79466476 actuaries

Actuaries in Insurance 2011

A
Project Report

On
“A Study of Actuarial Practices of Insurance
Company”
In the partial fulfillment of the Degree of

Master of Financial Management under the University Of
Mumbai

By

Mr. Warise Rajesh Bablya Jaiwanti

Roll No. 18

Masters in Financial Management

Under The Guidance Of

MR. JAYADEEP MANJESHWAR.

Allana Institute of Management Studies and
Research
CST, Mumbai-400001
2011.

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ACKNOWLEDGMENT
One of the pleasant aspects of preparing the project is
the opportunity to thank those who have made the project
completion possible. I am grateful to my guide
Prof. Jayadeep Manjeshwar for his valuable support,
professional advice, sustained interest, invaluable help and
guidance from the identification stage till the end.
I would also like to extend my gratitude to the faculty,
library staff for equipping me basics which helped me
throughout in the making of the project.
My Special thanks to the Director. Vidya Hattangadi
and course coordinator, Prof. Lukman, for their invaluable
contribution and help during the study of the project.
And finally, I would like to place on record, my sincere
thanks to everyone who has directly or indirectly been
helpful in the successful completion of the project.

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STUDENTS DECLARATION
I Rajesh Bablya Warise, the student of Allana
Institute of Management Studies of Master’s in
Financial Management (MFM) program, Semester 5
of the University of Mumbai of 2009 – 2011 batch,
hereby declare that this report entitled “Actuary” has
been carried out by me during this semester as per the
norms prescribed by the University of Mumbai, and the
same work has not been copied from any source directly
without acknowledging for the part/ section that has been
adopted from published/ non-published works.
I further declare that the information presented in
this project is true and original to the best of my
knowledge.

Dated:

Place: Mumbai

(Signature of the Students)

(Mr. Rajesh Bablya Warise).
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CERTIFICATE
I, Prof. Jayadeep Manjeshwar hereby certify that in
the Third Year of the Master’s in Financial Management
(MFM), batch 2009-11 at the Allana Institute of
Management Studies, has completed the project on
“Actuary” under my guidance, as per the norms prescribed
by the University of Mumbai, in the academic year 2009-11.
I further certify that the information presented in this
project is true and original to the best of my knowledge and
belief.

Dated:
Place: Mumbai

(Signature of the Guide)

(Prof. Jayadeep Manjeshwar)

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INDEX

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Sr Page
Particulars
No. No.
1. Introduction 07

2. What is an Actuary? 09

3. The Role and Responsibilities of an actuary 10

4. Specific Duties of an Actuary 11

5. Traits which all Actuaries should possess 13

6. What is Insurance ? 15

7. Eligibility 24

8. The Actuarial Society of India 25

9. Role of Actuaries in Insurance 28

10. Appointed Actuaries 29

11. Cessation of appointment of appointed Actuary 31

12. Powers of appointed Actuary 32

13. Duties and Obligations 33

14. Absolute Privilege of appointed Actuary 36

15. Growth Rate 37

16. New Avenues 39

17. Driving Force 40

18. Job Prospects and Career Options 41

19. Remuneration 44
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Conclusion 45
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Bibliography 46

22 Books Reference 48


EXECUTIVE SUMMARY

Most people will know something about the professions of accountants, doctors
and lawyers. But tell someone you’re an actuary and more than likely they will
look at you blankly – never having heard of an actuary.

The reason for taking this topic is to make everyone aware of work of
actuaries, which is most important in Insurance Company. An actuary
really plays an important role in Insurance. He deals with the business of
insurance and is responsible for many areas under the broad category of
insurance. He is responsible for collecting the data to forecast future risks
and see how the predictions will affect various aspects of insurance.

Actuaries also hold a legal responsibility for protecting the benefits promised by
insurance companies. Traditionally actuaries have been associated with
insurance sector but in present scenario with the economy opening up actuaries
are needed in sectors like non-life insurance, employee benefits, health
insurance, asset-management, reinsurance, insurance broking houses and
consulting companies.

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INTRODUCTION

Now a days, most of us must have seen, heard and read about companies which
provide insurance cover to policy holders in case of any eventuality like
accidents, hospitalization, household hazards, thefts or death and still others who
look after investment schemes, employee benefits, retirement benefits and
pension schemes. The policy holders are required to pay a fixed amount as
installments at regular intervals and they get this money back in the event of any
untoward incident or upon the maturity of the policy. Have you ever wondered
who decides as to what amount of money a policy holder should pay as premium
or what sum should be given as pension amount or returns by the company?

Well, this exactly is what an actuary does. They calculate insurance risks and
premiums. Technically speaking the job of an actuary is to assess the financial
impact of an uncertain future event. Roughly speaking they look at the financial
aspect of disasters; sarcastically speaking they are financial astrologers.

An actuary has to combine the skills of a statistician, economist and financier and
employ techniques of probability, compound interest, law, marketing,
management etc to predict the outcome of future contingencies and design
solutions to lessen the financial severity of such events.

Actuarial profession was formally established in 1848, with the formation of
Institute of Actuaries, London. In India, traditionally actuaries were found only
in the life-insurance sector but now with the opening up of the economy they are
wanted by non-life insurance companies, banks, stock exchanges, private and
government agencies and this are one field where demand exceeds supply.

