Jobs in Actuarial Profession

Being an actuary, you can be employed in various fields.

Life Insurance Companies

General Insurance Companies

KPO Companies (Knowledge Process Outsourcing)

Consulting companies

Investment Companies

Pension and Benefits Companies

Health Insurance Companies

Reinsurance Companies

In India, Life Insurance, KPO and Consulting companies provide large portion of the actuarial demand. Further, General Insurance sector after de-tariffing promises to provide very lucrative job profile in near future.

Pension and Benefits field is also likely to benefit given the reforms that are taking place in Pension and related areas. It is heard that Banking and Financial Companies are also now hiring actuaries for analyzing risks.

Health insurance actuaries are also in great demand, given that in India the scope of Medical Insurance is tremendous and lot of companies around the world want to enter India as soon as possible. Demand for health actuaries are bound to increase.

I don't know for sure, but talking with various industry experts, there is a feeling that work of General insurance or Health actuary involves more subjective decision. Due to this fact the responsibility of their decision is high and thus they are paid more than a life or pension actuary all around the world. Although in India General insurance or Health insurance companies are not paying as industry standard across world but it is likely to change soon.

List of Life insurers in India

1. Bajaj Allianz Life Insurance Company
   
2. Birla Sun Life Insurance Company
   
3. HDFC Standard Life Insurance Company
   
4. ICICI Prudential Life Insurance
   
5. ING Vysya Life Insurance Company
   
6. Life Insurance Corporation of India
   
7. Max New York Life Insurance Company
   
8. Met Life India Insurance Company
   
9. Kotak Mahindra Old Mutual Life Insurance
   
10. SBI Life Insurance Company
    
11. TATA AIG Life Insurance Company
    
12. Reliance Life Insurance Company
    
13. Aviva Life Insurance Company
    
14. Sahara India Life Insurance Company
    
15. Shriram Life Insurance Company
    
16. Bharti Axa Life Insurance Company
    
17. Future Generali India Life Insurance Company
    
18. IDBI Fortis Life Insurance Company
    
19. Canara HSBC Oriental Bank of Commerce Life Insurance Company
    
20. Aegon Religare Life Insurance Company
    
21. DLF Pramerica Life Insurance Company
    

List of Non-Life insurers in India

1. Bajaj Allianz General Insurance Company
   
2. ICICI Lombard General Insurance Company
   
3. IFFCO Tokio General Insurance Company
   
4. National Insurance Company
   
5. The New India Assurance Company
   
6. The Oriental Insurance Company
   
7. Reliance General Insurance Company
   
8. Royal Sundaram Alliance Insurance Company
   
9. Tata AIG General Insurance Company
   
10. United India Insurance Company
    
11. Cholamandalam MS General Insurance Company
    
12. HDFC ERGO General Insurance Company
    
13. Export Credit Guarantee Corporation of India
    
14. Agriculture Insurance Company of India
    
15. Star Health and Allied Insurance Company
    
16. Apollo DKV Insurance Company
    
17. Future Generali India Insurance Company
    
18. Universal Sompo General Insurance Company
    
19. Shriram General Insurance Company
    
20. Bharti AXA General Insurance Company
    
21. Raheja QBE General Insurance Company ( Prospective)
    

List is taken from site of IRDA.

Segmental Analysis

May be called initial step towards Portfolio Analysis, Segmental Analysis is nothing but to see the data in segments to see the trend which is not apparent when seen in totals.

In the analysis , Claim Frequency and Average claim size, burning cost as well as Loss Ratio is calculated according to different factors( rating Factors) like Location ,Age or may be different models.

In principle , following accruals principle , Earned premium should be compared to the claims that have occurred during the same period. Care should be taken , as for latest periods Claim experience seems to be better which actually is not the case as there are IBNR and IBNER cases which will increase the Claims.

Talking Actuarially , it is just the ONE WAY ANALYSIS which is a part of Premium Rating. Management sometimes like to see the data containing EILR. EILR meaning Earned incurred Loss Ratio. It is comparing Earned Premium with movement in Incurred during the time period.

Health Insurance in India and Medical Inflation

 

Health Insurance will experience tremendous growth in Indian market in coming decade. Middle class is growing thanks to growth rate of 8% to 10%. Increase in disposable income for middle class will insure that Health insurance will grow and increase its penetration in Indian market. Current penetration of Health insurance in India is very low somewhere in lower single digit. Further average age of Indian population is very low and India is a young country and going ahead average age is going to increase in India , hence increased medical cost and demand for Health Insurance. Medical Inflation plays a very important role in making Health Insurance a costly and complex affair.

Due to Medical Inflation premiums are increased every year making it hard for insurance companies to sell its products in market. Further, inflation as high as in late teens make it difficult to absorb the rise in claim cost. Brighter side is Health cost in India is among the lowest in the world and penetration level of Health Insurance is also one of the lowest in the world. On the other hand the quality of health service is also far far away from the desired levels. (May be the reason for low health cost and quality is low penetration of health insurance.)

