificant input in other areas
such as pensions, insurance regulations, and academics. The
downward trend resulted ii a reduction of number of students
taking actuarial exams. In the last few years, the actuarial
profession in India has experienced tremendous growth. The ASI
has grown as well with around 3,000 student members joining
the society. The current president of ASI is Mr. Kannan; who is
also the appointed actuary of SBI Life.
6.5 International Relationships
ASI is founding member of the International Actuarial Association,
the umbrella organization for all actuarial bodies across the world.
The ASI is actively involved in the formulation of future
education strategy of International Actuarial Association.
6.6 Become an Actuary
ASI has stipulated minimum standards to be met before a person
can become its student member. These include graduation instatistics or mathematics, CA, ICWA, MBA etc. Also, any person
with 85 or more marks in Mathematics at 10+2 level can also
apply to become a student. Any person with 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,
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statistics, or econometrics will be in a better position than others to
qualify as actuaries.
6.7Qualification in India
To qualify as an actuary, a candidate has to pass all examinations
in the prescribed subjects. In addition, he has to comply with other
criteria such as experience requirement and attendance at a
professionalism course prescribed for the purpose.
6.8 Duration of the Course of Study
There is no fixed duration to complete the course. Since all the 16
subjects prescribed are to be cleared before one is awarded the
Fellowship, continued and sustained effort is necessary to
complete the course. Single minded devotion, total dedication and
a systematic approach to problems are the qualities that will
enable a person to qualify as an actuary within a reasonable
time.
6.9 Actuarial Educational Model in India
The subjects for the examinations can be categorized in to four
groups. The first group Comprises of the CT ( Core Technical)
series; these involve development of theory of actuarial science
and applications of mathematics and statistics to actuarial
applications such as life insurance, general insurance, employee
benefits, investment and other areas. An introduction to economics,
financial economics and financial reporting is also included at this
stage. Although most part of the course is somewhat theoretical,
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the exercise and the question in the examination are practical in
nature as they reflect real life situations of the area of work to
which the subject is applicable. There are in total 8 CT series
papers and all are compulsory.
The second group comprises of CA (Core Applications) series
subjects. CA3 subject is mean to develop skills of communication
of technical aspect of the CT series subjects in simple language to
non-technical persons; here again the stress in examination
question is demonstration of the skills of communications inreal life environment. CA1 deals with the ideas underlying
assets, liabilities and asset-liability management. Also there is a
modelling course CA2. This is a practical course and hence does
not involve written examination. CA series subjects are also
compulsory. On completing CT and CA series students can get title
of AASI.
Next up are ST (Specialist Technical) series examinations. Here,
students can opt for any 2 of the 6 subjects being offered. The
aim is to ensure that the students gain expertise in their related
fields.
Finally, there is one SA (Specialist Application) series subject to be
taken. Here again, there are 6 subjects to choose from.
The actuarial education model, therefore, is ingrained with work
and application and therefore substantially this education beyond
CT series subjects takes place in work environment. The success
through examinations is linked to corresponding work experience
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and insight, thus gained. The examinations given at CT series level
take place, for most of the students in work environment.
7. GLOBAL INSURANCE SCENARIO AND
CHALLENGES FOR THE ACTUARY
An actuary is a financial-cum-mathematic expert who
specializes in the statistical estimation of various risks and their
financial consequences. He thus plays a key role not only in
designing and pricing of risk covers, i.e. insurance policies, but
also in all aspects of insurance company management including
reserving and distribution of surplus, investment of finds,
corporate restructuring and mergers and also regulation of
insurance sector. The insurance industry in India till the year 2000
being a state monopoly, its history of the past few decades has
been one of the stable and rather uneventful growths. However,
one cannot ignore the fact that the insurance business is only one
of the many interrelated financial services, and hence it can no
longer remain unaffected by the vast changes sweeping the entire
financial sector, both in India and abroad.
The most important and interesting development on the financial
scene that we have been witnessing in recent times is a
distinct trend towards integration or convergence of various
financial services into a single business entity that may be
referred to as "a financial super market". In our country this trend is
signaled by disappearance of the dividing line between long-term
project finance and short terms loans, as banks like SBI have
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entered in a big way into term lending business while long-term
financial institutions like IDBI, ICICI and IFCI are making forays into
working capital funds and commercial banking sector.
At the global level, this blurring of the distinctions among various
financial businesses is even more prominent and radical, as
evident from the emergence of concepts like Bane-assurance,
where banking giants have started acquiring life insurance
companies so as to capitalize or their extensive branch
network to sell protection-cum-saving products, while
insurance companies are setting up their own banks and mutual
funds. So much so that even retail chain stores that have always
sold only tangible consumer goods so far, are embarking on
insurance marketing, merely to cash on their competitive edge in
marketing and special rapport with the consumer.