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The Actuarial Society of India (ASI), the only professional body of Actuaries in
India was formed in 1944 and was admitted as a member of the International
Actuarial Association (IAA), an umbrella organization to all actuarial bodies
across the world, in 1979. It was registered in 1982 under registration of
Literacy, Scientific and Charitable Societies Act XIII of 1960. Its objectives
include the advancement of Actuarial profession in India, providing opportunities
for interaction among members of the profession, facilitating research, arranging
lectures on relevant subjects and providing facilities and Guidance to those
studying for the professional Actuarial Examination.

The Institute of Actuaries Of India (IAI or formally ASI) was initially started as a
non-examining body when Actuaries used to get qualified from Institute of
Actuaries or Faculty of Actuaries of UK. The Institute of Actuaries of India
started conducting Entrance Examinations in India for students of Institute of
Actuaries, UK, in 1975. In 1989, it started conducting examinations for its Indian
qualification up to Associate ship level, and in 1992, it started conducting
Fellowship level exams. The IAI has been following the UK pattern of
examinations since November 2000 with an eye to be a part of global standards
set by the International Actuarial Association (IAA).

To become an actuary one must be a Fellow of a recognized professional
examining body like the Actuarial Society of India (ASI), Mumbai or the
Institute of Actuaries, London. The work of an actuary involves a lot of number
crunching and the nature of work is quite tedious, nevertheless it offers rewards
in terms of intellectual challenge, status, job satisfaction and earnings. As their
judgment is the basis of decision making for many business activities, their
career paths often lead to upper management and executive positions.

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WHAT IS AN ACTUARY?

Most people will know something about the professions of accountants,
doctors and lawyers. But tell someone you’re an actuary and more than likely
they will look at you blankly – never having heard of an actuary.

If, however, they are aware of the work that actuaries do, they are likely to be
impressed; being an actuary carries quite a reputation. This is partly due to the
difficult exams, but mostly due to the fact that actuaries are experts in a field
that is renowned for its complexity and mathematical prowess.

An actuary deals with the business of insurance and is responsible for many areas
under the broad category of insurance. The actuary is an individual who will
analyze important data such as mortality, sickness, injury and disability rates and
use that information to aid those involved with insurance. An actuary is
responsible for collecting the data to forecast future risks and see how these
predictions will affect various aspects of insurance.

Any person with minimum 18 years of age and having a high degree of aptitude
for mathematics and statistics can take up the course and become an
Actuary.

A person with a high degree of aptitude for mathematics and statistics can
become an actuary. The other necessary skills include good communication
skills, ability to use computers and related technology, business sense, a practical
outlook, a curious bent of mind, the ability to work on ones own and also be a
team player as the situation demands and to be self motivated.. However an
aspirant should have single minded devotion, total dedication and a systematic
approach towards problems in order to successfully become an Actuary.

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THE ROLE AND RESPONSIBILITIES OF AN ACTUARY

The daily job duties, which an actuary must complete, are quite vast and varied.
This individual wears many hats and must be adept with completing various
tasks on a daily basis. Although many individuals may be unaware of the
responsibilities, which an actuary takes on in their job role, the position of
actuary is one of an important nature.

One who accepts the role of actuary is responsible for a multitude of items. They
will review statistical information relating to rates dealing with mortality,
sickness, accidents, disability and retirement. They will take the information that
they obtain from reviewing statistical data and relay the information to
individuals who need such items to successfully pursue insurance-related
interests. The general role of the actuary is to compile the data that they collect in
such a manner that it helps companies deal with payment and coverage issues.

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SPECIFIC DUTIES OF AN ACTUARY

There are a variety of specific duties, which an actuary must carry out on a daily
basis. The first duty that an actuary must undertake in their job role is to review a
variety of documents. These documents relate to statistical information,
insurance plans, annuity plans, pension plans, contracts and company policies.
The overall goal in reviewing these various document is to construct guidelines
for which the companies can follow with their customers and employees.

Once the actuary has reviewed all of the pertinent documents, the individual
must then construct concise tables evidencing the results of the intense document
review. The tables will diagram the statistical evidence as well as highlight the
recommended route to pursue with regard to disbursements, premiums and
retirement funds.

An additional specific duty of an actuary is to determine company policy and
explain such policy and its aspects to those who will benefit from it. The actuary
may also work on the policy so that it adequately works to benefit those affected
by the policy.

An actuary may also do consulting work and help various companies with their
statistical needs and company policy construction. One who is an actuary may
work for a specific corporation or many different companies and corporations.

Actuaries may also be asked to testify as expert witnesses in various forms of
litigation. Their testimony most often relates to the lifetime earnings an
individual would have seen based on a variety of factors.

One who fulfills the role of an actuary may also have to testify before public
agencies with regard to new or revised legislation affecting the companies and
corporations, which it works for. This frequently occurs when a new law is about

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to be passed or the company wishes a particular piece of legislation to become
law.

The actuary is also the go to individual for any questions relating to their job
responsibilities asked by the customers of the company. If the questions are best
answered by the actuary, and then he/she will do so in order to present
straightforward information to the public.

An actuary must also develop mathematical ideas and formulas so that the proper
data can be assessed. The actuary must use his/her mathematical abilities to
format equations, which will aid in the resolution of an issue.

