Pages 44 `20 2012 Actuarial Gala Function and Awards (2012and Awards AGFA) Celebrations For Private Circulation Only

VOL. IV ISSUE 3 MARCH 2012

c o N T E N T S www.actuariesindia.org

Chief Editor FROM THE CHIEF EDITOR Face to Face with CONTENTS Taket, Nick 4 NICK TAKET wishes the IRDA's initiative on 31 • Vijay Balgobin – first fellow of IAI 2011 Tel: +91/22/6740-3333 product design success in promoting the life from Mauritius Email: [email protected] insurance industry • Nikhil Gupta – Meena Sidhwani Award winner 2011 • Arjun Nagal – ACET January 2012 Topper Editor Introductory Address Sharma, Sunil 5 14th GCA 20th – 21st February 2012: Email: [email protected] Introductory Address by Students Column President, Liyaquat Khan during the 34 • IAI student Event Inaugural function on 20th February Puzzle Editor • Coaching ST4 students and a visit to India Mainekar, Shilpa by Ian Rogers Email: [email protected] Keynote Address • Coaching ST2 (Life Insurance) students 8 14th GCA Inaugural function, 20th February by Marjorie Ngwenya 2012 : Keynote Address by Manager (Library and Publishing) J. Hari Narayan, Chairperson IRDA Rautela, Binita 35 Farewell and Welcome Tel: +91 22 6784 3325 Email: [email protected] REPORTAGE 11 • 2012 Actuarial Gala Function and From the Press 37 IAA news release: IAA adopts principles of Awards (AGFA) by Avdhesh Gupta professionalism for its member associations COUNTRY REPORTERS • Plenary Sessions by Avdhesh Gupta Smith, John Laurence • Concurrent sessions on Pension, New Zealand Employee benefits and Social security by FROM THE DESK OF Email: [email protected] R. Arunachalam 38 Chairperson- Advisory Group on • Concurrent sessions on Health Care Communication (AGC) – Sunil Sharma Kakar, Gautam Insurance by Bhumika Bhatia European Union (EU) • Concurrent sessions on General Insurance SHILPA'S PUZZLES Email: [email protected] by Neel Chheda 42 • Concurrent sessions on Life Insurance by Kailash Mittal Chung, Phuong Ba Career Corner Taiwan, Hong Kong & Japan 27 Kuwait Re invites applications for the post of Chief Actuary Email: [email protected] Events 28 • Renaissance = (Math + Art) x Imagination 37 Canara HSBC – Life Insurance invites by Krithika Verma applications for Sr. Manager Actuarial Sharma, Rajendra Prasad in Gurgaon • Institute and Faculty of Actuaries event in USA India by Derek Cribb 43 Oliver James Associates invites Email: [email protected] applications for multiple vacancies 41 Gateway to the World of Actuary _ ACET Announcement Cheema, Nauman 30 Pakistan Email: [email protected]

Leung, Andrew Thailand Disclaimer : Responsibility for authenticity of the contents or opinions expressed in any material published in this Magazine is solely of its Email: [email protected] author and the Institute of Actuaries of India, any of its editors, the staff working on it or "the Actuary India" is in no way holds responsibility there for. In respect of the advertisements, the advertisers are solely responsible for contents and legality of such advertisements and implications of the same. Krishen, Sukdev The tariff rates for advertisement in the Actuary India are as under: South Africa Back Page colour ` 35,000/- Full page colour ` 30,000/- Half Page colour ` 20,000/- Email: [email protected] Your reply along with the details/art work of advertisement should be sent to [email protected]

ENQUIRIES ABOUT PUBLICATION OF ARTICLES OR NEWS Balgobin, Vijay Please address all your enquiries with regard to the magazine by e-mail at [email protected]. Mauritius Kindly do not send it to editor or any other functionaries. Email: [email protected] Printed and Published monthly by Gururaj Nayak, Administrative Officer, Institute of Actuaries of India at ACME PACKS AND PRINTS For circulation to members, connected (INDIA) PRIVATE LIMITED, A Wing, Gala No. 55, Ground Floor, Virwani Industrial Estate, Vishweshwar Nagar Road, Goregaon (E), Mumbai-63. individuals and organizations only. for Institute of Actuaries of India : 302, Indian Globe Chambers, 142, Fort Street, Off D N Road, Near CST (VT) Station, Mumbai 400 001. • Tel +91 22 6784 3325 / 6784 3333 Fax +91 22 6784 3330 • Email : [email protected] Webside : www.actuariesindia.org

The Actuary India March 2012 3 FROM THE CHIEF EDITOR t has recently been reported in the media that the IRDA has a number concerns about some of the new I product designs that the life insurance companies have been filing with the Regulator. The Chairman of the IRDA has written a letter to the Life Insurance Council suggesting that some product features were not in the best interests of policyholders. According to the press reports the letter made a number THE CHIEF EDITOR of specific proposals and invited comments from the Life Insurance Council and its members.

