Study of The Role of Actuaries in Insurance

Study of the Role of Actuaries in Insurance
OBJECTIVES OF THE STUDY
1. To understand the concept of Actuarial Science and the role of

Actuaries in Insurance business.
2. To analyze the powers, functions and responsibilities and duties of
actuaries.
3. To study the role of actuaries with reference to life insurance and
general insurance.
4. To examine the current scenario of Actuarial Science in India.
SCOPE OF STUDY
The scope of study of this project extends into both, Life Insurance
and General Insurance and the Role of Actuaries in both these fields.
It also talks about the role of Appointed Actuaries.
It talks about the Portfolio of an Actuary.
The study concentrates majorly on Actuarial Science in India but
also has certain comparisons with the same abroad in certain areas.
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LIMITATIONS
The biggest limitation or drawback that rose during the making of

this project was the limited awareness about the topic.
Not only the general public but also many Insurance related people
are not aware of this subject.
Also, there are only around 250 Actuaries in India and contacting
them was a major difficulty.
The Actuaries refused to fill in any questionnaire as they are not
allowed to fill in any Unregistered Questionnaire.
METHODOLOGY
Primary data-
Primary data was collected by way of interaction with a few
Actuaries. They refused to fill in any questionnaire as they are not
allowed to fill any Unregistered Questionnaire.
Secondary data-
Secondary data was collected through the internet and referring to
Actuarial books.
WHAT IS ACTUARIAL SCIENCE?
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Actuarial science is the discipline that applies mathematical and statistical

methods to assess risk in the insurance and finance industries. Actuaries
are professionals who are qualified in this field through education and
experience. In many countries, actuaries must demonstrate their
competence by passing a series of rigorous professional examinations.
Actuarial science includes a number of interrelating subjects,

including probability, mathematics, statistics, finance, economics, financia
l economics, and computer programming. 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 union
of stochastic actuarial models with modern financial theory. Many
universities have undergraduate and graduate degree programs in actuarial
science.
WHO IS AN ACTUARY?
Actuaries are professionals who apply mathematics to financial problems.

They evaluate the financial implications of contingent events, in other
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words, events that are not certain to occur. They are often involved in
managing the risks that can arise from undesirable contingent events.
Actuaries evaluate the likelihood of future events. They also design ways
to reduce the financial impact of undesirable events that do occur. He is a
technical expert studying mortality of insuring public, evaluating financial
condition of the insurer.
An actuary applies analytical, statistical and mathematical skills to

financial and business problems, especially those which involve uncertain
future events, such as in life insurance, general insurance, risk
management, health care financing, investment, corporate finance,
banking, pensions and social security. This helps individuals and
businesses to safeguard their future, confidently and at a fair price, in an
ever-changing world.
Actuaries are -
acknowledged experts in the analysis and modeling of situations

involving financial risk and contingent events;
concerned with both the asset and liability side of the balance sheet;
able to provide realistic solutions to complex problems with a long
term forward look; and
Practical, innovative and numerate.
To do their work, actuaries must have a high level of technical knowledge.

For example, they need to understand the nature of insurance, the risks
inherent in different types of assets, the ways in which statistical models
can be used, and the legal and regulatory constraints that apply to the
business. Their work often affects many stakeholders, so they must be able
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to balance different interests and observe high ethical standards in doing

so.
Although the actuarial profession has existed for many years, it is not a
large profession and, therefore, is not well known by members of the
general public. In fact, there are many countries in which no actuaries
reside. Actuaries have traditionally worked primarily in the insurance and
pension industries, and mostly in countries where those industries are well
established. In the insurance industry, actuaries can be involved in all types
of insurance: life or nonlife; and direct insurance or reinsurance.
Although actuaries are often employed by insurers, many are employed by

consulting firms and provide services to more than one insurer. Some
insurance actuaries work for supervisory authorities, as either employees
or consultants. Within these organizations, actuaries can fill a wide range
of positions. Many actuaries work in technical roles, applying their skills
to tasks such as designing new insurance products, forecasting expected
rates of loss, setting premium rates, or calculating the liabilities of an
insurer to its policyholders. Others apply their knowledge and experience
in management positions, with responsibilities ranging from technical or
operational departments, to product line management, to senior executive
roles.
In India, Insurance Regulatory Development Authority (IRDA)

Regulations require that there should be an Actuary for every life and non-
life insurance company. An Actuary is a person who has passed a
specialized examination conducted by the Actuarial society of India or the
Institute of Actuaries, London.
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HISTORY OF ACTUARIAL PROFESSION.

The basis for actuarial science dates back to ancient times. The funeral
societies of Rome, wherein each member chipped in regularly to pay for
the funerary services of members when their time was up, were the first
forerunner of life insurance. And naturally, someone had to figure out how
much each member would have to pay to cover the upcoming funerals of
the aged among them. These calculations were rough, but given the small
number of people in such societies -- a few dozen to several hundred -- it
was relatively easy to estimate upcoming deaths and the associated costs.
From the fall of Rome, however, it took mathematics and business theory
more than 1,000 years to catch up to the point wherein they could be
advanced further. Edmund Halley was best known for discovering of the
comet that now bears his name. However, he also helped found modern
actuarial science. In 1693, Halley made a study of the population in the
German town of Breslau. Through careful recording of births, deaths and
the aging population, Halley compiled a "mortality table." That bit of
mathematics, using probability theories developed just a few decades
before, allowed Halley to accurately predict the likelihood of a given
person dying in any given year. That, in essence, is the very foundation of
the life insurance industry. By the ability to predict life expectancy, Halley
was able to determine how much to charge a given person in premiums to
cover burial costs.
A generation later, English mathematician James Dodson created an entire