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TRAITS WHICH ALL ACTUARIES SHOULD POSSESS

There are many beneficial traits, which an actuary should possess. First and
foremost, an actuary needs to possess wonderful mathematical skills. Since they
will be dealing a great deal with statistical equations and data, having such
mathematical skills will help them to excel in their job responsibilities.

Good analytical skills are another important trait which an actuary should
possess as it will help them in their job role. As they will need to analyze a
variety of documents, having analytical skills, which are more than adequate,
will greatly benefit them in the long run.

An actuary is an individual who should possess good public speaking skills as
well. In their daily job duties, not only will they need to analyze documents and
data but they will also have to report such data results to company officials and
members of the public. Therefore, in order to best get their opinions and
conclusions across in a straightforward, easy to understand manner, good public
speaking skills should be a prerequisite to taking on the role of actuary.

Creativity is something, which actuaries should possess. From time to time, they
will need to aid company officials in the drafting of company policy and make
changes to the policy. With a little bit of creativity, an actuary will be able to take
the documentation and put such a spin on it that it is formed into a proper and
valid policy.

One who is an actuary should also have wonderful research skills. Since many of
the documents that they need to analyze will not just pop into their laps, it is
important that actuaries can do good research and find out what they need to
know with regard to statistics and pertinent documents in an efficient and
expedient manner.

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An actuary should also have good working computer skills. Since 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 them as well.

Comprehension skills are also a necessary component for all actuaries to possess.
The actuary is an individual who in their job role will need to analyze and
interpret often-complex documents and laws as well. If one has excellent
comprehension skills they will be able to do their job that much better.

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What is insurance?

We face a lot of risks in our daily lives. Some of these lead to financial losses.
Insurance is a way of protecting against these financial losses. For a
payment (premium), an insurance company will take the responsibility
of compensating your financial losses.

What is General Insurance?

Insurance other than ‘Life Insurance’ falls under the category of General
Insurance. General Insurance comprises of insurance of property
against fire, burglary etc, personal insurance such as Accident and
Health Insurance, and liability insurance which covers legal liabilities.
There are also other covers such as Errors and Omissions insurance for
professionals, credit insurance etc.

Non-life insurance companies have products that cover property against Fire and
allied perils, flood storm and inundation, earthquake and so on. There
are products that cover property against burglary, theft etc. The non-
life companies also offer policies covering machinery against
breakdown,there are policies that cover the hull of ships and so on. A
Marine Cargo policy covers goods in transit including by sea, air and
road. Further, insurance of motor vehicles against damages and theft
forms a major chunk of non-life insurance business.

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In respect of insurance of property, it is important that the cover is taken for the
actual value of the property to avoid being imposed a penalty should
there be a claim. Where a property is undervalued for the purposes of
insurance, the insured will have to bear a rateable proportion of the
loss. For instance if the value of a property is Rs.100 and it is insured
for Rs.50/-, in the event of a loss to the extent of say Rs.50/-, the
maximum claim amount payable would be Rs.25/- ( 50% of the loss
being borne by the insured for underinsuring the property by 50% ).
This concept is quite often not understood by most insureds.

Personal insurance covers include policies for Accident, Health etc. Products
offering Personal Accident cover are benefit policies. Health insurance
covers offered by non-life insurers are mainly hospitalization covers
either on reimbursement or cashless basis. The cashless service is
offered through Third Party Administrators who have arrangements
with various service providers, i.e., hospitals. The Third Party
Administrators also provide service for reimbursement claims.
Sometimes the insurers themselves process reimbursement claims.

Accident and health insurance policies are available for individuals as well as
groups. A group could be a group of employees of an organization or
holders of credit cards or deposit holders in a bank etc. Normally when
a group is covered, insurers offer group discounts.

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Liability insurance covers such as Motor Third Party Liability Insurance,
Workmen’s Compensation Policy etc offer cover against legal
liabilities that may arise under the respective statutes— Motor
Vehicles Act, The Workmen’s Compensation Act etc. Some of the
covers such as the foregoing (Motor Third Party and Workmen’s
Compensation policy ) are compulsory by statute. Liability Insurance
not compulsory by statute is also gaining popularity these days. Many
industries insure against Public liability. There are liability covers
available for Products as well.

There are general insurance products that are in the nature of package policies
offering a combination of the covers mentioned above. For instance,
there are package policies available for householders, shop keepers
and also for professionals such as doctors, chartered accountants etc.
Apart from offering standard covers, insurers also offer customized or
tailor-made ones.

Suitable general Insurance covers are necessary for every family. It is important
to protect one’s property, which one might have acquired from one’s
hard earned income. A loss or damage to one’s property can leave one
shattered. Losses created by catastrophes such as the tsunami,
earthquakes, cyclones etc have left many homeless and penniless.
Such losses can be devastating but insurance could help mitigate them.
Property can be covered, so also the people against Personal Accident.
A Health Insurance policy can provide financial relief to a person
undergoing medical treatment whether due to a disease or an injury.

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Industries also need to protect themselves by obtaining insurance covers to
protect their building, machinery, stocks etc. They need to cover their
liabilities as well. Financiers insist on insurance. So, most industries or
businesses that are financed by banks and other institutions do obtain
covers. But are they obtaining the right covers? And are they insuring
adequately are questions that need to be given some thought. Also
organizations or industries that are self-financed should ensure that
they are protected by insurance.
Most general insurance covers are annual contracts. However, there are few
products that are long-term.