This letter can be seen as the next logical step after the IRDA recently issued an exposure draft on the need for distributors to conduct an analysis of each policyholder’s needs before recommending a particular type of policy to the policyholder.

FROM The life insurance industry has many stakeholders, which include the Government, the IRDA, policyholders, the life companies, all the different distributors, the employees of life companies, the appointed actuaries and the actuarial profession. The active and wholehearted participation of all these stakeholders is required for the industry to succeed.

It is true of the life industry, as it is true of all industries, that for the industry to succeed then the industry must create and offer products and services that give some value to each of its stakeholders. So this IRDA initiative on product design will have a major impact on the success of the industry.

The last few years have been difficult for the life industry, and so at this time it is particularly important that these two IRDA initiatives on product design and analyses of policyholders’ needs are successful in promoting the life industry.

Given the importance of these initiatives, I hope that the Chairman of the IRDA and the Life Insurance Council members will not take it amiss if I suggest that the consultation process should be as wide as possible and it should encompass all the industry’s stakeholders.

Each of the stakeholders will bring to the table their own different and unique perspectives. I believe that by taking into account all of these viewpoints the IRDA will be able to come up with a set of guidelines that gives the industry the boost that it currently needs.

Nick Taket

DRAFT VISION, MISSION AND VALUES STATEMENTS of IAI

Vision: Mission: Values IAI to be a globally well recognized 1. To educate/train risk professionals 1. Integrity 2. To enhance and maintain high professional professional organization 2. Respect for other’s views standards developing enduring thought 3. To shape Public Policy and Awareness 3. Accountability leadership in managing 4. To engage with other professional/regulatory/ 4. Continuing Learning/ uncertainty of future financial government bodies Research Oriented outcomes. 5. To promote/build IAI as a respected brand of 5. Transparency risk management globally 6. To promote research to advance actuarial 6. Be Responsive/Sensitive science/application

When you do the common things in life in an uncommon way, you will command the attention of the world."

- George Washington Carver (1864-1943)

4 The Actuary India March 2012 A ddress Introductory Address By Liyaquat Khan I ntroductory

14th GCA, 20th – 21st February, 2012

Introductory address by President, Liyaquat Khan during the inaugural function on 20th February (Note: the text herein is the excerpts from the speech edited suitably – highlights, bolds and circular space are editorial)