framework for the creation of a mutual life insurance company, but died in
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1757 -- five years before the Society for Equitable Assurances for Lives
and Survivorship was founded in London.
The term "actuary" was coined in London in 1762 by the Equitable, which
first used scientifically calculated premium rates. The Secretary to the
Board of the Equitable was given the title Actuary, based on the Latin
actuarius, who was the business manager of the Senate in ancient Rome,
and kept the daily verbatim record there. In 1775, William Morgan FRS
was appointed as the Actuary of the Equitable. Since he was himself an
excellent mathematician, he took over the role of premium calculation and
financial manager and became the first actuary in the sense we know it
today.
Thus, the actuarial profession was formally established in 1848 with the
formation of the Institute of actuaries (London). At one point of time it
was the only institute it the world to conduct the professional exam. Over
the years, actuarial associations were established in several other European
countries, in the United States, Australia and Japan. In 1895, the first
International Congress of Actuaries was held in Brussels, and the
International Actuarial Association (IAA) was formed.
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IN INDIA
In India, The Institute of Actuaries of India, is the sole professional body
of actuaries in India, and was formed in September 1944. It was formed by
the conversion of the Actuarial Society of India into a body corporate by
virtue of the Actuaries Act, 2006.
According to the committee of reforms in insurance sector (1994) at the
time of nationalization there were only 67 actuaries in the service of the
Life insurance company but their number eventually came down to eleven.
Entry of private companies has been allowed by the government since
recent past years. Many of these like HDFC Standard, Bajaj Allianz,
Prudential, ICICI, ICICI Lombard, Birla Sun Life, IFFCO TOKIO, MAX
New York, TATA AIG, AVIVA Life, MET Life, SBI Life, OM Kotak
Mahindra, ING Vysya Reliance and Royal Sundaram are very active in the
market due to which the demand of actuaries is sure to gain momentum,
because an Actuary is the heart of the insurance business.
Actuarial Work space
1. Health and Care Insurance

2. Life Insurance
3. General Insurance (non-life)
4. Pensions & Other Employee Benefits
5. Finance
6. Investment
7. Enterprise Risk Management (ERM)
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8. Academics
9. Regulatory
10. Re-insurance
QUALIFICATIONS TO BECOME AN ACTUARY
Some actuarial associations establish qualification standards that must be

met by individuals who wish to become members. The qualification
standards often cover areas such as education, professional knowledge,
experience, and professionalism.
Actuaries require a high level of knowledge of mathematics and statistics.

Most actuaries attain such knowledge through attendance at university.
Some universities offer degrees in actuarial science, although many
actuaries have studied at universities that do not offer such degrees, instead
obtaining degrees in mathematics or related subjects.
The approach to actuarial education varies among jurisdictions. Some

place more emphasis on university studies, while others require more self-
study, with the results tested through examinations developed by the
professional association or, in some cases, a supervisory authority. The
IAA has set out a syllabus of topics in which, at a minimum, competence
must be demonstrated by individuals who seek qualification as actuaries.
In addition to meeting educational requirements and successfully

completing professional examinations, many actuarial associations require
a minimum period of practical experience, under the guidance of an
experienced actuary, before an individual can attain full professional
qualification. Some associations require participation in formal training on
ethics and professionalism, and may require the recommendations of one
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or more members before an individuals application for membership will

be accepted.
Increasingly, actuarial associations require members to undertake

continuing professional development as a condition of maintaining their
membership. Such requirements are designed to ensure that actuaries are
aware of evolving best practices, changes in regulatory requirements, and
relevant business developments.
In many jurisdictions, full membership in a recognized actuarial

association is required to perform certain official tasks, such as
determining the technical provisions of an insurer. In some jurisdictions,
full membership is a necessary but not a sufficient condition to perform
these tasks, with additional specialized qualification requirements being
imposed by either the professional association or a regulator.
Only if a local actuarial association imposes requirements that cover at

least the following topics is it eligible for full membership of the IAA:
Financial mathematics
Probability and mathematical statistics
Economics
Accounting
Modeling
Statistical methods
Actuarial mathematics
Investment and asset analysis

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Actuarial risk management
Professionalism.
Skills required
1. One must have a natural problem solving ability.

2. Be able to see the situation from different vantage points.
3. Develop lateral thinking
4. Practical outlook
5. Problem curiosity and business sense with highly developed inter
personal Communication Skills
6. An Aptitude for Mathematics
7. Deep Knowledge of Statistics and Commerce.
Training institutes in India for Actuarial studies
1. Bishop Herber College, Tiruchrapalli.

2. CMD School of Insurance and Actuarial Science, Uttar Pradesh.
3. Amity School of Insurance and Actuarial Science, Noida.
4. Insurance Institute of India, Mumbai.
5. International Institute for Insurance and Finance, Andhra
Pradesh.
6. Institute for integrated learning in Management, New Delhi.
7. Birla Institute of Management Technology, New Delhi
8. RNIS college of Insurance, New Delhi.
9. Jaipuria institute of Management, Lucknow.
10. Institute of Insurance and Risk Management, Hyderabad.
There are 17 other colleges in India which provide Graduate courses in

Actuarial Science.
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ROLE OF ACTUARY IN INSURANCE
COMPANIES
As mentioned, actuaries are involved in many aspects of the operations of

insurers. To illustrate this fact and focus attention on some of the key areas
of actuarial work, it may be useful to consider a concept known as the
actuarial control cycle.
The actuarial control cycle shows that, within the business environment,
there are many interrelated factors that affect the ability of an insurer to
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generate and maintain sufficient capital to ensure that it can meet its
obligations to policyholders.
The diagram is circular because each element has an effect on the next,
and analysis of the results provides necessary input to future developments
along the entire cycle. The professionalism of the actuaries involved is an
essential ingredient in the successful operation of the cycle.
Risks
Insurers are subject to many types of risk, not only those against which
they insure policyholders, which are called underwriting risks. Other types
are credit, market, liquidity, and operational risks. The objectives of an
insurer are to understand the nature and extent of the risks to which it is
subject and to manage those risks effectively. Actuaries are often involved
in the risk assessment process. They identify the specific risks that can
affect insurers and consider the relevance of those risks to a particular
insurer. They seek to quantify the most relevant risks, and use this
information to assess the potential effect of those risks on the insurers
financial situation.
Actuaries also participate in managing the risks. For example, they may
determine how much risk an insurer can afford to retain on each policy,
design a reinsurance program to deal with excess amounts of risk, and
negotiate the terms of reinsurance contracts with the reinsurers.
In recent years, a growing number of companies in a wide range of
businesses have appointed chief risk officers and adopted an approach
known as enterprise risk management (ERM). In the insurance business,
the chief risk officer is often an actuary.
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Design
Insurers seek to design products that will meet market needs. For example,
individuals might be willing to buy a product that would insure them
against the risk of unemployment, but if the insurance covered situations
where an individual quit voluntarily, it is unlikely that the risk could be
managed by the insurer. Of course, products must also be designed to in a
way that they can be priced appropriately, from the perspectives of both
the insurer and its policyholders.
Actuaries often play important roles in the product design process. They
assist in identifying market needs, for example, through the analysis of
sales patterns, competitors products, and social and demographic trends.
They work with others, such as marketing, underwriting, and investment
experts, on product design teams. Their work can involve assessing the
feasibility of product design features suggested by others, as well as
proposing alternatives for consideration.
Actuaries are also involved in designing compensation schemes for the

