The operation of insurance companies is largely based on the degree of risk they undertake and the returns that they generate from it. Which is why, they require employing advanced analytical and statistical skills to gauge risks and returns associated with each proposal they receive. Here is where an insurance actuary comes into the picture.

What is an Actuary?

An actuary is a professional who specialises in the field of analysing financial risks by implementing statistical, financial and mathematical theories. In insurance, actuaries aid in assessing risks which help companies in the estimation of premiums for their policies.    

Role of an Actuary in an Insurance Company

It is ideal for insurance companies to create policies that bear minimal risk and can generate stable returns. Estimating risk and return from each proposal also in turn aids in assuring policyholders that their claims will be settled.

With regards to insurance, actuarial practices involve analysing factors related to a customer’s life expectancy, construction of mortality tables that help one to have a measurement of predictability and offering insight to brokers.

Actuarial science mostly finds its application in the life insurance mortality analysis. However, they can also be applied in case of other general insurance fields like property and liability insurance.

Sometimes recommendations for the determination of premium for insurance policies made by actuaries can also have a positive impact on the behaviour of policyholders. For instance, premium payable by non-smokers for life insurance policies is often significantly lesser than that for smokers. This might push individuals to quit smoking to avail their life insurance policies at a lower premium.

Who can be Appointed as Actuaries for Insurance Companies?

As per the Appointed Actuary regulations put forth by the Insurance Regulatory and Development Authority of India, any insurer or insurance company should mandatorily appoint an actuary to manage financial risks and uncertainty of the insurance business.

To be appointed as an actuary with any insurance company, an individual has to fulfil the following criteria, as put forth under regulations:

• He/she should be a resident of India.
• Should be a fellow member as per the Actuaries Act, 2006.

In the case of life insurance:

• He/she should have passed a specialisation subject related to life insurance. Currently, specialisation refers to a Specialist Application subject as put forth by the Institute of Actuaries in India.
• A prospective candidate should have at least 3 years of post-fellowship experience pertaining to the annual statutory value of life insurers.
• A minimum of 10 years’ experience in the life insurance industry, out of which, at least 5 years should be that of the post-fellowship experience.

In the case of general insurance:

• He/she should have passed a specialisation subject related to general insurance. As per the Institute of Actuaries in India, currently, specialisation refers to a Specialist Application subject.
• He/she should have at least 1 year of post-fellowship experience pertaining to the annual statutory value of a general insurer.
• A minimum of 7 years’ experience in the general insurance industry, out of which, at least 2 years should be that of the post-fellowship experience.

In the case of health insurance:

• He/she should have passed a specialisation subject related to health or general insurance. Similar to the above two categories, as per the Institute of Actuaries of India, currently, specialisation refers to the Specialist Application subject.
• He/she should have at least 1 year of post-fellowship experience pertaining to the annual statutory value of a health or general insurer.
• A minimum of 7 years of experience in the general or health insurance industry, out of which, there must be at least 2 years of post-fellowship experience.

Apart from these, an individual can be eligible for the position of Appointed Actuary with any insurance company if they comply with the following criteria:

• Should be an employee of an insurance company.
• Is not already appointed as an actuary with any other insurance company in India.
• Is not over the age of 65 years.
• Possesses a Certificate of Practice from the Institute of Actuaries in India.
• Has not committed any professional breach or is not guilty of any other misconduct.

Individuals satisfying the above criteria can be appointed as an actuary for insurance companies by the IRDA.

Is there an Association of Actuaries in India?

Yes, the Institute of Actuaries in India is a professional body for actuaries in India. Formed in the year 1944, the Actuarial Society of India (ASI) was converted into the body corporate of the Institute of Actuaries in India under the virtue of the Actuaries Act, 2006.

Objectives of ASI:

• To propagate the advancement of actuaries in India.
• Facilitating research on the subject relevant to actuarial sciences.
• Opening avenues to promote communication between different members of the profession.
• Providing the necessary guidance for those studying actuarial sciences in India.

The Actuarial Society of India is also one of the founding members of the International Actuarial Association, which is the organisation for all actuarial bodies across the world.

Are Actuaries Required for both Life and General Insurance Companies?

Yes, actuaries are crucial for both life and general insurance companies. Few companies appoint full-time actuaries while others hire the consulting services of actuarial firms.

Actuaries are an indispensable part of any insurance company. They play a key role in determining the policies put forth by these companies.