riends, welcome all of you. I will The third event in February 2001, the and other, means the actuarial space in take a few minutes in running time when I became President of the India is multi dimensional F through the landscape that we Actuarial Society of India, was named Now that is the reality that has changed have and why of this Global Conference as Global Conference of Actuaries the whole perspective from actuarial of Actuaries, the way it is. and called 3rd Global Conference of stand point. I have been associated with the Indian Actuaries and consequently the first two Number 3: The Consultancies were Actuarial Profession right from the time, were renamed accordingly. beginning then, they are stronger things starting evolving, that is 1999, At that point in time, we had all public now, and they are global in nature. when the insurance regulator was just sector insurers, and we were expecting The consulting capabilities are global formed, IRA (as IRDA was then called) more to come…many more to come in requiring actuarial human resources came into being, and when I became the private sector. with global skills. President for the first time in the year What is it we have now? 2000. A lot has happened since then. Number 4: The actuarial professional The event that you are witnessing bodies that operate in India for The insurance landscape– educating actuaries, besides the today had just started, under the then and now banner of Actuarial Society of India (the Institute of Actuaries of India are the Casualty Actuarial Society in US, the predecessor body to the Institute of Number 1 - Today India has insurance Society of Actuaries in the US and the Actuaries of India), not by the Actuarial sector wherein the globe sits in: just UK actuarial Profession called Institute Profession but by the then Insurance about all the joint ventures, particularly and Faculty of Actuaries. The largest Regulator, IRA lead my Mr. N Rangachari. on the life side, and most on the general block of students of the UK Actuarial The first two were called, International insurers side are joint venture and the professions outside UK are in India, Conference of Actuaries, and it started joint venture partners are global giants, currently about 2,500. with a noble objective that the then consequently it is the global mindset of Regulator had i.e. enabling a global the insurance industry that sits within So we have global insurance dialogue and discussion, on all the India. industry right within India, the global regulatory matters and all the aspects reinsurer’s right within India, the Number 2 - In the last 10 years, which was of insurance business that are driven global consultancies right within India. not expected then, what has developed, by actuarial considerations. He wanted Consequently the expectations of what I call off shored actuarial work - a global dialogue - a lot of people used all actuarial employers including the nearly about 1,000 actuarial staff work to come, and at that point in time, he insurance regulator on the capabilities within India on actuarial functions that felt that this event should take place and skills required of the actuarial pool do not belong to India, that belong to along with some industry body, mainly within India are global. the North Americas, the Continent, and because the then Actuarial Society In the background of the above, the different other countries. Given that of India did not have then enough regulator in my view, regulates insurance we have such relatively large actuarial experience in handling such an event on industry which is not typically Indian, human resources working for off shored its own and thus came the partnership but global in many ways. Therefore the actuarial work in life, non-life, pensions with FICCI in New Delhi. issues are global as well. The Actuary India March 2012 5 What this entire means to us in the India in the Ministry of Finance owns done. Unfortunately there is no direct actuarial profession? The actuarial as many as eight insurance entities connect between the actuary and the profession in India has to prepare and they occupy dominating space in beneficiary of pension rights. actuaries who posses global mindset, the insurance field within India. The The bedrock of any industry and the they ought to meet global expectations same structure allows the owner of A ddress economy of any nation is really the of the global employers, and they need to these companies i.e. the Ministry of general insurance industry. It stabilizes have secularity of thoughts, authenticity Finance, to have their nominee on the the industry and strengthens the of views, and ethical standards that Board of IRDA, the Board of Government economy. The life insurance industry meet global benchmarks, whatever that owned Insurance Companies and on creates wealth and generates basic may be. the Council of the Institute. Given financial resources that provide a person the system of Appointed Actuary, this Structure of the actuarial with respect and dignity to live life when enables huge conflict of interest to exist profession and systemic one has ceased to be economically within the system. risks within productive. The life insurance industry What does this mean? is, as a friend of mine puts it “bread and

I ntroductory We have now Institute of Actuaries butter business”. I would like to call it, in of India, which, since year 2006 is a Essence of actuarial work the Indian context, the bread business body under Act of Parliament, called only. Many Indians cannot afford butter Actuaries Act, 2006. Prior to that, we I look upon it as an opportunity to even now! So, in that context, the had Actuarial Society of India, started in develop actuaries with a flavor in actuarial human resources that we are 1944, and much later, became a body which, they develop a mindset of non- in the business of creating, besides under Societies Registration Act and competitiveness: “I am a member of having multi-dimensional skills and Bombay Trust Act. Once the Actuaries the Institute of Actuaries of India, I am global mindset, should have an attitude Act, 2006 came into being the affairs better, and that’s the best in the world”. to be down-to-earth and possess ethics of the Actuarial Society of India were No. Given that we have global kind of that drives them to work for protection of moved over, if-so-facto, to the Institute a landscape of actuarial work then policy holder security and larger societal of Actuaries of India. One transferred members of different actuarial bodies interest. In this context it’s helpful and to the other one, but certain aspects of work within India, there will have to be in some way desirable that actuarial the professional structure got changed. a multi-dimensional approach so as to human resources in India are members We have, as per law, four government develop a milieu in which, the actuarial of and connected with more than one appointees as members of the council students are prepared to take and meet major actuarial professional bodies and twelve are elected amongst the expectations at the global level. They that are in the business of actuarial fellow members of the Institute. The don’t develop self-serving attitude but education in India – the ones that I have reality, however, is: as of today we inculcate all inclusive and respect for all mentioned before. This will help them to have only one from the Government actuarial bodies. This is required for the develop right attitude, expose to issues in the Ministry of Finance and the first actuarial profession globally particularly in ethics at global level and lead them nominee from the IRDA who retired on when the actuarial profession is more to inculcate mindset and the ability 1st June, 2011, is not yet replaced. The global than any other profession. It to meet global expectation. This will Act provides that the government shall is a science based on theory and also place them at somewhat stronger appoint 4 nominees in the council, philosophy of the subject of probability. footing from ethical perspective. one from ministry of finance, one from The applications of actuarial science the IRDA and two others. So, that’s are based on the purity of mathematics, Vision, Mission and Values the reality today. In this backdrop, it is reality of statistics - numbers that get very important to understand the role generated as things happen. And that is The ethics and integrity is what we have of the actuarial profession and the all futuristic. been working rather hard on for at least in expectations on it. The work that actuaries do, even at the last about one and a half year. With a Doesn’t matter what limitations it has, the student level affects the life of the view to understanding concepts such as the profession has to deliver. people and economy of the nations these and arriving at our Mission, Vision The structure within which it has to much more than what is realized. The and Values statements, we engaged two function has limitations and according affected people and the political class strategy consultants in December 2010. to me there are serious structural who mange the nation do not know as They lead us through intensive exercises limitations embedding issues of conflict much as they should on whose actions spread over three months to come up of interest within. The nodal ministry is the results have happened i. e. the with one common understanding of the Ministry of finance, unlike in case of actuaries. Many of the actuarial staff Mission, Vision and Values that the other three professional bodies where work in and for the pension institutions Indian actuarial profession should the nodal ministry is the ministry of and the protection of the pension rights have. This was somewhat challenging: Corporate Affairs. The government of - the money is available when needed there being about 80 to 90 people at – is based on the actuarial work that is all times, most of them at very senior