What are the implications of these financial upheavals for the
future of insurance industry in India and for the actuarial
profession, whose development is closely aligned with the
prosperity of this industry?
As the Indian Government has permitted entry of private firms in
insurance business, one thing is certain that all professionals
including actuaries responsible for the blooming of this industry
and its future growth will have to draw heavily upon the vast
experience of insurance industries in developed countries of the
US and Europe and also learn a few significant lessons from the
fortunes and failures of those in other developing countries in
South East Asia. It is quite appropriate and desirable, that for the
Indian actuaries to take a hard look at some of the latest issues that
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are becoming centre-stage in the insurance debates and are
exercising the minds of actuaries all over the world.
The most significant impact of this growing synergy amongfinancial services on actuaries will be an inevitable move towards
closer co-operation with other related professions such as
accountants, engineers, lawyers, marketing specialists, bankers,
investment analysis and so on.
As things stand today, a lack of understanding of what actuary is
and what he or she can do is not only confined to the so-called
laymen but also pervades even 'experts' engaged in these related
professions.
The greatest challenge before an actuary today is how to reach
out to those whose decisions will matter a lot to his own
professional success, how to accept and incorporate their 'non-actuarial' viewpoints into his actuarial principles, theories and
models, and thus be accepted as a useful and pragmatic
decision-maker in the overall management of financial services.
7.1 Strengthening the future role of actuaries...
Other changes, for all life insurers, include replacing the role
currently fulfilled by the Appointed Actuary. Two distinct
actuarial roles, also requiring FSA pre-approval, will be
introduced to ensure that boards obtain actuarial advice on key
aspects of their business. For with-profits business specifically,
there will be a with-profits actuary whose role it is to provide
technical advice to the board focused on the fair treatment of
policyholders. He/she could not be a member of the board. All
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companies undertaking long-term insurance business will be
obliged to have an actuary (actuarial function) to provide technical
advice to the board on issues such as the valuation of
policyholder liabilities.
8. RISK AND ACTUARIAL SCIENCE
The future is full of uncertainty. Some of the events that can
happen are undesirable. "Risk" is the possibility that an
undesirable event will occur.
Actuaries are experts in...
Evaluating the likelihood of future events, designing creative ways
to reduce the likelihood of undesirable events, decreasing the
impact of undesirable events that do occur.
Actuaries are the leading professionals in finding ways to manage
risk. It takes a combination of strong analytical skills, business
knowledge and understanding of human behavior to design and
manage programs that control risk.
Every person and organization faces risk, and it comes in many
forms. Asexperts in measuring and managing risk, actuaries fill a
significant need in our society. Their contribution to society's
psychological, physical and economic well-being is immense. If the
risk management programs actuaries develop don't exist, our
economic growth would be greatly impacted. There are many ways
to manage risk. While, there are some well-established
techniques to manage risk. Some popular techniques include...
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8.1 Focus on catastrophic risks...
Mathematical theory shows that the greatest relief from risk
(and consequently, the greatest increase in peace of mind)
comes from eliminating the consequences of events that are very
unlikely, but result in very big losses. Thus, families should think
about what might happen if the breadwinner dies, their house burns
down, or they lose all of their savings. They should then
implement solutions that reduce the likelihood of these events,
as well as manage their financial impact. This might involve
purchasing a life insurance policy or investing the savings in many
different stocks, to reduce the exposure to any one company's
fortunes. Generally, a few simple measures taken to address
catastrophic risks have a great impact on our well-being.
8.2 Offsetting one risk with another...
Under certain circumstances, two harmful events might possessthe characteristic that when the likelihood of one goes up, the
likelihood of the other goes down. Thus, if we know that when
coffee prices go up, soda prices go down, we might want to
invest in both coffee and soda stocks, to manage our risk
8.3 Risk is a matter of perspective...
What might be harmful to one party might be good for another. For
example, when the value of the dollar goes down against the
French franc, which might be bad for an American business but
favorable for a French business. By trading off the consequences
of an undesirable event with another party who is affected
favorably, both parties are made better off.
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8.4 Diversify...
It is better to take on many small risks than face one big risk.
Many small risks generally average out, to give an outcome that is
not too extreme in one direction or another. Results become more
predictable. Thus, diversification is an important tool in managing
risk. Actuaries may always have been associated with insurance,
but, their skills are in demand elsewhere as the regulation
revolution continues. It is commonly observed that "what gets
measured gets managed". But historically many organizations
assessed risk on a subjective or qualitative basis rather than by
using quantitative disciplines.