It is important for proposers to read and understand the terms and conditions of a
policy before they enter into an insurance contract. The proposal form
needs to be filled in completely and correctly by a proposer to ensure
that the cover is adequate and the right one.

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Why should one insure ?

One of the main reasons one should insure is to protect one’s belongings and
assets against financial loss. When one has earned and accumulated
property, protecting it is prudent. The law also requires us to be
insured against some liabilities. That is, in case we should cause a loss
to another person, that person is entitled to compensation. To ensure
that we can afford to pay that compensation, the law requires us to buy
liability insurance so that the responsibility of paying the
compensation is transferred to an insurance company.

Who should buy general insurance?

Anyone who owns an asset can buy insurance to protect it against losses due to
fire or theft and so on. Each one of us can insure our and our
dependents’ health and well being through hospitalisation and personal
accident policies. To buy a policy the person should be the one who
will bear financial losses if they occur. This is called insurable interest.

What kinds of policies are there?

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Most general insurance policies are annual – that is, they last for one year. Some
policies are given for longer periods – like fire insurance for
residences – and some for shorter periods – like insurance for goods
transportation or for emergency medical treatment during foreign
travel.

How much should I insure for?

The amount you insure for is called the sum assured. Normally a policy should
cover the value of the asset – either the market value while insuring, or
the cost of replacing the asset should it be lost or destroyed. The
premium will depend on the sum assured.

Can I take two policies and get claims under both of them?

In case of an indemnity cover (one that seeks to compensate the actual loss )--for
instance, a policy that covers property, if there are two policies in
vogue, the loss shall be shared by both the policies. In no case can an
insured get more than the actual pecuniary loss he or she has incurred.
On the other hand, in respect of benefit policies like the Personal
Accident policy, where a fixed compensation is paid, no matter what
the actual loss is , one may obtain more than one policy.

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On what basis is claim paid?

In indemnity policies, the upper limit of a claim is the sum assured and this
usually applies for the period of the policy. Certain policies, however,
allow for reinstatement of the Sum Insured by payment of
proportionate premium for the remaining period of the policy. The
actual claim will be the actual extent of financial loss as validated by
documents like bills. If the property is underinsured, the insured shall
bear a rateable proportion of the loss. There can be more than one
claim in the policy period but the sum assured is usually the limit for
the policy period unless reinstated.

Nowadays health insurance policies – which cover hospitalisation costs – have
also a cashless settlement of claims. That is, you don’t have to pay for
the treatment at the hospital and then make a claim for reimbursement
of the expenses. The insurance company has a service provider called
the third party administrator (TPA) health services, who liaises with
the hospitals and directly makes the payment for your treatment as per
the terms of your policy and coverage.

Life Insurance Underwriting

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Negative underwriting factors cost you money. We commissioned this study to
determine exactly how much. If you are not able to change your factors to save
some money, at least you will know what they are costing you!

Underwriting Factor Company Premium
2 $1,330
Total cholesterol = 285 3 $ 730
3 $1,530
Cholesterol ratio = 7.0 7 $ 835
1 $1,285
Blood pressure = 141/90 6 $ 890
2 $1,330
Weight = 210 5 $ 815
Family member diagnosed before 60 6 $1,290
(heart or cancer) 7 $ 715
2 $1,330
Two driving convictions in three years 3 $ 730

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What is the periodicity of premium payments?

Most general insurance policies are annual and the premium payment is in
advance. No risk commences unless you have paid the premium. In
some long term policies companies have the facility of collecting
premiums periodically.

Why do different people have different premiums?

The premium is calculated on the extent and nature of the cover you want. A
higher sum insured means a higher rate of premium. Similarly a higher
risk will be charged a higher premium. An example of this is that an
older person will have to pay a higher premium for health insurance
for the same sum insured. Sometimes the risk is higher depending on
the location of risks – for example in motor insurance in areas where
accidents are higher. So the premium will vary according to the nature
and severity of the risk.

If I buy a policy and don’t make a claim, it is a loss. So, why should I buy
insurance?

General insurance is not meant to be for savings or investment returns. It is
meant for protection. What you pay for is the protection against a risk.
To approach it as something from which returns should be obtained is
not the correct approach as there is a price to pay for protecting a
property worth lakhs for a few hundred rupees.

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If there are problems with claims what can I do?

First you should write to the company and give them sufficient time to respond
suitably. If they don’t respond, or it is not a response satisfactory to
you, then you can approach the appropriate judicial channel. For
complaints relating to personal insurance covers upto a value of Rs.20
lakh, you may approach the Insurance Ombudsman in your area.

( HERE ANNOUNCE THE CONTACT INFORMATION OF
THE OMBUDSMAN ).

The Ombudsman has a technical team that will go into the merits of your case
and give an award) If you are unhappy with the outcome with the
Ombudsman you still have recourse to consumer courts.

We extended a previous study of life insurance quote sites. Note the difference in
premium for the same factor. Also, one company may have the high
premium for one factor and the low premium for another. See the
complete study.

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ELIGIBILITY

The Actuarial Society of India and Institute of Actuaries, UK are professional
examining bodies which conduct certificate, associate ship level and fellowship
level examinations and on passing these examinations candidates become
eligible to be admitted as an Associate Member of the society and can use AASI
against their name as a registered actuary. On passing all the subjects up to and
including 400 Series and upon satisfying the other criteria specified for the
purpose, candidates become eligible to be admitted as fellow member of the
Society and can use FASI against his/her name as a recognized fellow.

