Year 2001. Giri Biresh Kumar was a final year MStat student in the Indian Statistical Institute (ISI), Kolkata. The insurance sector, by then, had opened its doors to private players, and was considered to be a potential employer. One of Kumar’s professors at ISI pointed this out to him. As Kumar had a strong stats/math background he decided to be an actuary — people who make up the backbone of the insurance business. After completing his studies Kumar joined the Institute of Actuaries of India (IAI) as a student member and became a fellow in five-and-a-half years. Today, he works with actuarial consulting firm Milliman India, earning a little over Rs 40 lakh per annum.
“Actuarial science involves application of mathematical and statistical methods to assess risk in the insurance and finance industries. It includes a number of interrelated subjects, including probability and statistics, finance, and economics,” says Asha Joshi, appointed actuary, Bajaj Allianz General Insurance.
“Actuaries are professionals who are qualified in this field. They provide commercial, financial and prudential advice especially where long-term management and planning are critical factors.”
Traditionally, actuaries work in the fields of finance, investment and risk management, general insurance, life insurance, pension and social security. BPOs and management consultancy firms also employ actuaries.
The scope of work of an actuary is varied and interesting. He or she designs products (the benefits to be paid) for life or general insurance or pension plans; calculates the premium to be charged from policyholders for a product and what reserves a company should set aside for policies it has already sold; decides on investment strategies; analyses the performance of the company in various areas and fixes the bonus to be paid to policyholders. “Actuaries play a pivotal role in the conduct of the insurance business, ranging from product development, product pricing, underwriting, and claims reserving to asset liability management,” says Dr YP Sabharwal, a consulting actuary and the appointed actuary of the Oriental Insurance Company Limited. They can also consider getting into academics.
With the number of players in the insurance field increasing by the day, there is a growing need for qualified actuaries in the country. “There are adequate numbers of actuaries in life insurance and pension (funds), but more are required in general insurance. An appointed actuary could actually work there as a consultant instead of a full-time employee,” advises Sabharwal.
Subhendu Bhattacharyya, an actuarial assistant with the Life Insurance Corporation of India, feels the shortage of actuaries is “acute”, the reason being the “poor rate of success in the final stages of the exam (conducted by IAI), not to mention the sudden spurt in demand from the private insurers who have set up shop in the country.”
Agrees Kumar. “The membership of IAI has increased significantly over the last seven or eight years, but there are just a few hundred fully-qualified actuaries (those who have passed all the exams and attained fellowship from IAI). With more than 40 companies operating in India and many actuarial BPOs being set up, the number of qualified actuaries is still less than what is required.” The result is, as of date, actuary is a career that offers 100 per cent employment. You will not find a single unemployed qualified actuary in the country.
What's it about?
An actuary is an expert who applies statistical and mathematical methods to assess financial and other risks relating to various contingent events and for scientific valuation of financial products in the field of insurance, retirement and other benefits, investments, etc. The actuary designs insurance and pension plans, determines insurance premium rates and contract provisions for each type of policy offered, compiles data related to rates of mortality, sickness, injury, retirement and property loss from theft, accident, fire or any other hazard. On the basis of data thus collected, s/he analyses claims (insurance) from corporation or company. S/he also creates new and attractive policies to further the organisation’s business.
9.30 am: Reach office
10 am: Check mails
11 am: Assign work to team members
11.30 am: Analyse risks related to insurance – pricing, reserving, investment, etc
1 pm: Quick lunch
2 pm onwards: Continue doing risk analysis
3 pm: Meet clients
4.30 pm: Review meeting with junior colleague
5 pm: Write reports
6.30 pm: Call it a day
At entry level one’s income could be Rs 3 lakh to Rs 5 lakh per annum. After gaining experience of five to six years and clearing a good number of the possible 15 papers, an actuary can earn Rs 10 lakh to Rs 15 lakh per annum. Immediately after becoming a fellow of IAI one can earn anything from Rs 20 lakh to Rs 30 lakh per annum. The sky is the limit for an actuary with 15 to 20 years of experience
. In-depth knowledge of statistics and commerce
. A good head for mathematics
. Natural problem-solving
. Good analytical skills and ability to assess a situation from various angles
. Lateral thinking ability
. A good sense of business with highly developed
. Practical outlook
How do i get there?
A fellow member of the Institute of Actuaries of India (IAI) can sign up as an actuary. One begins by joining IAI as a student member and is required to clear 15 subjects in an exam conducted by the institute. A person can be considered for admission as student member if s/he fulfills certain conditions, some of which include:
a) Passing 10 + 2 or equivalent with at least 85 per cent marks in mathematics/ statistics and is recommended by two fellow members of the society.
The medium of instruction at the plus-two level should have been English
b) A graduate or postgraduate with subjects like mathematics, statistics, economics, computer science, engineering, MBA (finance)
c) Should be a fully qualified member of professional bodies such as the Institute of Chartered Accountants of India, The Institute of Cost and Works
Accountants of India and Certified Institute of Financial Analysts of India, etc
Institutes & urls
. Bishop Heber College, Tiruchirappalli
. CMD School of Insurance & Actuarial Sciences, Uttar Pradesh
. Amity School of Insurance and Actuarial Science, Noida
. Insurance Institute of India, Mumbai
. Birla Institute of Management Technology, New Delhi
. RNIS College of Insurance, New Delhi
Pros & Cons
. Very lucrative career
. Assignments do not entail high stress-levels
. Requires concentrated and dedicated self-study
. Not much awareness of this profession. A few people understand its value
. The road to becoming a fellow is difficult as the course is a long drawn one and very specialised
A senior official talks about the challenges an actuary faces
What are the challenges facing the profession?
With the market opening up to competition, product innovation, aggressive pricing, handling multiple distribution options, etc, have been the basic changes the industry has witnessed. These have thrown open loads of challenges (I will call them opportunities) for actuaries. While taking on more and more risks, it is also important for the actuaries to make sure adequate risk mitigation measures are in place. As the scope of actuarial work has expanded tremendously, it has become all the more important to keep oneself upgraded on the latest calculating techniques and tools.
Who are the leading employers for actuaries in India?
All life insurers, reinsurers, actuarial consulting firms and general insurers are the leading employers. There are a few KPO/ BPOs, which are providing actuarial services to their clients abroad; they also recruit actuarial talent.
Padmaja R, vice president, actuarian, Bajaj Allianz Life Insurance Company Interviewed by Pranab Ghosh