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.

1
 Study of the Role of Actuaries in Insurance

WHAT IS ACTUARIAL SCIENCE?

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, financial
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.

2
 Study of the Role of Actuaries in Insurance

WHO IS AN ACTUARY?

Actuaries are professionals who apply mathematics to financial problems. They

evaluate the financial implications of contingent events, in other 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

3
 Study of the Role of Actuaries in Insurance

the legal and regulatory constraints that apply to the business. Their work often
affects many stakeholders, so they must be able 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.

4
 Study of the Role of Actuaries in Insurance

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 1757
-- five years before the Society for Equitable Assurances for Lives and
Survivorship was founded in London.
5
 Study of the Role of Actuaries in Insurance

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.

6
 Study of the Role of Actuaries in Insurance

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)
8. Academics
9. Regulatory
10. Re-insurance
7
 Study of the Role of Actuaries in 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 or more members before an individual‟s
application for membership will be accepted.

8
 Study of the Role of Actuaries in Insurance

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

• Actuarial risk management

• Professionalism.

9
 Study of the Role of Actuaries in Insurance

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.

10
 Study of the Role of Actuaries in Insurance

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 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.
11
 Study of the Role of Actuaries in Insurance

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 insurer‟s 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.

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

12
 Study of the Role of Actuaries in Insurance

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 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,

13
 Study of the Role of Actuaries in Insurance

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 insurer‟s 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 insurer‟s past
experience with similar products, the experience of other 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 actuary‟s 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
14
 Study of the Role of Actuaries in Insurance

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.

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 insurer‟s assets. They can help to
establish appropriate targets for performance of the investment managers and

15
 Study of the Role of Actuaries in Insurance

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 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

16
 Study of the Role of Actuaries in Insurance

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 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

17
 Study of the Role of Actuaries in Insurance

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.

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,

18
 Study of the Role of Actuaries in Insurance

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 insurer‟s business. Also, some jurisdictions require 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
19
 Study of the Role of Actuaries in Insurance

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 insurer‟s capital and to raise additional capital, if
necessary.

ROLE 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
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

20
 Study of the Role of Actuaries in Insurance

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 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 company‟s activity.

21
 Study of the Role of Actuaries in Insurance

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.

 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

22
 Study of the Role of Actuaries in Insurance

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

For insurance brokerage the primary focus of the actuary‟s 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 client‟s business. The client‟s
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.
23
 Study of the Role of Actuaries in Insurance

COMMUNICATIONS WITH THE CLIENT

With the large amount of data available, more emphasis can be placed on the
client„s 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 client‟s 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.

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 client‟s 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 client‟s
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 client‟s 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 auditor‟s evaluation of the client‟s
financial balance sheet.

PREPARING A LOSS PROJECTION

The ability of the actuary to analyze the client‟s 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

24
 Study of the Role of Actuaries in Insurance

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 philosophy. The actuary‟s
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 client‟s data is not fully credible to project losses or to calculate
required reserves. The actuary must then augment the client‟s 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:

25
 Study of the Role of Actuaries in Insurance

 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

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

26
 Study of the Role of Actuaries in Insurance

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 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
company‟s 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
27
 Study of the Role of Actuaries in Insurance

 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
company‟s 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 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.

28
 Study of the Role of Actuaries in Insurance

POWERS OF APPOINTED ACTUARY:

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

29
 Study of the Role of Actuaries in Insurance

II. any other meeting of members of the insurer at which the

insurer's annual accounts or financial statements are to be
considered or at which any matter in connection with the
appointed actuary's duties is discussed.

DUTIES AND OBLIGATIONS 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;

30
 Study of the Role of Actuaries in Insurance

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;
(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;

31
 Study of the Role of Actuaries in Insurance

(viii) to ensure that the policyholders' reasonable expectations have been

considered in the matter of valuation of liabilities and distribution
of surplus to the participating policyholders who are entitled for a
share of surplus;
(ix) to submit the actuarial advice in the interests of the insurance
industry and the policyholders;

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.

32
 Study of the Role of Actuaries in Insurance

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 conducting examinations for its

33
 Study of the Role of Actuaries in Insurance

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 subject‟s 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;

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

34
 Study of the Role of Actuaries in Insurance

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;

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;
35
 Study of the Role of Actuaries in Insurance

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 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;

36
 Study of the Role of Actuaries in Insurance

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 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.

Actuarial Workspace
37
 Study of the Role of Actuaries in Insurance

 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 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

38
 Study of the Role of Actuaries in Insurance

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.

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

39
 Study of the Role of Actuaries in Insurance

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 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

40
 Study of the Role of Actuaries in Insurance

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

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

41
 Study of the Role of Actuaries in Insurance

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.

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.

42
 Study of the Role of Actuaries in Insurance

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 management rests with the company‟s 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
43
 Study of the Role of Actuaries in Insurance

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 actuarial profession has
recently undergone a rebirth and actuarial associations are still at an early stage
of development.

CONCLUSION

44
 Study of the Role of Actuaries in Insurance

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 to be charged by the insurer, has to be certified
by the actuary before they are submitted for the approval of the IRDA.

45
 Study of the Role of Actuaries in Insurance

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

46