A number of universities are offering graduate and postgraduate courses in
actuarial sciences. Mere completion of such courses does not make one eligible
to practice as an actuary, but such courses give students better conceptual clarity
and training by experts in a classroom environment which makes them better
equipped than if they directly write papers of ASI through self study. To qualify
as an Actuary, a candidate has to pass all examinations in the prescribed subjects
conducted by the professional examining body such as the Actuarial Society of
India and the Institute of Actuaries, UK.

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THE ACTUARIAL SOCIETY OF INDIA

The Actuarial Society of India was established in 1944 and registered as a
Society in 1982 under Act XXI of 1860 registration of Literary, Scientific and
Charitable Societies. The Society is a founder member of the International Forum
of Actuarial Associations.

Objects

• To provide a central Organization for the members of the actuarial
profession in India for the purpose of elevating the attainment and status
and for promoting the general efficiency of all who are engaged in
occupations connected with the pursuits of an actuary;

• To extend and improve the data and methods of the Science which has its
origin in the application of the doctrine of probabilities to the affairs of
life and to consider all monetary questions involving, separately or in
combination, the mathematical doctrine of probabilities and the principles
of interest;
• To plan, promote and provide for interaction amongst the members, to
arrange facilities for the reading of papers, the delivery of lectures, the
discussion of topics and for the acquisition and dissemination by other
means of useful information and knowledge connected with Actuarial
Science and other allied subjects with special reference to Indian
conditions;

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• To promote or to conduct work or research of interest to Actuarial
Science or to the practice of the Actuary;

• To prescribe syllabus of studies and hold examinations in subjects
pertaining to principles and practice of Actuarial Science with particular
reference to Indian conditions, by means of which the attainment of
adequate standard can be tested and to award certificates, diplomas and
other distinctions to successful candidates;
• To provide educational services and other facilities to those studying for
actuarial examinations;
• To disseminate information on Actuarial Science and other allied subjects
by undertaking and providing for publication of journals, reports,
pamphlets, research papers, books and other literature;
• To form and maintain either by itself or in collaboration with some other
Organization or organizations a library or libraries for use by members of
the Society;
• To confer honorary awards and other distinctions;
• To institute and award scholarships, prizes, medals and certificates;
• To maintain liaison with Universities and other educational and
professional bodies in India or abroad for the purpose of promoting the
objects of the Society;
• To maintain contact and co-operate with other institutions in any part of
the world having objects wholly or partly similar to those of the Society
including by way of payment of subscription, enrollment as a member
thereof, and generally in such a manner as may be conducive to the
furtherance of the common objects as the Society may deem necessary;

• To discuss and comment on the actuarial aspects of public, social and
economic and financial questions which from time to time may be the
subject of public interest;

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• To consider the actuarial aspects of legislation, existing and proposed,
and to take such action as is considered desirable;
• To arrange for the compilation and publication of statistical data and of
actuarial tables based thereon;
• To raise funds by subscription from the members of the Society and to
accept donations and bequests for all or any of the purposes of the
Society; and

Generally do all such things as from time to time may be
necessary to elevate the status and procure advancement
of the interest of the profession.

ROLE OF ACTUARIES IN INSURANCE

Actuaries are experts who perform actuarial analysis of insurance rates, rating
procedures, rating plans, and schedules of insurance companies. These are
professionals who are experienced in reviewing and analyzing insurance

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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 are involved in pricing, product design, financial management and
corporate planning. They use their professional expertise in solving complication
financial problems by combining their theoretical as well as practical knowledge.

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

APPOINTED ACTUARIES:

Procedure for Appointment of an Appointed Actuary:

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1) An insurer registered to carry on insurance business in India shall, subject to
sub-regulation, appoint an actuary, who shall be known as the 'Appointed
Actuary' for the purposes of the Act.

2) A person shall be eligible to be appointed as an appointed actuary for an
insurer, if he or she shall be------
(i) ordinarily resident in India;
(ii) a Fellow Member of the Actuarial Society of India;
(iii) an employee of the life insurer, in case of life insurance business;
(iv) an employee of the insurer or a consulting actuary, in case of general
insurance business;
(iv) a person who has not committed any breach of professional conduct;
(v) a person against whom no disciplinary action by the Actuarial Society
of India or any other actuarial professional body is pending;
(vi) not an appointed actuary of another insurer;
(vii) a person who possesses a Certificate of Practice issued by the
Actuarial Society of India; and
(viii) not over the age of seventy years.

(3) An insurer shall seek the approval of the Authority for the appointment of
appointed actuary, submitting the application in Form IRDA-AA-1.

(4) The Authority shall, within thirty days from the date of receipt of application,
either accept or reject the same:
Provided that before the rejecting the application, the Authority shall give an
opportunity of being heard to the insurer.

(5) If 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.

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(6) An insurer, who is unable to appoint an appointed actuary in accordance with
sub-regulation (2), shall make an application to the Authority in writing for
relaxation of one or more conditions mentioned in sub-regulation 2.

(7) The Author all, on receipt of the application referred to in sub-regulation (6),
communicate its decision to the insurer within thirty days of receipt of such
application.

(8) The appointment of an appointed actuary shall take effect from the date of
approval by the Authority.