intermediaries that will sell the products. The compensation schemes must
be attractive to the intermediaries, affordable, and provide incentives to
promote the sale of high quality business.
Pricing
If an insurer is to be successful in the long term, its products must be

priced adequately to produce profits. At the same time, prices must be
competitive with those offered by other insurers and, for some types of
products, non-insurance alternatives. Prices must be reasonable from the
policyholders perspective, being equitable among various classes of
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policyholders and bearing a reasonable relationship to the benefits

provided by the policy.
There are many factors that must be considered when calculating premium
rates that can be expected to produce profits. The costs of the benefits
provided by the product design must be estimated, including not only basic
claims costs but also the potential costs of any guarantees and options
provided to policyholders. Expenses must be accounted for, including
commissions, underwriting costs, other policy administration costs, and
overhead costs. The prices must reflect the rates of return that the insurer
expects to earn on the investment of premiums, as well as expectations
about the willingness of the policyholders to continue paying premiums
and maintain their policies in force. To the underlying cost factors
mentioned above must be added the need to produce a reasonable profit
margin. In many jurisdictions, insurers are required to maintain capital at
levels that are related to the risks inherent in the policies they have
underwritten. Even in the absence of such requirements, sound business
practice dictates that insurers have adequate capital to support the risks
they have assumed.
Accordingly, the profit margins should be sufficient to provide a return on

capital that is acceptable to the insurers shareholders. Further
complicating matters, in some jurisdictions there are regulatory constraints
on the pricing of insurance products.
Actuaries are often heavily involved in the pricing process, particularly for
long term life insurance products. They develop assumptions for the
various cost factors, taking into account the design of the product, the
insurers past experience with similar products, the experience of other
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insurers, and expectations of future demographic and economic conditions.

Actuaries use models to project future cash flows from the product,
solving for the premium rates that will produce the desired profit margins.
However, rarely does the actuarys job end there. The calculated premium
rates might be uncompetitive, at least for some potential policyholders, or
outside of the constraints set by regulation. In such cases, the actuary may
need to adjust the premium rates, for example, lowering them at some ages
and raising them at others, or modify features of the product design. The
actuary also needs to test the sensitivity of the profit margin to variations
in the cost factors. If profitability is too sensitive to certain factors, the
product design may need to be changed or an additional premium charged
for the risk involved.
Liabilities
Actuaries select appropriate methods for valuing the various types of

obligations. They establish assumptions for the parameters that will affect
the value of the obligations. Economic, demographic, and business
conditions change over time, and information becomes available about the
experience of the business that an insurer has underwritten. Therefore, the
assumptions used in calculating technical provisions often differ from
those used in the pricing process, and may change over time. Actuaries
must ensure that the policy and claims data used in the calculations is as
complete and accurate as possible. They prepare models that incorporate
the methods and assumptions they have selected and apply these models to
the data to calculate the technical provisions.
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Actuaries should also test the sensitivity of technical provisions to changes

in the assumptions, to ensure that the provisions will be adequate even if
future experience differs somewhat from the assumptions. The results of
this testing may show a need to modify the methods or assumptions.
Modern international financial reporting standards actually expect the
actuary to make adjustments to the liability figures when changes in
assumptions appear to be warranted.
Assets
Actuaries may participate in the selection of investment managers who

will be responsible for investing some or all of the insurers assets. They
can help to establish appropriate targets for performance of the investment
managers and evaluate actual performance with reference to those targets.
Some actuaries work in the investment operations of insurers, selecting
investments and managing the mix of investments in the portfolio.
Asset and liability management
Recognizing the importance of having an investment portfolio that is

appropriate to the nature of their obligations, a growing number of insurers
have taken steps to actively manage the relationship between assets and
liabilities on an ongoing basis. The main objective of asset and liability
management (ALM) is to reduce the risk to an insurer that exists if assets
and liabilities are mismatched, for example, if a change in market
conditions might cause an increase in the value of liabilities while also
causing a decrease in the value of assets. On a more positive note, ALM
can help an insurer to invest its assets more effectively and generate higher
profits. Most insurers that practice ALM have established committees to
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oversee this activity. Actuaries participate in the ALM committee together

with investment managers, product line managers, and financial officers.
Actuaries are often responsible for modeling the asset and liability cash
flows, and assessing the effects of various risk factors on the results. They
develop techniques and measurement tools that can be used in the ALM
process to reduce the effects of these risks. For example, a basic approach
to ALM involves measuring the average duration of expected liability cash
flows and investing in a portfolio of assets that has the same average
duration.
Experience analysis
When discussing the previous elements of the actuarial control cycle, the
need for an actuary to make assumptions about factors that will affect the
future profitability of an insurer has been mentioned several times. In
setting the assumptions, it is important to have both information about past
experience with respect to each of the factors and knowledge of changes in
the environment that might result in future experience being different than
that of the past. Analysis of past experience provides information about
what has happened, including trends that might continue into the future.
Experience analysis is useful not only in setting assumptions but also in

assessing how closely actual experience has corresponded with previous
assumptions. Such assessments are essential to the identification of
sources of profits and losses of an insurer. They enable an actuary to revise
the assumptions used in calculating technical provisions to reflect
changing conditions, helping to ensure that the provisions will be
adequate. The information can also used to manage the business more
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effectively, for example, by revising underwriting criteria to improve the

quality of business, targeting marketing efforts to more profitable products
and consumers, and adjusting premium rates to achieve profit objectives.
Actuaries are often responsible for conducting experience analyses. They

