Actuary important

Dinesh Chandra Khansili tells you how Actuarial Science is one of the fastest growing job strains in today’s market with a clutch of industries needing actuaries to manage their businesses

The roots of Actuarial Science go back all the way to 1613 AD when a book on compound interest was published by Richard Witt. Hence, it can be considered one of the oldest professions in the world. However, awareness about Actuarial Science is limited to high-level financial professionals, not just in India but across the globe.

The importance of Actuarial Science can be judged by the fact that qualified actuaries and actuarial students pursuing Actuarial Science are from other professions too, like CA, MBAs from IIMs, Statisticians from ISIs, Intellectuals from IITs and also from many prestigious engineering colleges and universities. The salaries match the best in the industry.

The career graph of Actuaries has been fairly long and upward moving. Dedication, hard work and intense preparation are needed for around seven years to become a qualified actuary. Any place where risk and uncertainty exists,  actuaries have a big role to play.

However, due to a clustering of financial risks in Life Insurance, General Insurance, Health Insurance, Reinsurers, Pensions and financial investments, actuaries are preferred by insurance, credit risk and wealth management companies. Other areas include banking, stock markets, financial product brokers and valuation of employee benefits. Data science is the new area where actuaries and actuarial students have a natural inclination to excel.

During nationalisation of insurance, the LIC of India was the major employer of actuarial personnel and the prominence and recognition of actuaries were apparent when most of its chairpersons were actuaries. There was a sharp demand and supply gap existed for actuarial personnel once the insurance sector was opened up for private players in 2000. The market offered handsome packages to the good quality actuarial professionals and the trend continues.

Actuarial professionals at national and international levels have an unparalleled advantage in all work areas of insurance companies. The following are the primary ones:

Risk Management, Product Design and Pricing, Managing Policy holders reasonable expectations relating to benefits/ bonus distribution,  policy illustration, managing investments/ asset liability management, actuarial models development, predictive/stochastic modeling, Information Technology, new initiatives, compliance,  advice to other departments like policy servicing/HR (efficiency/employee benefit)/IT, valuation of liabilities, solvency maintenance, mergers and acquisition.

Actuaries & Nation Building

The role of actuaries was felt in India when actuaries touched the lives of Government, public and private sectors' employees and their family members by designing, setting up and managing gratuity schemes under payment of the Gratuity Act of 1972 and superannuation schemes. The actuaries help manage Government initiatives in providing insurance coverage to masses under the Pradhan Mantri Suraksha Bima Yojana, Pradhan Mantri Jan Dhan Yojana and the Aam Admi Bima Yojana for BPL families, universal health insurance schemes for APL families, Jan Arogya Policy, Janata Personal Accident Schemes, students’ safety, Ashraya Bima Yojana, Rural and Agriculture Insurance and Swavalamban.

Actuaries helped by designing and managing plans for small and large scale businessmen to carry on their businesses. The bankers’ indemnity policy helps control the risks of looting and fraud. LPG has reached the doorstep of the poor. The LPG dealers ensure regular supply and so their safety net is of utmost importance. Multi-peril policy for LPG dealers is in place. Meritorious sports winners at Olympics and Asian Games and artists’ schemes provide pension and insurance coverage to its members. 

SEWA is providing insurance and health insurance with help of insurers and actuaries to their members. Similarly social schemes are in place for beedi workers, carpenters, brick kiln workers, fishermen, cobblers, handicraft artisans, rickshaw pullars, bidi patta collectors, handloom and Khadi weavers, leather and tannery workers, woman tailors, physically handicapped self-employed persons, papad makers, rickshaw pullers and auto drivers, primary milk producers, salt growers, safai karmcharies, tendu leaf collectors, seri culture (silk farming), forest workers, power loom workers, toddy tapers and hill area women.

The insurance sector manages these schemes and actuaries’ role is pricing the product to ascertain the funds needed, analyse the experience, keep reserves, monitoring experience of scheme/products, maintaining solvency  and assessing sustainability in longer run and ascertain when Government support is needed.

Future Prospects

The development in artificial intelligence, genetic engineering, super computers, power of analysing huge data and information spread on social media and robotics has raised  questions on professions like medicine, engineering and space science. Actuarial Science is no exception. However, the development in science has helped actuaries to get better information to do their work.

Even today in traditional actuarial areas, there are some jobs done in a limited way. In life insurance, the group insurance is an area where scheme membership ranging from 10k and above, there is no concrete information on attrition rates. There are a number of other studies undertaken in life insurance; similar studies need to be undertaken in general insurance and health insurance areas. The Appointed Actuary system is well established in the life insurance business and the same is need in health and general insurance. In Postal Life Insurance, Agriculture Insurance Company, ESI, ECGC and IMGC type organizations, actuarial departments are yet to be strengthened.

The need of expertise of actuarial professionals has also been felt in organisations which deal in long-term finances. Actuaries can be useful in assessing the risks and quantifying those risks. In banks, for example in managing credit risks, asset liability management and also analysis of the non-performing assets in line of persistency analysis in insurance companies will change the perception of banking if actuaries are involved. There are many such scenarios in the market where actuaries have a big role. The market may utilise actuaries and other actuarial professional services for their financial management.

The insurance sector shall see the risk-based capital regime and there would be need of more actuarial personnel in traditional insurance and pension areas. The Government utilises services of actuaries in planning and annual budget, hence there is no dearth of employment opportunities for actuaries.

Actuarial Education

The ACET (Actuarial Common Entrance Test) is the entry gate to writing an actuarial examination in India. A student who is good in English, Mathematics and Statistics with +2 levels can clear ACET, though the entrance examination is not limited to only science stream students.

Important aspects of risk management and modelling are included in the first nine examinations called Core Technical (CT). Under Core Applications (CA) level, two practical examinations of intense nature test the modelling and communication skills of the student along with an extensive paper on actuarial risk management.

At Specialist Technical (ST) and Specialist Applications (SA) levels, the principles introduced at CT and CA level are applied at high levels. The ST and SA level examinations offer choice to a student on areas he/she can choose for the career, viz., life insurance, general insurance, pensions and other employee benefits, investment and risks. Students are trained in general business management through the actual experience they gain is in the real job world.

The writer is executive director, Institute of Actuaries of India (IAI)