Education, Careers & Professional News

Calculating the odds

Source
DECAAN HERALD

Date
2005-07-28

Information
ever wondered how insurance companies arrive at the premium you pay for your policy? They hire actuaries who calculate death, accident and unemployment rates and determine how much insurance should cost.

Actuaries use maths and statistics to calculate the odds that an event will happen. They design insurance programmes and pension plans. Actuaries have different duties depending on whether they work in insurance, finance, or employee benefits. Actuaries who work for insurance companies predict insurance risk by using statistics. They figure the odds of fires or other natural disasters occurring. They calculate death, accident, and unemployment rates. They also estimate the rates at which disabilities and retirements occur. Actuaries determine how much insurance should cost. They do this by comparing the cost of providing coverage with the money needed to cover expected losses. Then they set insurance rates accordingly.

What they do

Actuaries may help decide company policy or develop new financial or insurance products. They are sometimes called on to testify at public hearings or in court on issues that affect their companies. They calculate the costs and benefits of different courses of action for co-workers. Actuaries who work for banks or other financial companies also calculate odds. They design pension plans by calculating the amount of money that can be made on investments. They calculate how much people need to pay into their pension or retirement plans to offset pension payments.

A typical day of work includes:

Predicting insurance risk.

Studying statistics and calculating the odds of fires or other natural disasters occurring. They do the same thing to predict unemployment.

Setting insurance rates according to cost and competitors rates.

Determining rates for paying out profits on investments.

Pricing corporate stock offerings.

Testifying before public agencies or in court on issues that affect their companies. Explaining how new laws might affect their businesses.

Analysing data or information.

Attributes required

Actuaries work with money, insurance, and other factors that have a big impact on peoples lives and must be aware of changes in social, economic, and other events that might affect the work they do.

They must have good communication skills. Read and understand written information. Analyse ideas and use logic to determine their strengths and weaknesses.

Identify ways to measure and improve system performance.

Use reasoning to discover answers to problems.

Combine several pieces of information and draw conclusions.

Use math skills to solve problems.

Manage oneself, people, time and things

What to study

A degree in math, statistics, economics, business or finance are all good starting points for a career in actuarial science. You could even do your BA in actuarial science or a postgraduate certificate /diploma in insurance. To become an actuary you need to take the entrance exam conducted by the Actuarial Society of India. These are held twice a year and consist of one paper each in English and mathematics.

To become an insurance surveyor you need to be a degree or diploma holder in engineering/architecture or hold a Fellowship/Associateship of the Institute of Chartered Accountants.

You can also obtain the Fellowship or Associateship of The Institute of Insurance Surveyors and Adjusters (IISA) by taking their exam and thereby become a licensed insurance surveyor. You can even major in actuarial science, math, statistics, economics, finance, accounting, or other closely related area

Job opportunities

Challenging careers exist in a growing number of fields, including the insurance industry, consulting firms, government, banks and investment firms and large corporations. The largest growing segment for actuaries is actuarial consulting. The trend for companies, even large insurance corporations, is to outsource actuarial services. Actuarial consultants have also started to become more involved with decisions regarding health plans, advising on mergers and acquisitions, demutualisations, new product development and asset management, financial analysis, alternative distribution systems, regulatory compliance and market conduct issues.

The big brother of the Insurance industry in India is LIC (Life Insurance Corporation), which employs over 100,000 people. You could join as an Assistant Administrative Officer through the all-India examination.

The examination is objective in nature and consists of logical reasoning, general knowledge and quantitative reasoning. The written exam is followed by an interview. On being selected candidates are sent for a six-month training programme.

Salary and benefits

Starting salaries fall in the range of Rs 4,250 to 8,500 which can go up to Rs 6,000 to 9500. As Assistant Manager your pay scale will touch Rs 7,500 - 10,000. A Zonal Manager gets Rs 14,000 a month. This is just the basic salary. Additional allowances include Dearness Allowance, Travel Allowance, City Compensatory allowance, etc which works to almost 150-200 per cent of your basic salary! Salaries in multinational companies are very good. At the entry level you will be paid around Rs 4 lakh p.a. and after five years of experience it can reach Rs ten lakh p.a.

Outlook

Nationally, the number of jobs for actuaries is expected to grow about average through the year 2012. Openings will be limited by the size of this very small occupation. More actuaries will be needed due to growth in managed health plans. However, downsizing and company mergers will work to temper that growth.

Job prospects are expected to be good for workers in property and casualty insurance areas, as those areas are expected to grow. Employment of consulting actuaries is also expected to grow This is because more companies are contracting out for these services.

While starting out actuaries often rotate into different duties in order to learn various aspects of the job.

At first they may prepare data and perform other simple tasks. Advancement depends largely on job performance and the number of actuarial exams passed. Actuaries may advance to administrative and executive positions. Some may advance to management positions in other areas. Some teach at colleges and universities. Projections suggest that for a wide spectrum of functions - marketing, sales, human resources, finance, operations, actuarial function, at least a 20,000 strong work force is needed, plus 1.5 lakh agents. In five years from now managerial recruitment is likely to rise 10 times thus making it the most attractive sector in the job market.

Compiled by YoungBuzz India Pvt. Ltd.