develop the methods of analysis, identify and prepare the necessary data,
and perform the analyses. They interpret the results, communicate this
information to appropriate members of management, and propose actions
that might be taken in response to the information.
Profitability
It is essential that insurers have a clear understanding of the sources of

their profits or losses. This information can be used to help identify and
deal with problems as they arise. It also aids in the identification of
business opportunities, for example, products that have been more
profitable than expected and might be more actively promoted. Some
products have pricing elements that can be adjusted, for example, premium
rates, expense charges, or interest crediting rates. Profitability analysis,
along with consideration of likely future conditions and the competitive
environment, enables an insurer to make appropriate adjustments to these
elements. Some products, referred to as participating or with-profits
policies, involve the payment of premiums that are higher than they might
need to be, on the understanding that the profits will be shared with
policyholders through dividends or bonuses. In order to arrive at an
equitable basis for sharing profits with such policyholders, and to help
decide what portion of the profits to distribute to shareholders,
understanding of sources of profitability and trends in profitability is
essential.
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Actuaries are involved in the analysis of profitability in several ways. They

can determine the sources of profits or losses. In some cases, actuaries
calculate the present value of anticipated future profits of the insurer,
referred to as embedded value. Actuaries develop dividend and bonus
scales for participating or with-profits business, and present their
recommendations to the board of directors for approval.
On a broader scale, actuaries are often involved in developing and

implementing business strategies designed to increase the profitability of
an insurer. For example, they participate in identifying other insurers that
might be acquired or with which an insurer might merge. They assist in
determining the value of acquisition candidates. If a line of business is
unprofitable, actuaries can help to assess whether the business should be
run off or sold to another insurer. In such transactions, as well as situations
when an insurer is changing its form of organization from mutual to
shareholder-owned or vice versa, actuaries are often required to assess the
effects of the transaction on policyholders and provide assurance that no
class of policyholders will be disadvantaged because of the transaction.
Solvency
Insurers must remain solvent if they are to meet their obligations to

policyholders, not to mention generating a positive return on the
investment of their owners. Most, if not all, jurisdictions impose
requirements regarding the minimum amount of capital that must be
maintained by an insurer to help ensure its solvency.
In many jurisdictions, capital adequacy requirements are proportional to

the risk inherent in an insurers business. Also, some jurisdictions require
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insurers to perform stress tests, which involve projecting the effects of

adverse scenarios on the future solvency of the insurer. Insurers must
maintain at least enough capital to meet regulatory requirements, or else
face the risk of being forced to cease doing business. However, if an
insurer has too much capital in relation to the size and risk of its business,
it will be very difficult for the insurer to generate a sufficient return on
capital to satisfy its shareholders. Therefore, insurers seek to avoid holding
more capital than they need to cover the risk inherent in existing business,
referred to as economic capital, and to support expected future growth in
their business.
Actuaries are often involved in the assessment of solvency and

management of capital. They can calculate the minimum capital required
for regulatory purposes, both currently and based on projections of future
growth in business. Actuaries use models to perform the stress tests
required by regulators and to determine economic capital. They also
participate in the formulation of strategies to make effective use of an
insurers capital and to raise additional capital, if necessary.
R OLE OF ACTUARIES IN LIFE INSURANCE
It is universally acknowledged that the life insurance business depends

fundamentally on actuarial skills. However, different regulatory traditions
ascribe different levels of professional responsibility to the actuary.
At one end of the regulatory spectrum is the substantive control approach,

whereby products have to be approved by the supervisor, as do the actual
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premium rates to be charged, including, in the case of life insurance,

technical assumptions. In these circumstances the role of the company
actuary is focused mostly on carrying out the calculations in accordance
with the agreed methods and assumptions. Proposals for new policies had
to be developed, but the scope for individual actuarial judgment was
limited, since the key judgments on adequacy and viability were taken by
the regulatory authority. This placed particularly onerous responsibilities
on actuaries within the supervisory body.
Actuaries are experts who are experienced in examining and assessing

insurance functions, stocks and underwriting techniques and offer complex
assistance regarding actuarial matters to policy investigators and other
complex staff. Actuaries work for Insurance coverage, Retirement living
funds, General insurance, Investments, Government and Instructors.
Actuaries are experts in the industry that evaluate the effect of various
forms of possibility, in the past determining the chance of failures and
working to reduce their effect.
An actuary is an enterprise professional who deals with the economical

effect of possibility and concern. Actuaries in the past evaluate the chance
of activities and evaluate the it all depends outcomes in order to reduce
failures, emotional and economical, associated with not sure unwanted
activities. Since many activities, such as death, cannot be prevented, it is
helpful to take measures to reduce their economic effect when they occur.
These risks can affect both sides of the balance sheet, and require asset
administration, obligation administration, and assessment expertise.
Logical expertise, enterprise knowledge and understanding of human
behavior and the vagaries of information techniques are required to design
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and manage programs that control possibility. Actuaries are employed in a

number of insurance areas, including life insurance, property insurance
and control. Actuaries offer expert examination of economic security
techniques, with a focus on their complication.
1. Designing and pricing contracts

2. Monitoring the funds required to provide the benefits promised.
3. Recommending the bonuses to be added to with- profit policies.
Now-a-days, actuaries may also provide expert advice on investment, get

involved in the planning and marketing of products, and advice on
strategic risk measurement- and so be involved in almost any aspect of a
companys activity.
ROLE OF ACTUARY IN GENERAL INSURANCE
General insurance actuaries help provide expertise in three main areas:
Reserving -in reserving they apply statistical techniques to assess

the likely outcome of general insurance liabilities, typically, and the
provisions that are needed for reporting purposes.
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Rating -the pricing actuary assesses the frequency and average

amount of claims to estimate premiums.
Capital modeling -for capital modeling the actuary projects both the
liability and assets of insurers to assess solvency and future capital
needs.
General insurance or non-life insurance policies, including motor

