Wednesday, September 19, 2007

Smart Skills
Actuary’s job is worth the risk
Usha Albuquerque

Today, when we buy anything of value, the first thing we do is insure it against any risk. Whether it is a house, a new car or bike, jewellery, paintings, our work, and even our health and life itself — an insurance policy is a safeguard against damage or loss. Every pragmatic businessman gets his business insured. Film stars and performers insure their talents — Lata Mangeshkar has insured her voice, Sania Mirza her arms, and J Lo her body (Or, so we’re told!). But how do we measure risk, and assess the cost of that risk in different situations?

This is the job of an actuary — one who calculates the probability of death, sickness, injury, disability and other such risk factors and determines the kind of contract or policy an individual or organisation needs to have, along with the premiums needed to be paid to minimise the extent of loss or damage. Actuaries are the backbone of the insurance and pension industries. They apply mathematical, statistical and economic analyses to a wide range of practical problems in insurance, investment, financial planning and management.

Actuarial science is built on the statistical evaluation of the financial and economic implications of possible future contingencies. As this is a highly complex mathematical science, actuaries are in high demand.

Work of an actuary

The work of an actuary involves the calculation of insurance risk, premiums and pension programmes. Actuaries calculate the probability of different risk factors such as sickness, death, disability, retirement, fire, theft, property loss or return on investment under different circumstances, and then calculate the premium rate to the paid by the insurer. The work is largely concerned with the application of the theory of probability and that of compound interest to a variety of practical problems. In other words, an actuary is a problem solver, calculating long-term liabilities with the help of mathematical skills.

Actuaries can work in any field where risk is measured in financial terms. This could be with insurance companies, consulting firms, banks, government departments and in industry.

Work therefore depends on the sector you are working in. Those working with insurance companies handle areas such as life, health or property, investigating and calculating relative life expectancies of various groups of population, assessing the effects of lifestyles, and proneness to different diseases, and working out policies and premiums accordingly. In banking and financial services organisations, actuaries handle credit risks, and calculate pre-payment charges, and premiums. Actuaries are often called upon to make decisions concerned with the financial soundness of insurance companies and pension funds, and by virtue of their analytical and incisive outlook, can make significant contributions in the fields like demography, social welfare, and so on.

Finding cover

To become an actuary, you need to pass the exams conducted by the Actuarial Society of India, or complete a course in Actuarial Science. You also require excellent mathematical and analytical skills to get into this career. Any person with a high degree of aptitude for mathematics and statistics can become an actuary.

Course clues

There are very few courses in actuarial science available in India.

The Insurance Regulatory Authority of India, IRDA, recognises the Fellowship in Actuarial Science from the Actuarial Society of India (ASI). This is open to both graduates and undergraduates, similar to the CA programmes. To become a full-fledged actuary, one has to clear, through self-study, a series of examinations conducted by the Actuarial Society of India, Mumbai. The ASI programme consists of a correspondence course and requires the completion of 16 papers divided into two groups. For more details check the website— www.actuariesindia.org

However, it is advisable to do an undergraduate degree, either first or concurrently, before embarking on the Fellowship, so that you leave your options open in case you decide on another career option. Since the maths component in Actuarial Science is high, graduates or postgraduates in mathematics or statistics or those who had Actuarial Science as an optional subject at the degree level are in a better position to qualify as actuaries.

Actuarial science is also offered as a three-year degree BA or B. Sc course by some universities, or as one of the subjects of a degree programme. Some universities offer a Master’s degree in Actuarial Science for graduates of mathematics, statistics or economics. These include Kurukshetra University, Goa University, and the University of Mumbai. The Amity School of Insurance and Actuarial Sciences, also offers a 1- year PG in Insurance Management.

Placement prospects

Once qualified, most actuaries are snapped up by the insurance companies — national and multinational. The Life Insurance Corporation takes on those with a postgraduate degree or diploma in Actuarial Science, or those who have cleared the entrance test of the ASI. The Insurance Regulatory and Development Authority also recruits actuarial officers and actuarial assistants. There are also jobs for actuaries in any sector where finance, investment, statistics or scientifically — based forecasting is involved. These include organisations handling Operations Research, Statistics, Investment, Demography and so on. Many openings in these fields are available in countries abroad as well. A number of Actuaries have also set up their own consultancy firms to advise in matters like Gratuity and other Retirement Benefit Schemes.

With the rapid increase and growth of specialised industry and engineering and the heavy finances involved in such sectors the insurance sector has received a major impetus for growth. So, if you have an excellent grasp of maths, a practical outlook and an analytical mind, then a career in actuarial science will ensure you are never without a job.

The writer is a noted career expert