CESSATION OF APPOINTMENT
OF APPOINTED ACTUARY.

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(1) 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:

(a) that he or she ceases to be eligible in accordance with sub-regulation
(2) of regulation (3), or;
(b) that he or she has, in the opinion of the Authority, failed to perform
adequately and properly the duties and obligations of an appointed
actuary under these regulations.

(2) The Authority shall give an appointed actuary a reasonable opportunity of
being heard, if he or she has been given a notice of withdrawal of approval by it.

(3) If a person ceases to be an appointed actuary of an insurer otherwise than on
the grounds mentioned in sub-regulation (1), the insurer and the appointed
actuary shall intimate the Authority the reasons therefore within fifteen days of
such a cessation.

POWERS OF APPOINTED ACTUARY:

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(1) 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 the functions and duties of the appointed
actuary.

(2) The appointed actuary may seek any information for the purpose of sub-
regulation (1) of this regulation from any officer or employee of the insurer.

(3) The appointed actuary shall be entitled, --

(a) to attend all meetings of the management including the directors of the
insurer;
(b) to speak and discuss on any matter, at such meeting,--
(i) that relates to the actuarial advice given to the directors;
(ii) that may affect the solvency of the insurer;
(iii) that may affect the ability of the insurer to meet the reasonable
expectations of policyholders; or
(iv) on which actuarial advice is necessary;
(c) to attend, --
(i) any meeting of the shareholders or the policyholders of the insurer; or
(ii) any other meeting of members of the insurer at which the insurer's
annual accounts or financial statements are to be considered or at which
any matter in connection with the appointed actuary's duties is discussed.

DUTIES AND OBLIGATIONS
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In particular and without prejudice to the generality of the foregoing matters,
and in the interests of the insurance industry and the policyholders, the duties and
obligations of an appointed actuary of an insurer shall include:--

(a) rendering actuarial advice to the management of the insurer, in particular in
the areas of product design and pricing, insurance contract wording, investments
and reinsurance;
(b) ensuring the solvency of the insurer at all times;

(c) complying with the provisions of the section 64V of the Act in regard to
certification of the assets and liabilities that have been valued in the manner
required under the said section;

(d) complying with the provisions of the section 64 VA of the Act in regard to
maintenance of required solvency margin in the manner required under the said
section;

(e) drawing the attention of management of the insurer, to any matter on which
he or she thinks that action is required to be taken by the insurer to avoid--
(i) any contravention of the Act; or
(ii) prejudice to the interests of policyholders;

(f) complying with the Authority's directions from time to time;

(g) in the case of the insurer carrying on life insurance business,--
(i) to certify the actuarial report and abstract and other returns as required
under section 13 of the Act;

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(ii) to comply with the provisions of section 21 of the Act in regard to
further information required by the Authority;
(iii) to comply with the provisions of section 40-B of the Act in regard to
the bases of premium;
(iv) to comply with the provisions of the section 112 of the Act in regard
to 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;
(v) to ensure that all the requisite records have been made available to
him or her for the purpose of conducting actuarial valuation of liabilities
and assets of the insurer;
(vi) to ensure that the premium rates of the insurance products are fair;
(vii) to certify that the mathematical reserves have been determined
taking into account the guidance notes issued by the Actuarial Society of
India and any directions given by the Authority;
(viii) to 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 share of
surplus;
(ix) to submit the actuarial advice in the interests of the insurance
industry and the policyholders;

(h) in the case of the insurer carrying on general insurance business to ensure, --
(i) that the rates are fair in respect of those contracts that are governed by
the insurer's in-house tariff;
(ii) that the actuarial principles, in the determination of liabilities, have
been used in the calculation of reserves for incurred but not reported
claims (IBNR) and other reserves where actuarial advice is sought by the
Authority;

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(i) informing the Authority in writing of his or her opinion, within a reasonable
time, whether,--
(i) the insurer has contravened the Act or any other Acts;
(ii) the contravention is of such a nature that it may affect significantly
the interests of the owners or beneficiaries of policies issued by the
insurer;
(iii) the directors of the insurer have failed to take such action as is
reasonably necessary to enable him to exercise his or her duties and
obligations under this regulation; or
(iv) an officer or employee of the insurer has engaged in conduct
calculated to prevent him or her exercising his or her duties and
obligations under this regulation.

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ABSOLUTE PRIVILEGE OF APPOINTED ACTUARY.

(1) An appointed actuary shall enjoy absolute privilege to make any statement,
oral or written, for the purpose of the performance of his functions as appointed
actuary. This is in addition to any other privilege conferred upon an appointed
actuary under any other Regulations.

(2) Any provision of the letter of appointment of the appointed actuary, which
restricts or prevents his duties, obligations and privileges under these regulations,
shall be of no effect.

Applicability to reinsurance business.-
- These regulations shall apply to reinsurers carrying on reinsurance business in
India.

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GROWTH RATE

According to R. Kannan, president, Actuarial Society of India, the opening up of
the insurance sector in the country has pushed up the demand for qualified and
senior actuarial students. "About 2,000 candidates enroll with the ASI as students
every year. But the total number of actuaries available in India is only about 225.
Of these there are just 40 people in the 20-60 age group," says Kannan. "On the
other hand, each of the 15 life insurance and 15 non-life insurance companies
needs at least two to three qualified actuaries."