and household policies, provide payments depending on the loss from a
particular financial event. General insurance typically comprises any
insurance that is not determined to be life insurance. It is called property
and casualty insurance in the U.S. or non-life insurance.
General insurance is broadly divided into two areas, personal lines and
commercial lines. Commercial lines products are usually designed for
relatively large legal entities. These would include workers' comp
(employers liability), public liability, product liability, commercial fleet
and other general insurance products sold in a relatively standard fashion
to many organisations. There are many companies that supply
comprehensive commercial insurance packages for a wide range of
different industries, including shops, restaurants and hotels. Personal lines
products are designed to be sold in large quantities. This would include
motor insurance, household insurance, pet insurance, creditor insurance
and others.
THE ROLE OF THE ACTUARY WITH
INSURANCE BROKERS
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For insurance brokerage the primary focus of the actuarys role is assisting
the broker in structuring an insurance program for the client. The broker is
the individual responsible for the solicitation of actuarial work from clients
and initiates the request to prepare an actuarial study for the client.
COMMUNICATION WITH THE BROKER
The communication between the broker and actuary is crucial in the

preliminary stage. The actuary needs to clearly identify how the client or
broker is going to use the study. The availability of a prior study may save
significant time and cost if loss and claim count development triangles
have already been prepared. The actuary needs a clear understanding of
the clients business. The clients stockholders annual statement is a good
source of information. If the client is not a publicly traded corporation,
then any client promotional information can be used. After gathering all
needed information. The actuary should send a confirmation memo to the
broker outlining the project and including the expected cost and
anticipated completion date.
COMMUNICATIONS WITH THE CLIENT
With the large amount of data available, more emphasis can be placed on
the clients data and less on the industry data. Due to the large number of
claims, it is possible for the actuary to do more analysis that reflects the
unique experience of the client. Because of the emphasis on the clients
data, the actuary may have substantial direct contact with the client. An
important use of the actuarial study is the calculation of the appropriate
accruals for the projected period and the required reserves for prior
periods.
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Determining appropriate accruals and required reserves is extremely

important for large accounts. Since there is more emphasis on the accruals
of the client, there is more interaction directly with the client and the
clients financial department. Because of the increased interaction with the
client on large accounts, the actuary can play a major role in solidifying
the account with the broker. In some instances the actuary may have more
contact with the clients financial department than any other individual in
the brokerage firm.
Another function that an actuary may be asked to perform is to present the

findings of the study to the clients auditors. This may be a very important
role for the actuary, because the amount of the required reserve and loss
projection can be material to the client and to the auditors evaluation of
the clients financial balance sheet.
PREPARING A LOSS PROJECTION
The ability of the actuary to analyze the clients data is a critical role. The
process begins with the actuary analyzing the most recent evaluation of
detailed data for the client. The actuary needs to ascertain whether or not
allocated loss adjustment expenses are included and whether the losses are
limited to some amount or unlimited.
The analysis begins by segmenting the most recent evaluation of incurred

losses into ranges. The actuary examines this data to see if the losses fit the
pattern that the actuary would anticipate for this type of client. If the study
has been prepared in the past, then the actuary can compare policy periods
at like periods of development. This is extremely important for analyzing
the most current period and any possible changes in the initial reserving
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philosophy. The actuarys experience can be used to analyze the loss

distribution to determine whether the claim reporting pattern, percentage
of claims, and size and number of open claims seem reasonable. This is
information that can be very important to the client and broker, especially
when a client changes claims adjustment organizations.
The determination of appropriate loss development factors can be very

difficult and uses all the experience of the actuary. For medium sized
accounts, quite often the clients data is not fully credible to project losses
or to calculate required reserves. The actuary must then augment the
clients data with appropriate industry data. Again, the experience of the
actuary becomes very important in determining what industry data to use
and what weight to apply to the industry data. The use of industry data is a
critical issue for medium sized accounts.
THE ACTUARY AS A RESOURCE FOR BROKERS
The actuary has the responsibility in the brokerage firm to keep the
brokers aware of changes in the actuarial environment. The medium to
convey the information can range from a phone call to a seminar. Some
examples are:
Preparing various insurance exhibits applicable to their clients, such

as loss development factors for a municipality.
Providing comment on loss data or analysis from other sources
submitted by the broker
Participating in or leading an internal seminar for the brokers on a
specific topic or insurance issue.
THE ROLE OF APPOINTED ACTUARIES

27
A more comprehensive formal involvement of the actuary in the financial

monitoring and control of the insurance business began to be achieved in
the United Kingdom through the introduction in 1974 of the Appointed
Actuary concept, which was first enacted in the Insurance Companies Act
1973.
An important distinguishing feature of this approach from what had gone

on before was the continuous nature of the appointment. The Appointed
Actuary is not just required to carry out specific tasks, such as the
periodical valuation of liabilities and the determination of surplus, but
must be identified as a named individual at all times.
The legislation requires the Appointed Actuary to carry out an annual

valuation of the liabilities of the long-term insurance business and to
determine the surplus in the long-term business fund available for
distribution. The Appointed Actuary must provide an annual certificate
detailing the amount of the required minimum solvency margin and
certifying that the amount published as reserves in respect of the liabilities
of the long-term business constitutes proper provision for those liabilities.
The Appointed Actuary must also certify each year that the data are
adequate to support the valuation and that the premiums charged have
been adequate in relation to the corresponding liabilities being taken on,
having regard to the overall financial position of the company.
The Appointed Actuary must be satisfied at all times that, if he or she were
to carry out a full actuarial valuation, the financial position would be
satisfactory. The formal published valuation takes place only annually, is
28
submitted to the supervisor six months after the date to which it relates,
and may not be analysed in detail until some weeks (or even months) after
that. The Appointed Actuary, on the other hand, is deemed to be in such a
key position within the company that he or she should have a good idea of
what the position is at any particular moment, and not just at year-ends. In
order to be satisfied on this, the Appointed Actuary has to monitor in detail
all aspects which could impinge upon the companys financial position, in
particular:
product design
methods of marketing
volumes of business
premium rates
options and guarantees
surrender values and paid-up values
investments held and changes in investment policy
derivative exposures
current and likely future level of expenses
current and likely future tax basis
reinsurance arrangements
claims handling policy
any contingent liabilities.
The Appointed Actuary needs to be able to model the financial behaviour

of the company between valuations, so as to be able to estimate the effects
of these various factors on the overall financial condition and, in particular,
on the companys ability to meet (and continue to meet) the minimum
solvency margin requirement.
The Appointed Actuary is clearly expected to act as a front-line controller

of prudential financial management, lessening the need for close
regulatory attention, which could never in practise give the same degree of
29
continuous monitoring as is required to be undertaken by the Appointed