6 The Actuary India March 2012 level, CEO’s, Appointed Actuaries, should have happened. Since early actuarial profession works successfully CFO’s, senior Consultants and others nineties, as a consequence of change towards protection of the insuring public who work for the Institute as volunteers. in political thinking, the nation started rights. The umbilical cord between the These leaders of the profession have what is called economic reforms or regulator and the actuarial profession - to be on-the-same page: What do we liberalization, two words for the same Appointed Actuary system – should work A ddress want the profession to be in 5, 10, 15, thing. The people who give shape to effectively and without being stressed 20 and even 50 years, down the line? this and implement the policy are “the by the Government. What are we doing today, are there any steel frame”, of the Government - the The professional support to ensure a flaws to put them at the same level of bureaucracy. Have they changed their top class pool of current and potential the challenges that we have met. We mindset, exceptions apart? To some Appointed Actuaries and ethical values did succeed in some measure, though extent yes, but only to some extent. Are around their work must be proven and probably not in full. We have come out they able to adjust to the structure that is demonstrative. And the role of Appointed with a set of statements for Vision, required, to ensure that role boundaries Actuary has to be much more extensive Mission and Values – the guiding of the regulator, role boundaries of than what it is now. I see a huge risk to stars to march forward. The backdrop the government functionaries, role I ntroductory delivery capabilities of the Appointed of that is what I have said before – boundaries of the profession and the Actuary System if within the Insurance the globalism of the Indian insurance role boundaries of the industry, are Company adequate actuarial manpower space. I also mentioned that as many as correctly understood and respected? does not exist. Many of the Insurance eight insurance entities are government Not really at least in my view. Companies particularly the ones in the owned still. They occupy the largest Public Sector domain are un-inclined to space whether it is life, non-life, health Conflict of interests recruit the actuarial resources in spite or pensions including assets that these and sinister risks of the fact that at least at student level hold. There is no requirement of capital there is over supply. at all as far as the Government owned I see a huge risk – sinister ones to the life insurance entity is concerned. insurance and pension including social Talking about the insurance industry security system of the nation, when the and the stakeholders such as Joint Given the above backdrop let us same ministry officials sit as council Venture partners, Reinsurers and the understand the space in which the members of the actuarial profession, Consultancies, in order for them to be Institute of Actuaries of India sits in. The same people sitting in the authority of interested in India, we have to generate Institute created in year 2006, taking the insurance regulator, and the same enough volume of business for them to over the then existing (since 1944) the people sitting as directors of these eight be interested in and invest in resources. Actuarial Society of India, has the nodal entities. On this count there are concerns. point of contact in the Government The actuarial profession has a role in the Ministry of Finance who own for So we have challenges, we are facing it understanding these concerns. That the Government, the eight insurance and with right minded people working means there has to be a dialogue on companies – the Ministry has as many together are sure to come out of it. continuing basis between all the stake Directors serving on the Board of these After all, the economic reforms or holders, respecting respective roles companies. Same Ministry of Finance liberalization came about in spite of within their respective boundaries, has right to appoint four Government this inertia legacy. However the reality is and yet, transacting across the nominees on the Council of the Institute that the very notion of conflict of interest boundaries. Important to ensure by all and the same Ministry nominee sits on appears to be living in hibernation as far the stakeholders that no one boundary the Board of the IRDA. This structure that as the regularity space of the Insurance takes over the other and each perform has developed, in my understanding, is industry is concerned. roles within respective boundaries the legacy of the past. Years and years My issue is not that we don’t have including the Government. Transactions of total controlled economy, that India challenges, my issue is that the must take place in a healthy way and no had – public sector oriented – which structure that has evolved, need to be one dominates the other. our political leaders then thought that re looked at. The role boundaries have was the best that should happen. As to be understood and defined clearly, Well friends, thank you very much, I th time passed and consequences of such and the transgression across those role welcome all of you to the 14 GCA. You political philosophy brought to bear boundaries should be minimal, if not have two days of opportunity to make upon the nation, it was realized that, totally eliminated. Having said this, we best out of your participation. have to take steps to ensure that the that was maybe not the best thing that