8.5 Need of actuaries in risk management...
Today, risk management has become core to good corporate
governance. The understanding and management of risk usingboth quantitative and qualitative measures is increasingly
recognized as a means of achieving strong performance against
financial, social and environmental business objectives.
The actuarial profession has its origins in risk quantification. The
traditional role of actuaries involves quantifying risk to set
adequate insurance premiums. This role has developed over the
years into providing high quality analysis for management and
boards of varying financial services organizations - and also for
regulators.
More recently, actuaries have become involved in other activities
where the demand for better financial risk management has beenincreasing, including banking, funds management, and project
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finance and in the utilities and the resources industries. Actuaries
are relied upon through their professional education and affiliation
to ensure their advice is unbiased and candid. The insurance
business is the business of absorbing risk, both short and long
term. That risk would otherwise be borne by individual people or
businesses, and is often accompanied by considerable volatility. It
is, therefore, not surprising to find some of the most sophisticated
risk frameworks and methodologies in place within insurance
companies.
8.6 Determine risk exposure in banks under Basel II...
From 2007, banks will be required to determine capital
requirements to meet operational risk exposure under Basel II.
Under the advanced measurement approach (AMA), banks will be
able to determine their own approach to the assessment of
exposure to operational risk subject to the approval of the
regulator. The method taken must be comprehensive and
systematic and have demonstrable integrity. Actuaries are working
with other professionals to develop methodologies for the
measurement of risk in banking, which is especially important in an
environment where there are data limitations and the need to find
solutions that balance statistical rigor with a thorough
understanding of operational conditions. The new Basel II
framework is intended to reward stronger and more accurate
risk management and to align the capital requirements of a bank to
its risk appetite. The AMA will mean that capital better reflects
the organization's own risk profile with the benefit of reinforcing the
inter-connectedness of risk, capital and management behavior.
Heightened demand for risk management signals a significant step
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9. CONCLUSION
Actuaries are the backbone of the insurance companies.
They apply mathematical, statistical and economic analysis to a
wide range of practical problems in insurance, investment, financial
planning and management. In short, they are disciplined problem-
solvers. A creative aspect of the work of actuaries is forecasting of
future contingent events. The actuarial profession has a rich and
varied history dating back to the seventeenth century
Actuaries use skills in mathematics, economics, finance,
probability and statistics, and business to help businesses assess
the risk of certain events occurring, and to formulate policies that
minimize the cost of that risk. For this reason, actuaries areessential to the insurance and reinsurance industry, as staff
employees or as consultants, as well as to government
agencies such as the Government Actuary's Department in the
UK or the Social Security Administration in the US.
Actuaries also address financial questions, including those
involving the level of pension contributions required to produce a
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certain retirement income and the way in which a company
should invest resources to maximize its return on investments
in light of potential risk. Using their broad knowledge, actuaries
help design and prices insurance policies, pension plans, and
other financial strategies in a manner which will help ensure that
the plans are maintained on a sound financial basis.
Actuaries play a key role to design insurance plans,
determine the premium, monitor the profitability of insurance
companies and recommend corrective action when appropriate.Actuaries are involved in pricing, product design, financial
management and corporate planning. Actuaries working in
insurance companies also ensure that insurance companies have
set aside enough funds to pay claims and provide advice on
how to invest the insurance companies' assets. They use their
professional expertise in solving complication financial problems-
by combining their theoretical as well as practical knowledge.
An insurance company has to take the assistance of an
actuary in conducting the business of insurance. The IRDA in
consultation with the Insurance Advisory Committee has made
regulations for appointment of actuary. Regulation 5 of the 'IRDA
(appointed actuary) Regulations, 2000' provides that a life insurer
shall not carry on business of insurance without an appointed
actuary.
As things stand today, a lack of understanding of what actuary is
and what he or she can do is not only confined to the so-called
laymen but also pervades even 'experts' engaged in these
related professions. Thus the greatest challenge before an
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actuary today is how to reach out to those whose decisions will
matter a lot to his own professional success, how to accept and
incorporate their 'non-actuarial' viewpoints into his actuarial
principles, theories and models, and thus be accepted as a useful
and pragmatic decision-maker in the overall management of
financial services.
BIBLIOGRAPHY
SR.
NO.SOURCE AUTHOR
Internal sources
1Insurance Fundamental : Environment
and Procedures
B. S.Bodla, M.C.Garg
and K. P. Singh
2 InsuranceJulia Holyahe and
William Weipers
3 Insurance and Risk Management Dr. P. K. Gupta
4 Magazine: Insurance ChronicleThe ICFAI University
Press
External sources
1 Internet search
2 Visit to Actuarial Society of India
-
7/30/2019 Acturies in INDIA
52/52
Mumbai