Actuaries in Health Insurance have a major role to play in Indian scenario. To change and modify the way data is collected (both claims and policy). Data which is available right now to actuaries working in Indian health insurance companies is very less and that too of low quality. Lot of work has to be done to ensure that proper data is recorded which will enable actuaries to work on advance techniques like Portfolio Monitoring and Pricing in Health insurance.

Medical Inflation

Medical Inflation could be defined as rise in Medical Care Costs year on year. This includes Doctor Fees, Pharmacy and other Hospital services.
Medical inflation on average is around 17 % year on year much higher than general wholesale index.
Premiums of Health insurance has to increase by about same rate to tackle Medical Inflation , which has been one of the challenges for insurance companies.
Health is a long term plan with annual renewals and re-pricing. If product is getting costlier by 25 % each year ( due to Medical Inflation and Age Factor ) it is very difficult for consumer to keep renewing their policies. A stable premium like Life insurance is the need with no price increases. Designing such a policy includes accurate estimation of future Medical inflation which is not possible by any stretch of imagination.
You cannot charge high to younger generation to subsidize the higher cost for older people, this might trigger anti-selection and you will be left with portfolio containing only older people.
Health Insurance Companies have to figure out a solution that can cater to the needs of consumer and also protect their capital and interest.
In US companies do raise their premiums by large amount every year and now the fact the health premium increases every year is well understood and accepted by people. Such understanding has to be developed in Indian scenario.
The rise in Real estate prices and crunch of expert and skilled manpower has made it impossible to control Medical Inflation in coming few years also.
Insurance is also one of the factors causing Medical Inflation. When Hospitals know that there is a financer ready to pay the bills they increase the cost without much resistance and hence causes Medical Inflation. Also insured customer also wants to go into a care which is the best and costly as he is insured which causes increase in demand of high end hospitals and hence medical inflation.

General Insurance Industry In India

Name Of Company	Premium (Gross) 2007-08	Premium (Gross) 2006-07
Royal Sundaram	695.16	600.58
Tata-AIG	813.39	741.56
Reliance General	1946.42	912.31
IFFCO-TOKIO	1235.83	1150.32
ICICI Lombard	3344.69	3003.45
Bajaj Allianz	2404.34	1803.34
HDFC ERGO General	216.58	190.16
Cholamandalam	563.67	314.59
Future Generali	10.64	0
Universal Sompo	0.48	0
New India	5274.14	5017.19
National Insurance	4030.8	3814.42
United India	3738.94	3498.77
Oriental Insurance	3855.61	3928.66
ECGC	669.39	618.05
Star Health	173.03	22.51
Apollo DKV	2.98	0
AIC	828.66	564.67

You can see there are many companies which have just started operations in india. There are many more companies which will be entering the indian insurance market in coming years.
These data are taken from IRDA journal and shows the premium collected by companies over year and year on year growth.

Actuarial Knowledge Process Outsourcing

Actuaries are highly skilled professionals and are in great demand in insurance industry all over the world. Due to recently privatised industry here in India , first wave of qualified actuaries will be out within two years. By that time number of Actuarial Students will also be quite large.

KPO - Knowledge Process Outsourcing industry in india is growing rapidly. Since Actuaries all over the world are in great demand and India promises to provide skilled manpower to cater this need. KPO industry in india ( in actuarial field) promises to be a big employer and money spinner in coming 5 years.

Many IT companies have already sensed this oppurtunity and already started to stablish their KPO's. Other big multinational insurance company also have started to offshore their Actuarial Work to Indian subsidary.

Lets see how this industry fair in the future.

Risks of Inaccurate Reserving

As you know from my previous posts, that in General insurance one of the main job of an Actuary is to do Reserving. There are risks involved if estimates of Reserves goes far from what it should be.
IBNR Estimates could be too low or could be too high in any given circumstances , which gives rise to UnderReserving or OverReserving.(These could be because of many reasons explained later).

Risks Associated with UnderReserving.

• Under Reserving gives wrong sense of profitability. When a company underreserves , it is actually underestimating its liability and hence wrong sense of profitability.
• Due to UnderReserving , your portfolio seems to be profitable, hence you see that your Loss Ratio is better , which makes you to reduce prices. Over some period you will become underpriced and your liability will increase. Loss Ratio which is actually higher than you have seen will further increase.
• As Warren Buffet has said , " To underReserve is to Under Price".

Risk Associated with Over Reserving.

• When you OverReserve, you actually is hiding your profit. Your profitability will reduce. You tend to see your Loss Ratio is higher , whereas it is actually lower.
• You tend to Over Price your products, hence loosing market share and profitable business.
• Over Reserving will decrease your profits, increase the capital demand to meet solvency putting strain on your balance sheet.

Factors Triggering Inaccurate Reserving.

• Tendency to improve profitability by under reserving.
• For long term portfolio like Liability , ignoring industry/past experience and going by own data.
• Over Estimating case reserves.
• Outdated methods of finding IBNR which tends to overestimate.
• Being over optimistic or very conservative without logic.