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The Actuary India March 2012 7 A ddress Keynote Address By J. Hari Narayan K eynote

14th GCA Inaugural function, 20th February, 2012

Keynote Address by J. HARI NARAYAN, Chairperson- IRDA [Note: insertions within parenthesis, highlights or boxes are editorial]

r. Amit Punchhi, Mr. Liyaquat which you have chosen for the 14th GCA, it to recognize the actuaries to serve in M Khan, President of the Institute of that is, the ‘Challenges of Change’. the country even if they might not be the Actuaries of India on whose shoulders And ladies and gentlemen there is no members of the Institute of Actuaries of this entire event rest, Mr. Allan O’Bryant, question that we are right now in the India. There are specific provisions in the Executive Vice President of RGA, Mr. midst of very important changes which laws which permits this and in fact, it was Desmond Smith, President of the will affect every aspect of the business use of these provisions that my senior International Actuarial Association, we are in. These changes could affect colleague Mr. N Rangachari, the first IRDA Mr. Heerak Basu, Secretary of the the design of products as well with Chairman, when the establishment of the IAI Advisory Group on International other aspects of the business which IRDA and the opening of the insurance Relations and ladies and gentlemen….. are subject to regulatory control. The industry took place, had made use of it is a deep pleasure this morning to be changes will certainly be there. But in this to provide a large number of actuaries here at the 14th Global Conference of actuaries’ global meeting, I think I would who were qualified and eminent in their Actuaries. like to dwell a little bit on the actuaries’ own fields but in different domains and institution in India. different jurisdictions and providing them The IRDA identity? an opportunity to work with and to build The actuarial strengths and partner with the Indian Insurance Standing here at this desk, I can see all and weaknesses! Industry. I would think the time is right of you; Actuaries from across the world even today to do similarly in the case of and budding Actuaries of India. When I non-life actuaries and I would like to make As we see from the IRDA perspective we say I see all of you, I can see you despite use of this forum to say that indeed I have do have certain constraints in meeting the the glaring lamps which prevent me from every intention to push this a little forward. demands for actuaries in the insurance seeing you very clearly. This may be seen Because we need to increase the number industry in India. And I am sure under the as a parable of the IRDA also; that is actuaries in terms of their experience, able leadership of Mr. Khan and the other as an institution we do not see clearly exposure and age…which we believe the members of the Institute you have striven what we are required to see because of insurance industry will have more and to develop and fill this gap. But I think distractions. But despite the distractions, more demand for as the years go by. more needs to be done and perhaps in a the question is what is it that the IRDA different dimension; there are no doubt I notice that in the program that you must be focusing on from a Regulator’s a growing number of actuaries in India; have….you have crafted for discussing perspective? That has been clearly we saw excellent bright young people last changes and many aspects of it which answered by the Parliament which has evening [during 2012 Actuarial Gala are to be discussed by all of you here laid down that the IRDA must primarily Function and Awards event] who are over the next 2 days and I would like look at the welfare of the policyholders indeed the future of the profession, none to make use of this privileged position and thereafter the growth of the industry. the less they will take time to mature which the Institute has kindly offered It has been the endeavour of the IRDA to like a good wine….but I think we need to me as a platform to talk about the do precisely this since it was constituted grow a little faster. I just wanted to inform challenges that we face in the IRDA or and it will continue to do so. Mr. Khan that we are fully aware of the the perspective I would bring to your Thank you …. someone who was listening situation within the actuarial profession deliberations which would certainly help to me has reduced the lights. Thank you. in India and within the legal structure us settling the regulatory space. So I will just follow exactly the program which you Coming back I really like this theme of Institute of Actuaries of India and regulations of the IRDA which requires have set out for yourselves. 8 The Actuary India March 2012 .