Actuary. The link to the insurance supervisor is effected through the
professional duty to blow the whistle if the Board or the management of
the company persists in pursuing a strategy which the Appointed Actuary
believes may have a serious adverse financial impact on the company, in
spite of attempts to persuade them otherwise.
It is also recommended, that the Appointed Actuary should report regularly

to the Board of Directors on the possible future financial condition of the
company. This requires work to be carried out on a dynamic financial
analysis of the company, investigating the possible impact on the future
financial condition of a variety of plausible adverse scenarios. The idea is
to help the Board to understand the risks to which the company is most
vulnerable, and to formulate strategies for managing and controlling those
risks.
POWERS OF APPOINTED ACTUARY:
30
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 of this regulation from any officer or employee of the
insurer.
3. The appointed actuary shall be entitled, --
to attend all meetings of the management including the
directors of the insurer;
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;
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.
31
DUTIES AND OBLIGATIONS OF
ACTUARIES
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 Actuary of an insurer shall
include:--
1. 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;
2. ensuring the solvency of the insurer at all times;
3. complying with the provisions of the Act in regard to certification
of the assets and liabilities that have been valued in the manner
required under the said section;
4. 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;
5. complying with the Authority's directions from time to time;
6. 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;
32
(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;
7. 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;
(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
33
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;
8. complying with the provisions of the Act in regard to maintenance

of required solvency margin in the manner required under the said
section;
9. 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.
34
ACTUARIAL SOCIETY OF INDIA
Institute of Actuaries of India.
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
35
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.
Objectives
1. Advancement of the Actuarial profession in India.
2. Facilitating research, arranging lectures on relevant subjects

reading papers etc.
3. Providing facilities and guidance for those studying for Actuarial

Examination.
4. To promote, uphold and develop the standards of professional

education, training, knowledge, practice and conduct amongst
Actuaries;
36
5. To regulate the practice by the Members of the profession of

Actuary;
6. To promote, in the public interest, knowledge and research in all the

matters relevant to Actuarial Science and its application; and
7. To do all such things as may be incidental or conducive to the above

objects or any of them. Charitable Trust Act, 1950. In 1989, the ASI
started examinations up to Associate level, and in 1991,
8. 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;
9. 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;
10.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;
37
11.To promote or to conduct work or research of interest to Actuarial

Science or to the practice of the Actuary;
12.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;
13.To provide educational services and other facilities to those studying

for actuarial examinations;
14.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;
15.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;
16.To confer honorary awards and other distinctions;
17.To institute and award scholarships, prizes, medals and certificates;
18.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;
19.To maintain contact and co-operate with other institutions in any

part of the world having objects wholly or partly similar to those of
38
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;
20.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;
21.To consider the actuarial aspects of legislation, existing and

proposed, and to take such action as is considered desirable;
22.To arrange for the compilation and publication of statistical data and
of actuarial tables based thereon;
23.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
24.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.
CURRENT SCENARIO IN INDIA
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
39
20-60 age group, Industry feels there is 20-25% shortfall. " 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."
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. ASI fellowships can be completed in 5-6 years' time.
Actuarial studies can be pursued alongside a full-time job. With about 6
years of experience, a fellowship and work at a senior position, you can
earn Rs 50 lakh a year. To year 2012
Actuarial Workspace
Insurance companies: Life (24), Non-life including Health (24).

Reinsurance companies: SwissRe, MunichRe, RGA,
HannoverRe, GenRe.
Consulting: MNCs such as Tower Watson, Mercer, Milliman and
some Indian Consulting firms.
Work domain: Pensions, Life Insurance, P&C, Solvency II
Organizations: Deloitte, WNS, Genpact, AonHewitt, Towers
Watson, Swiss Re, E&Y and others.
PREDICTING THE FUTURE ROLE OF

ACTUARIES
Several shifts are underway that will result in significant changes in the
way that insurance companies use actuarial resources. An increase in
qualified actuarial resources and a need to move company actuaries into
more strategic activities will offer opportunities that have previously been
40
unavailable. The exact timing and pace of this change is uncertain, but the
economics are so compelling that the time would soon arrive.
First, over 10,000 people in India are currently sitting for the actuarial
exams. As the result of the growth in the knowledge worker outsourcing
industry, and the privatization of the Indian insurance industry, actuarial
studies are now much more attractive to qualified students. Scarcity will
be reduced as a result of this increasing supply of expertise.
Second, companies increasingly need to apply their internal actuarial talent

to more strategic activities such as sophisticated price modeling and risk
management. Predictive modeling and multi-tier pricing require constant
attention and monitoring. Existing regulation in Europe regarding
Solvency consumes increasing amounts of resource. Both of these
activities are best performed in-house.
Leading companies will recognize that the traditional insurance product

pricing process can be separated into separate activities, some of which
can be outsourced. For example, the development of loss triangles and the
updating of price indications are examples of discrete, measurable work
that can be effectively performed remotely. Once these tasks are complete,
internal actuaries can then review them and make final, proprietary pricing
decisions. Moving the tactical work offshore lowers costs, and frees
company resources to focus on higher value activities.
There are barriers to this transition. Tradition and inertia will slow
adoption. It may take seven to 10 years, but the cost advantages and a need
to redirect company talent will eventually result in a shift the norm to a
multi-source, onshore/offshore actuarial model.
41
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."
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 , which is likely to raise the number of life insurance
companies. The number of general insurance companies is also expected
to increase. The health insurance sector is also expected to get a big dose
of growth. 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.
COMPARISONS ABROAD
Canada
Canada has adopted many of the features of the original U.K. Appointed
Actuary model, but has adapted the system to a different regulatory and
42
legal environment and has expanded the role to general insurance