While there is no concrete forecast on what the demand for actuaries will be, E
Balaji, COO, Ma Foi Management Consultants, a human resource consulting and
recruitment firm that signed up about 40 actuaries for a single BPO client in end-
2005, says that there is generally a 20-25 per cent shortfall in supply.

R Krishnamurthy, managing director (distribution consulting), Watson Wyatt
Insurance Consulting, agrees that insurance liberalisation has exposed a big gap
in the demand and supply ratio of actuaries. "When the Life Insurance
Corporation of India was the monopoly player and general insurance was subject
to a tariff regime, opportunities were limited and there was no incentive to
qualify as actuaries," he says. "Now there is a demand for freshly qualified
actuaries, especially in the employee benefit sector. Till now, this sector was
largely handled by chartered accountants, but changes will call for professional
actuarial valuation."

At the moment, qualified actuaries find the going good. Consider Anil Singh, 37.
He started out as an actuarial trainee with LIC in 1991, soon after completing his
Master's in Statistics from Lucknow University. While working with LIC, he
studied with the ASI and, in 1995, became an ASI associate. After a break, Singh

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qualified as an actuarial fellow in 1999. Subsequently, he worked with a couple
of private sector insurance companies as a senior actuarial analyst and is now the
chief actuary with Bajaj Allianz Life Insurance, taking home an annual pay
packet of Rs 40 lakh (Rs 4 million).

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NEW AVENUES

Low supply, high demand: There are only 225 actuaries in India. Industry feels
there is 20-25% shortfall.

Larger profile: Apart from the traditional areas of life and general insurance,
pension and reinsurance, actuaries now act as consultants, investment advisers
and risk managers as well.

Hands on: ASI fellowships can be completed in 5-6 years' time. Actuarial studies
can be pursued alongside a full-time job.

Money magic: With about 6 years of experience, a fellowship and work at a
senior position, you can earn Rs 50 lakh a year.

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DRIVING FORCE

The growth in the Indian financial market is the major reason for the spurt in the
demand for actuaries. Apart from the traditional areas of life and general
insurance, pension and reinsurance, actuaries are now needed to play the roles of
consultants, investment advisers and risk managers as well. A number of banks
are planning joint ventures to set up insurance companies in 2007, which is likely
to raise the number of life insurance companies from 16 to more than 20. The
number of general insurance companies is also expected to increase from 12 to
around 15.

The health insurance sector is also expected to get a big dose of growth. V
Jaganathan, managing director of Star Health Insurance, says there is huge
potential for the sector in a populous country like India. Apollo Hospital, for
instance, is close to establishing a health insurance company. Reforms in
pension funds, whenever they happen, are also expected to add to the demand.

India has the potential to emerge as a key actuarial back office in the BPO sector
as well. A few companies are already in the business of low-level calculations.
Once the supply pool expands, India can take up more complex and more
lucrative back office work, says Krishnamurthy.

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JOB PROSPECTS & CAREER OPTIONS

Traditionally actuaries have been associated with insurance sector but in present
scenario with the economy opening up actuaries are needed in sectors like non-
life insurance, employee benefits, health insurance, asset-management,
reinsurance, insurance broking houses and consulting companies.

The job of an actuary involves formulating policies and calculating the premium
to be charged. For this they assemble and analyse data to estimate the probability
of such eventualities as death, sickness, injury, disability and property loss and
formulate a sum which is advantageous to the customer as well as the company.
In areas where employee benefits and retirement/ pension schemes are dealt, the
actuaries have to calculate the amount of money to be paid as contribution to
pension fund in order to generate a certain income level post-retirement.
Actuaries in administrative positions have to explain technical matters to
executives, government officials, shareholders, policyholders. Actuaries working
in tandem with government/ government agencies are responsible for designing
social security and Medicare plans. Many of these professionals work as
independent consultants providing actuarial advice to clients for a fee. Some also
provide investment advice. Actuaries have scope for career growth not only in
India but also in countries like USA, UK, Canada and Australia where they
already have the necessary infrastructure and support system available.

Some of the potential employers are:

Life Insurance

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1. AMP Sanmar Life Insurance CoLtd;
2. Allianz Bajaj Life Insurance Co Ltd;

3. Birla Sun Life (Distributor Co Ltd);
4. Aviva Life Insurance Co Ltd.;

5. HDFC Standard Life Insurance Co Ltd.;

6. ICICI Prudential Life Insurance Co Ltd.;

7. ING Vysya Life insurance Co Ltd;

8. Om Kotak Mahindra Life Insurance Co Ltd.;

9. Max New York Life Insurance Co Ltd.;

10. Met Life Insurance Co Ltd.;

11. SBI Life Insurance Co LTD;

12. TATA AIG Life Insurance Co Ltd;

13. Life Insurance Corporation of India

Non-Life Insurance

1. Bajaj Allianz;
2. HDFC Chhub GIC ltd;

3. ICICI Lombard General Insurance Co Ltd;

4. IFFCO-TOKIO General Insurance Co Ltd.;

5. Reliance GIF;

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6. Royal Sundaram GIC;

7. Cholamandalam GIC;

8. TATA AIG;

9. Oriental Insurance;

10. United India Insurance.;

11. National Insurance Co;

12. General Insurance Corporation;

13. New India Assurance Company

Actuarial Apprentices with LIC

The Life Insurance Corporation of India takes in candidates who are Graduates/
Postgraduates with Mathematics and Statistics as main subjects with 60% or
more marks in aggregate and coming in the age-group 18-25 years. The selection
is based on a written test conducted by LIC which consists of two papers. Paper I
includes Essay Writing (Hindi or English) and paper II comprising of
Mathematics or Statistics or Actuarial Science. Candidates who have passed one
or more examination of the ASI or Institute of Actuaries (London) or those
having PG Diploma in Actuarial Science with more than 50% marks in aggregate
are exempted from appearing for the exams.