The first one which I believe we would or non- life or health. The question is, has regulations which we follow. Now, quite be discussing would be question on this to be opened up to enable greater obviously that is far from the truth and intermediation and I think that’s a very, participation? I do think banks offer a doesn’t reflect the actuality very well. very important matter - in fact I read significant platform for distribution of The solvency requirement which we an article the other day which says products but how exactly we make use have required at 150% is because we the bulk of the financial crisis which of this, we have to be careful and we have not really gone into the analysis of A ddress engulfed the world is really because need to learn from the experience in what kind of risk an asset class bears. of intermediation….something has other jurisdictions. The curious thing If that could be correctly captured and gone wrong with the whole process of about bank insurance is that there factored then it is possible that 150% intermediation in the entire world….. are practically as many patterns and which is the overall requirement may various types of monitory transformations forms of bank assurances, as there are come down. But that’s a work still in and the licenses of different types which jurisdictions, so nothing really constrains progress and there is something which were offered in that particular structure. us and it is up to the Indian regulations I would request the actuaries institute But if you look at it more mundanely and to the Indian industry to develop to conduct an exercise in what might in India when we are having a look at our own pattern which will suit the be the appropriate method to assess K eynote intermediation and from an emerging kind of structure we have in the Indian the risk inherent in the different asset market’s point of view, we have to look at space. The IRDA has opened this up for classes in the Indian economy. And what basically what we are going to do with the discussion and debate; certain ideas might be the mechanism which we have agency, the agency distribution channel are there which we have spelt out in the to put into place to ensure these risks and in what way it can be strengthened, exposure draft for the kind of regulation are suitably calibrated to the changing widened, rebuilt, made more productive we would like to bring in and I think that’s markets and the changing environments and the other two channels which we the area which we are currently expecting as we go along. have through formal intermediation that comments. With regards to the actuaries education is the bank insurance channels and The third area is the broking channel: in in business leadership as I have been the broking channel. The fourth one is the broking channel we are considering pointing out, we might be compelled to of course the direct marketing channel whether there is merit in enabling far take steps to ensure the steady supply of where I am sure the industry has far greater penetration of brokers by a actuarial talent for the industry. better knowledge than I do. But in all different structure of licensing in the these four aspects there are areas for brokerage system. I would like some regulatory concern which we do wish to The risks of business and Solvency deliberation on this and discussions. address. This is an area where we are very keen to On the reinsurance side which is garner knowledge from experiences from scheduled as Session 4, we have The intermediation – rest of the world. brought in regulations pertaining to defining the business the broad requirement of rating which game globally The Reinsurance – rules of a reinsurance agency must possess to the playground operate in India. And that’s very, very Firstly, on the agency: we believe that broad. But going forward we will be coming the agency system is here to stay and The other section, which you are going out with a registration mechanism, a unlike in some other countries agency to discuss in the next few days is the system which has been put into place force and agency distribution is not likely Enterprise Risk assessment and but that is something which I think one to weaken as we go into the immediate approach. In India we don’t have a risk should take a note of and I am sure in future and I think that is a good thing based approach though the government the years to come this will give an angle because given the scale and the types and the regulator feel that we ought to to the needs of the industry and to the of markets India has and its breadth in be moving in this direction. The Reserve needs to regulate the entire reinsurance terms of the number of points which are Bank of India has already made it clear process. But at the present moment to be covered in terms of geography and they would be moving to a risk based it is only the registration mechanism the kind of problems there are in terms approach for assessing solvency and which has been sought to be put into of communication, the agency force is strengthen the financial structure of place. One other intervention which we indeed an important one. There has the banking system. And without any are working on is the introduction of a been some shrinkage in the agency force doubt the Indian financial sector as I platform based trading for reinsurance. recently from a little less than 3 million to know would be moving towards the risk A lot of work has been done on that; a little over 2 million over the past years… based assessment soon. The exact time considerable work has been done by but I think we need to look at in what way lines are a bit hazy at the moment but I the General Insurance Corporation of we can re-craft this. Is it advisable for think a target around 2016 – 17 might India [GIC Re]. Based on that experience instance, to go in for a multi tier agency not be unreachable. In India, as all of we have been working on what we system? It is one of the burning questions you are aware, we really don’t have a call ETASS (Electronic Transactions we are facing. defined approach to this. For instance, Administration and Settlement System) On the bank insurance side currently the risk of all asset class is zero; that for reinsurance transactions and we in India we have a system where there is the regulations assume that there do hope that in course of time all is a bank in tie-up with one insurance is no risk in any asset class in the reinsurance transactions will take place company in its choice of field…either life Indian economy as per the pattern of on this platform. A lot of discussions are

