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.
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.
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.
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.
