What makes an Insurance company different from other companies? Insurers offer contracts to undertake financial risk of an individual, a group, an asset or an event whereas other companies offer goods and services.
While transaction of goods and services offered by non-insurance companies settles with customers immediately, the contracts sold by insurers may last for hours, days. months, years or life time of an individual or of an asset.
A customer buying a product of an insurance company transfers all uncertainties and risks of a related event to the insurer and becomes peaceful about adversities and losses likely to happen in future. The insurer, on the other side, undertakes all related risks and uncertainties and assures compensation on the financial loss for the entire time period under the contract.
A risk in the market is an opportunity for insurance companies and the opportunity is managed by professionals called Actuaries, who make financial sense of future.
Hence an insurer essentially has to employ actuaries to run their business to manage their highly technical functions. An Actuarial department is thus a necessity for an insurance company; in case of a non-insurance company, though it is desirable to have risk professionals like actuaries to manage their risks, the risk management is still not a priority.
However, Actuaries are employed in financial services sector of developed countries, particularly in the banking sector where financial risk is considered as high.
The Enterprise Risk Management (ERM) is one of the important areas of specialisation of actuarial science and India too has a good number of Actuaries qualified as CERA (Chartered Enterprise Risk Actuary).
Making financial sense of future involves understanding of economy, knowledge of social, cultural and geographical sciences, skills in mathematical, statistical, logical and analytical reasoning, business knowledge and expertise in modelling.
These characteristics being independent of geography make Actuary a truly global profession and hence are recognised across all boundaries.
Every country has its own system of developing and recognizing an actuary. In India, the honour of this task to develop actuaries is entrusted to Institute of Actuaries of India.
Although there are differences among various countries, all these systems have to meet the standards specified by International Actuarial Association and hence the skill sets are transferable across countries. The qualification from 1AI is recognized as equivalent to IFoA, UK and Al, Australia.
Employment of Actuaries, Nature of Work & Responsibilities
Actuaries have a role where there is a risk, wherever it is!! Referring to this, an Actuary should be in a better position than any other financial professional to evaluate any project or to advise the viability of any project.
Insurance companies, in general deal with all types of short and long term financial risks by offering a range of products. This makes an insurance company vulnerable to financial risks than any other organisation.
All insurance and investment products in the market fall within definitions of either life insurance or non-life insurance which mainly cover term assurance, whole life assurance, endowment assurance, annuities and pension products, micro insurance , health insurance, motor insurance, marine insurance, fire insurance, engineering insurance and aviation insurance.
There are a number of other forms of nonlife insurance as well applicable to any event or any object which carry a risk of loss.
Within an insurance company, actuaries mainly involve in product design & development, pricing, valuation, embedded value calculation, asset-liability modelling and experience analysis. It is critical for the management of any insurance company to seek advice from actuaries in various
aspects of running the business on a regular basis which makes the actuarial department as the centre of core activities of an insurer.
In India, there are 52 insurance companies which include 24 life insurers, 23 non-life insurers and 5 standalone health insurers. A large insurance company employs more than 30 actuarial resources ranging from student members to Fellow (fully qualified) members for meeting its requirements and smaller companies employ in the range of 20-25 members.
Re-insurance (arrangement by which Insurers transfer a part of their risk to another insurer called re-insurer) is another area that requires actuarial expertise. India has only one public sector re-insurance company GIC Re: however, there are foreign re-insurance companies having liaisoning offices and employing actuarial candidates.
Valuation of terminal benefits of a workforce is another important area where actuaries play a major role. This includes valuation of pension, gratuity and leave encashment of employees in a company which is a statutory provision in many countries.
There are good number of consulting actuaries and actuarial firms in India delivering services in employee benefits area There are quite a good number of actuarial resources employed in all consultancy services. Other institutions employing actuarial students include rating agencies, analytics firms and wealth management companies.
India has been proven as a hub for actuarial outsourcing. Many global companies have set up their global and regional business centres to carry out their work in a cost effective manner.
Most of these off-shoring/outsourcing units cater to UK or US companies and can be found in both insurance and pension related work.
India has become a rapidly growing centre of expertise in delivering actuarial services for most of the developed markets like Eastern and Western Europe, Asia-Pacific and many other countries and is offering a number of mass employment opportunities to all levels of actuarial candidates.
There are many actuaries qualified from India working in other countries in Asia-Pacific regions and UK, catering to the needs of the region as well.
Growth of insurance is directly related to the demographic and economic profile of the country. With average age of an Indian close to 28 and economy poised to grow at higher levels.
India demonstrates immense potential for growth in the insurance sector and many more companies are expected to start their operations in the near future.
The actuarial profession in India, anticipating increased demand for actuaries in the near future have designed programs to attract potential students to pursue actuarial science leading to a rewarding career.
In terms of compensation levels, it varies significantly according to Industry, experience levels, responsibilities and geographies; however, an experienced Actuary in the senior level position of an insurance company in India earns not less than a crone as their annual compensation.
HOW TO BECOME AN ACTUARY?
The Institute of Actuaries of India (IA1) is a statutory body established under The Actuaries Act, 2006 for regulation of actuarial profession in India.
Enrolment as a student of IA1 requires qualifying ACET (Actuarial Common Entrance Test) conducted twice in a year. The minimum eligibility criterion to appear for ACET is completion of 10+2 with English as one of the subjects.
A candidate enrolled as a student member need to clear examinations in different levels. viz., CT (Core Technical), CA (Core Applications), ST (Specialist Technical) and SA (Specialist Applications).
Under these groupings, all 9 subjects under CT and all 3 subjects under CA are compulsory. Two subjects can be selected from ST level and one subject from SA level by a student in order to complete examinations.
A candidate completing all examinations need to attend a two day IFS (India Fellowship Seminar) and work based experience of 3 years in order to become a Fellow member (FIAI)
Core Technical (CT) subjects include:
- CT1- Financial Mathematics
- CT2- Finance and Financial Reporting
- CT3- Probability and Mathematical Statistics
- CT4- Models
- CT5- General Insurance, Life and Health contingencies
- CT6- Statistical Models
- CT7- Business Economics
- CT8- Financial Economics
- CT9- Business Awareness online module (Practical exam)
The Core Application (CA) level require pass in 3 subjects, out of which 2 are practical as:
- CA1- Actuarial Risk Management (Two papers CA11 & CAl2)
- CA2- Model Documentation, Analysis and Reporting (Practical)
- CA3- Communication (Practical)
Under Specialist Technical (ST) level, two subjects to be chosen from:
- ST1- Health and Care
- ST2- Life Insurance
- ST4- Pension and Other Employee Benefits
- ST5- Finance and Investment A
- ST6- Finance and Investment B
- ST7- General Insurance Reserving and Capital Modelling
- ST8- General Insurance Pricing
- ST9- Enterprise Risk Management
One subject to be chosen from Specialist Application (SA) level offering:
- SA1- Health and Care
- SA2- Life Insurance
- SA3- General Insurance
- SA4- Pension and Other Employee Benefits
- SA5- Finance
- SA6- Investment
A student member is given all study materials by the IA1 along with guidance and support in order to progress in examinations. A mutual recognition agreement is also in place with Institute and Faculty of Actuaries (IFoA), UK and with Institute of Actuaries of Australia subject to satisfying certain norms and conditions. This arrangement makes a candidate obtaining qualification from a profession recognised across many countries in Europe and Asia-pacific regions.
(The author Vindo Kumar Kuttierath is Head (Research), Institute of Actuaries of India,
Source: Emp. New 29/11/2014 Author: Vindo Kumar Kuttierath (E-mail : [email protected])