companies. Both life and general insurance companies are required to
appoint an actuary, and there is a high degree of involvement by the
Canadian Institute of Actuaries (CIA), of which the Appointed Actuary
must be a member in good standing. The Appointed Actuary is responsible
for the calculation of the risk-based capital requirement (Minimum
Continuing Capital and Surplus Requirement, or MCCSR), and is also
required to report to the Board of Directors regularly on the results of
dynamic capital adequacy testing (DCAT), along similar lines to the
dynamic financial analysis referred to above in the context of the U.K.
United States
The United States has not yet introduced a full appointed actuary system.
On the life side the role has changed in recent years from evaluating the
liabilities in accordance with regulatory norms to providing an opinion as
to whether the assets are adequate to cover the liabilities. Cash -flow
testing, using prescribed investment scenarios, is required to be carried out
on a quarterly basis to ensure that, on a realistic basis, assets equal to the
statutory liabilities are sufficient to enable policy benefits to be paid out.
The actuarial profession has played a significant role in the development
of risk-based capital requirements, which have been adopted in all U.S.
jurisdictions. A number of states have also introduced the concept of an
illustrations actuary to ensure that excessive benefits are not projected at
the point of sale.
European Union
43
Significant changes have been taking place in insurance regulation in some

continental European countries, following the move to the concept of a
single license to operate throughout the European Union (EU). The
framework directives that completed this process now prevent EU
supervisory authorities from exercising prior control on products or
premium rates. This has forced a switch from material to normative
controls and has greatly increased the responsibilities placed on actuaries
in some countries.
Germany
In Germany new insurance legislation requires each life insurance

company to appoint a responsible actuary (Verantwortlicher Aktuar), who
has to take professional responsibility for ensuring the adequacy of
premium rates and for ensuring that the principles of rating and reserving
which are included in the law are observed. The responsible actuary is
responsible for reporting to the board of directors on proposals for bonus
distribution to policyholders and has a whistle-blowing role similar to that
of the U.K. Appointed Actuary.
Italy
Italy has for some years had a requirement for an actuarial opinion on the
technical provisions of a general insurance company. This opinion has to
be provided to the auditor of the general insurance company, as part of the
process of establishing whether the accounts show a true and fair view of
the financial situation of the company. After several years of debate, it now
seems that an Appointed Actuary role will soon be introduced in respect of
the life insurance business.
44
Belgium and the Netherlands
Belgium has introduced its own version of the appointed actuary system,
for both life and general insurance companies. The Netherlands has a
longer tradition of actuarial professional responsibilities in the area of
designing and pricing products for life insurance and in respect of non-life
reserving. The Dutch actuarial profession (Het Actuarieel Genootschap)
also has more experience than most Continental European actuarial
associations of developing postgraduate education programs.
Japan
Japan had a tradition more closely akin to that of Germany, but has now
introduced a form of appointed actuary system (Hoken-Keirinin) as part of
the deregulatory modifications to the insurance law. The Institute of
Actuaries of Japan has issued a standard of practise which was strongly
influenced by the U.K. standard.
France
An important exception to the general trend towards giving company

actuaries greater professional responsibility may be observed in France,
where a rather different tradition has grown up. Although France moved
away from a detailed prior-approval system of regulation several years
before Germany, it has not considered it appropriate to give a specific role
to the insurance company actuary within the insurance law, other than a
modest responsibility for approving the use of mortality tables.
Responsibility for proper pricing of products, establishing prudent
technical provisions and exercising sound and prudent overall financial
45
management rests with the companys Chief Executive and the Board of
Directors.
Switzerland
Switzerland has adopted the same terminology as Germany in the German-

language version of the new insurance law. The responsible actuary role in
Switzerland is to be introduced for general insurance companies as well as
life insurers. Reinsurers will also be required to comply and, if they are
composite reinsurers, to appoint both a responsible life actuary and a
responsible non-life actuary. The actuary will be responsible for the
integrity of the data needed for pricing and for valuation purposes, as well
as for calculating adequate premium rates, prudent provisions and
assessing the solvency margin requirement. He or she will also be required
to monitor all developments that could affect the financial position.
Other Countries
Outside Europe and North America, Australia and South Africa both have
a long-established professional role for the actuary in environments where
supervision has always concentrated on reserve adequacy and financial
strength.
Hong Kong, Singapore and Malaysia have appointed actuary systems and
place considerable professional responsibility on the actuary.
Other countries in East Asia do not have a strong professional role for the
actuary and rely on more prescriptive regulation. This is also the case in
most Latin American countries and, to an extent, in the countries in
transition in Central and Eastern Europe. In most of the latter countries the
46
actuarial profession has recently undergone a rebirth and actuarial

associations are still at an early stage of development.
Statistics, Data Analysis and Interpretation

I.) Membership figures as on 31st March 2012:
Designation Number of Members
Fellow 246
Affiliate 21
Associate 134
Students 7864
Total 8265
Fellow- A member of the Institute of Actuaries of India, on application, is

admitted as a Fellow member subject to passing exams and relevant work
experience. He has to pass all the exams of the IAI.
Affiliate- A Fellow Member, or is a holder of membership considered

equivalent to the Fellow Membership of the IAI, of any other institution, is
admitted as an Affiliate Member
Associates- Students members who have passed all the subjects of CT

series and all CA subjects are eligible, on application, to become Associate
Member of the Institute
47
Student- Before a candidate start with any examinations, he must be

admitted as a student member of the Institute of Actuaries of India.
II.) Age wise bifurcation of actuaries
Age Fellow Associate Affiliate Student Total

<20 0 0 0 91 91
20-25 0 1 0 3110 3111
26-30 19 17 2 2229 2267
31-35 24 16 5 981 1026
36-40 33 16 3 585 637
41-45 45 47 5 593 690
46-50 28 10 1 185 224
51-55 11 6 1 59 77
56-60 10 6 3 15 34
61-65 12 12 1 9 34
66-70 7 0 0 3 10
71-80 36 2 0 4 42
81-90 19 1 0 0 20
91< 2 0 0 0 2
Total 246 134 21 7864 8265
III.) Actuarial Membership
48
Actuarial Membership
Institute of Actuaries (UK) Institute of Actuaries of India
10%
10%
5%
Institute of Actuaries
5% (Australia) Society of Actuaries (USA)
70%
Others
IV.) Whether in a specific Actuarial role?
38%
62%
yes no
V.) Practice area, if in a specific Actuarial role.
49
8%
9%
7%
49%
Life General15%Pension Investment Risk Management Others