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REMUNERATION

If you can survive the grilling tests, there is a payoff - the median annual salary
for an actuary is handsome. Actuaries are globally in demand and can command
hefty pay packets, salaries and perks. No wonder then that this profession has
been rated among the best jobs in the US.

In India the trend is slowly picking up. Stipend for an actuarial trainee per month
in India is around Rs 25,000 per month. Insurance companies and consulting
firms give merit to experience and qualifications with salary packets ranging
from 8 lacs per annum for beginners to around 40 lacs per annum for those in
senior positions. In UK a qualified actuary can earn 20 lacs per annum.

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CONCLUSION

An actuary is an individual who has many duties and responsibilities
concomitant to their position. If one in this job role has excellent analytical,
comprehension, mathematical and public speaking skills, they will most likely be
individuals who excel at their job and produce the highest quality work product
possible. If one has all of these aforementioned skills, the position of actuary
may be the perfect one to fill.

An actuary is the technical expert on life insurance matters studying the mortality
of the insuring public, evaluating the financial condition of the insurer,
determining the policies to be offered and the premium to be charged,
determining the policies to follow in underwriting an investments of its funds,
Master’s in
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t 47

deciding on the bonus that can be declared on the participating policies and so
on. A good actuary is a good economist, a good statistician and a good security
analyst.

Every well-managed insurance company will have an actuary to continuously
study its operations and advice the management on the appropriateness of their
policies. The periodical valuation of a life insurance company, required to be
conducted as per the provisions of the Insurance Act, is the responsibility of the
actuary. The premium proposed to be charged by the insurer, has to be certified
by the actuary before they are submitted for the approval of the IRDA.

BIBLIOGRAPHY

www.actuary.org

www.actuariesindia.org

www.webindia123.com

www.irdaindia.org

www.actuariesindia.org/ - Cached - Similar

insuranceactuarial.com/actuary-careers-path.php - Cached - Similar

www.actuary.com/actuarial-discussion.../content.php?...Actuarial...Path - Cached

- Similar
Master’s in
Financial
Managemen
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www.theactuary.com/actuary/.../microinsurance-mongolia-nomadic-path -

Cached - Similar

www.actuarialoutpost.com/actuarial_discussion.../showthread.php?p...

www.actuaryforum.com/FindPost5591.aspx - Cached - Similar

en.wikipedia.org/wiki/Institute_of_Actuaries_of_India

www.actuarialoutpost.com/actuarial.../forumdisplay.php?f... - Cached - Similar

www.indiaeducation.net/.../Institute-of-Actuaries-of-India-IAI.aspx

www.ivyproschool.com/actuarial-science-faq.html - Cached - Similar

wikimapia.org/6067562/Institute-of-Actuaries-of-India - Cached - Similar

www.hw.ac.uk/Actuarial_Management

www.authorstream.com/.../CasualtyActuary-754016-india-insurance-market-

actuary/ -

www.actuaryclub.com/...for.../321-ACTUARIES-INDIA.html?... - Cached –

Similar

www.finance-directory.org/insurance/site/33287 - Cached - Similar

articles.economictimes.indiatimes.com/.../28430846_1_life-insurance-policies-

insurance-act - Cached - Similar

www.markosweb.com/www/actuariesindia.org/ - Cached - Similar

www.sify.com/.../institute-of-actuaries-of-india-to-expand-overseas-news-

education-kkzoa2eeaji.html

en.wikipedia.org/wiki/Actuarial_science

Master’s in
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BOOKS:

IRDA: IC33 LIFE INSURANCE

Principles of Insurance

Practice of Life Assurance

Practice of General Insurance

Regulations of Insurance Business

Life Assurance Underwriting

Health Insurance

Master’s in
Financial
Managemen
t 50

Foundation of Actuarial Science

General Insurance Underwriting

General Insurance Accounts preparation and Regulation of Investment

Fire Insurance Underwriting

Consequential Loss Insurance (Fire)

Fire Insurance Claims

Fire & Consequential Loss Insurance

Fire Insurance Coverages

Fire Rating and Underwriting

Marine Insurance Claims

Marine Insurance

Agricultural Insurance

Motor Insurance

Personal Accident, Sickness & Misc. Insurance

Liability Insurance

Engineering Insurance

Miscellaneous Insurance

Liability & Engineering Insurance

Group Insurance & Retirement Benefit Schemes

Reinsurance Management

Law & Economics of Insurance

Insurance Salesmanship

Principles and Practice of Insurance and Survey and Loss Assessment

Master’s in
Financial
Managemen
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Foundations of Casualty Actuarial Science – Part I

Foundations of Casualty Actuarial Science – Part II

Life Insurance

General Insurance

Insurance Broking

The Actuary Magazine

Master’s in
Financial
Managemen
t 52

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