Actuarial Experience VS Clearing Actuarial Papers

For a student actuary like me, one thing that concerns me the most is what comes first? “Experience or Clearing papers”, both are very important, there is no doubt about it. But it is also true that clearing papers while doing job is very difficult and you cannot perform both of them at your best. One of them has to take a back step.

Why Experience is Important?

In current market scenario , when the actuarial market is flooded with hundreds of Actuarial students , students having RELEVANT experience is hard to find. I am saying RELEVANT in bold letters because , it is very easy to get a job and show in CV that you got an experience, but during the interview, interviewer came to know how much do you know practically and how you have performed on job. Experience people are paid because of their performance on job and this is needless to say.

Further , if he or she finds out that you have been neglecting job and doing studies, it gives a very bad impression on employers mind.

Looking at the market scenario right now in India , there is a drought of students who have cleared more than 6 papers with 2 yrs of relevant experience. If you get late in getting a job, things could get worse as there is flood of students right now with very little experience and will get decent experience in 2 years from now, filling the demand.

Why Clearing Papers is Important ?

If you are a actuarial student , you must have faced the question “ How many papers have you cleared ?”. This is the most common question and YES most important question, if you stuck with a low number of papers for a long time, it again gives a bad impression about your mathematical skills and dedication for studies. First thing that everybody sees in your CV is number of papers, First thing an interviewer will ask you is number of papers you have cleared. To rise in the ladder of career , clearing papers is the first step. Most importantly, without clearing papers , it is hard for us to understand what we do, and apply innovativeness in our work.

So , clearing papers gives a career a major boost is a fact, and clearing papers while doing a job is a difficult proposition is also a fact.

So , one should sit at home and concentrate in clearing papers or one should join a job , is one important question.

My Case

There are several facts which helped me take the decision.

Nobody asks a Fellow actuary , how soon you have cleared the papers, the only question that arises is how many years of relevant experience do you have.

There is a minimum experience of 5 years before Institute of Actuaries UK will give you a fellow degree, so clearing all the papers and waiting for the fellow degree , does seem a bit awkward. However , IOA only recommends to have work based skills and wants you to clear papers while on Job.

The most important one is the number of students entering the profession, and 10 years down the line, I think when everybody will become an actuary, things that will matter is how many years of experience do you have, and there will be quite a difference between a person having 7 years of experience and 10 years of experience.

There may be other logic in deciding the answer to this question, I am not saying which is right and which is wrong, I am just saying that this is what seems to fit me.

Hopefully I have provided some facts which can help you decide.

Remuneration Of Actuaries In India

Actuarial Field is relatively unheard in India and that is one of the reason that , Actuarial Jobs in india is not paid as much as in other countries. However , things are improving very fast. I am not able to say about Life Insurance market , but in General insurance general Pay structure is something like :--

Students having passed 4 papers and fresher --- 3 to 5 lakhs per annum
Students having passed 7 papers and 2 years of exp --- 8 to 10 lakhs.
Associate and having 3 years of exp -- 15 to 20 lakhs
Fellow with more than 5 years of exp -- 40 lakhs..

These figures will give you some idea about the status of actuaries in General insurance, things are changing fast, and thus these figs. may change dramatically over short period of time.

Reserving IBNR

Reserving is insuring that company has enough reserves to meet future liabilities. Finding IBNR that is Incurred but Not reported claim is one of the most important jobs of an actuary in general insurance company.
IBNR can be calculated using various means , which are very well discribed in various literatures available , but what i learnt in short period of experiance is that, if your analysis is meticulous then whatever method you will choose you will tend to arrive at similar results.
I personally experianced following things:-
Looking at the initial data ( Triangles ) i tend to form a picture of the given portfolio in my mind. Talking with claims people and other marketing and data entry persons made me to modify my picture to some extent. Further analysis of data by forming ratios, comparing with NEP's and other things all led me to change my picture slightly also in the whole procedure i tend to find out some errors in data also and corrected those too.
After the whole exercise , when i used various methods to find IBNR , the fig. was very close to each other, which gave me further support that my analysis is getting better.

Please feel free to give useful suggestion to me and your valuable ideas and comments.

Thanks.

Actuary in General Insurance

Actuary in General Insurance companies generally performs two very important tasks.

1. Reserving.
2. Premium Rating.

In reserving an actuary suggests company how much IBNR(incurred but not reported) claims could come in future along with how much reserves company should keep to take care of IBNER. moreover Actuary also gives his opinion on Solvency position of the company.

In Premium Rating , an actuary uses past data and trends to come up with rates which should be charged to policy holders in order to be competitive and profitable in the markets. These rates are dependent on rating factors and trends shown by the industry and companies past data.

Although the scope of actuary in General insurance company is much more than these two tasks, but currently in India , Actuaries perform these tasks only. Further the way in which IRDA is developing the market , it is not long when an actuary starts to perform other activities which are performed all around the globe.