12%
VI.) If not, what type of work?
18%
5%
3%
56%
9%
IT Engineering Underwriting Marketing Customer service Others
9%
50
VII.) Work experience
Work Experience
14% 0
2%
7% 1 to 3
4 to 5
14% 63% 6 to 8
9+
VIII.) Efficiency of the Actuarial Society of India
Efficiency of the ASI
7%
13%
33%
1 2 3 4 5
20%
27%
51
IX.) Reporting to the Government
Reporting to the government
42%
yes
58% no
X.) Reporting to Professional Bodies and Society
52
Reporting to Professional Bodies
4%
yes no
96%
CONCLUSION
53
This project has attempted to describe some of the many roles an actuary
plays in an insurance firm. I believe and as shown in this project that an
actuary plays an important role in the insurance sector and that his work is
indispensable. As the market hardens the importance of the role of the
actuary will increase.
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, 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
54
to be charged by the insurer, has to be certified by the actuary before they

are submitted for the approval of the IRDA.
Annexures
Questionnaire
NAME OF THE ACTUARY:

NAME OF INSURANCE COMPANY:
Q Designation with respect to the Actuarial Society:-

a) Student b) Fellow
c) Affiliate d) Associate
Q Present Age :-
a) <25 b) 26- 35 c) 36-45 d) >45
Q Actuarial Membership with which of the following Societies?
a) Institute of Actuaries, UK
b) Indian Actuaries Society
c) Institute of Actuaries, Australia
d) Society of Actuaries, USA
e) Any other. Please Specify-
Ans:
Q Are you in any specific Actuarial role?
a) YES b) NO
Q If yes, which practice area do you perform in?
a) Life Insurance b) General Insurance
c) Health Insurance d) Re-Insurance
e) Risk Management f) Investment
g) Pension/ Retirement Benefit h) Other. Please Specify
Ans:
Q If not, what type of work do you do? Specify.
Ans:
Q Work Experience (with respect to Actuarial):-
a) 0 b) 1-3 years
c) 4-5 years d) 6-9 years
e) 10-15 years f) 16 +
55
Q Rate on a scale of 1-5 the level of efficiency of the Actuarial

Society of India (5 being the highest).
Ans:
Q Who/ What body may receive a copy of the Actuarial Report?
a) Board of Directors/ Shareholders
b) Supervisory Authority
c) Companys Management
d) Other
Ans:
Q Which statements regarding statutory reserving are signed by the
Appointed Actuary?
a) Actuarial Report c) Balance Sheet
b) Report on Solvency d)Annual report
Q Does the Appointed Actuary in any way directly or indirectly
report to the Government?
a) YES b) NO
Q Does the Appointed actuary report in any way to the professional
bodies?
a) YES b) NO
Q Are you satisfied with the current status of the Actuarial profession
in India?
a) YES b) NO
Ans: (Comments, if any)
BIBLIOGRAPHY
www.actuaries.org.uk
www.actuariesindia.org
www.beanactuary.org
www.actuarialpost.co.uk
www.worldbank.org
www.insurancenetworking.com
www.actuarialsociety.org
www.casact.org
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Study of The Role of Actuaries in Insurance

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Study of The Role of Actuaries in Insurance

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Study of the Role of Actuaries in Insurance

OBJECTIVES OF THE STUDY

1. To understand the concept of Actuarial Science and the role of

The biggest limitation or drawback that rose during the making of

WHAT IS ACTUARIAL SCIENCE?

Actuarial science is the discipline that applies mathematical and statistical

Actuarial science includes a number of interrelating subjects,

Actuaries are professionals who apply mathematics to financial problems.

An actuary applies analytical, statistical and mathematical skills to

acknowledged experts in the analysis and modeling of situations

To do their work, actuaries must have a high level of technical knowledge.

to balance different interests and observe high ethical standards in doing

Although actuaries are often employed by insurers, many are employed by

In India, Insurance Regulatory Development Authority (IRDA)

HISTORY OF ACTUARIAL PROFESSION.

A generation later, English mathematician James Dodson created an entire

Actuarial Work space

1. Health and Care Insurance

QUALIFICATIONS TO BECOME AN ACTUARY

Some actuarial associations establish qualification standards that must be

Actuaries require a high level of knowledge of mathematics and statistics.

The approach to actuarial education varies among jurisdictions. Some

In addition to meeting educational requirements and successfully

or more members before an individuals application for membership will

Increasingly, actuarial associations require members to undertake

In many jurisdictions, full membership in a recognized actuarial

Only if a local actuarial association imposes requirements that cover at

Probability and mathematical statistics

Investment and asset analysis

Actuarial risk management

1. One must have a natural problem solving ability.

Training institutes in India for Actuarial studies

1. Bishop Herber College, Tiruchrapalli.

There are 17 other colleges in India which provide Graduate courses in

ROLE OF ACTUARY IN INSURANCE

As mentioned, actuaries are involved in many aspects of the operations of

Actuaries are also involved in designing compensation schemes for the

If an insurer is to be successful in the long term, its products must be

policyholders and bearing a reasonable relationship to the benefits

Accordingly, the profit margins should be sufficient to provide a return on

insurers, and expectations of future demographic and economic conditions.

Actuaries select appropriate methods for valuing the various types of

Actuaries should also test the sensitivity of technical provisions to changes

Actuaries may participate in the selection of investment managers who

Asset and liability management

Recognizing the importance of having an investment portfolio that is

oversee this activity. Actuaries participate in the ALM committee together

Experience analysis is useful not only in setting assumptions but also in

effectively, for example, by revising underwriting criteria to improve the

Actuaries are often responsible for conducting experience analyses. They

It is essential that insurers have a clear understanding of the sources of

Actuaries are involved in the analysis of profitability in several ways. They

On a broader scale, actuaries are often involved in developing and

Insurers must remain solvent if they are to meet their obligations to

In many jurisdictions, capital adequacy requirements are proportional to

insurers to perform stress tests, which involve projecting the effects of

Actuaries are often involved in the assessment of solvency and

R OLE OF ACTUARIES IN LIFE INSURANCE

It is universally acknowledged that the life insurance business depends

At one end of the regulatory spectrum is the substantive control approach,

premium rates to be charged, including, in the case of life insurance,

Actuaries are experts who are experienced in examining and assessing

An actuary is an enterprise professional who deals with the economical