The Actuary India March 2012 9 going on, designs are there, detailed be by law serviced to meet the needs of I expect will be in place in a month discussions have been held with broking the poorer sections of the society and and will start of their activities soon. firms and insurance companies and in India we define them in two ways…. Perhaps that might enable a focused also reinsurance companies and this one is rural….anybody in the area which discussion and dialogues between these will deepen as we go along and I think is classified as rural by the census of two fundamental groups. One weakness A ddress currently in the reinsurance space these India and the other is social which is in the health care setup in India is that are the two areas which the regulator’s really an income based, occupation there is no unified regulatory apparatus offices will be looking at and be working based kind of sub stratification but on health…by law, it isn’t there yet. on. the products have to be sold to their Several bodies have recommended this targets. By and large insurance industry for the consideration of the Government The Micro insurance – meets these targets; there have been and I am sure the Ministry of Health is which way to go? a very few slipups but not very, very looking at it but at the moment that is not Coming to micro insurance and micro significant. The industry has been very there. In the absence of such a body we finance there is not much work at the responsible in meeting the targets as do hope that the health forum would be a K eynote present moment going on in terms of laid down by the act. But the question useful step in bringing about a platform the regulatory architecture apart from really arises whether the objectives of where these issues can be mutually what has already been defined in our these insurances are actually being met. discussed. Some concerns which we regulations. By and large in India what Have they actually provided the kind of have immediately is how do we cover HIV we have defined micro insurance based lifeline, the kind of life support which we and handicapped persons? Do we do upon the claim outgo which a given event believe insurance promises particularly it at all? This is important because this might require. I think there are some for the poorer section? I don’t believe particular issue has also been taken up inherent problems in such a definition that has happened. When I have a look by the Supreme Court of India on public and I would like to understand and learn… at the claim ratios of these policies they interest litigation. The IRDA had issued and learn from all of you what might be a are surprisingly low; they are much lower an exposure draft for the consideration better way to go forward. What we really than a similar class of events covered on of the industry; we are awaiting their do see is these two things….. On one side a platform which is not micro insurance. response and we need to do something we have a claim outgo based definition So I conclude from that…that there constructive in this direction. is some kind of miscommunication, of micro insurance, on the other side in There are issues about the elderly and mismatch as between the insurance the Indian law there is a requirement to the aged persons; The IRDA had occasion companies and the policy holders who meet certain social and rural obligations a couple of years ago to intervene by stand to benefit from such policies. I by the enactment. A certain proportion requiring the provision of cover with am convinced that this is one of the of policies sold or lives covered has to renewability up to a certain age except fundamental problems of the micro for justifiable reasons and by and large insurance platform in India. There is insurance companies have fallen in line not adequate communication; there with such an approach but the question is not enough long term commitment arises whether we should expand that from distributors, manufacturers from further, whether we should make it one side and the policy holder on the necessary for insurance companies to other. Is that the area where a regulatory cover it for life; is that the way forward? intervention is called for? It is a question Does it require a regulatory intervention which we need to debate on and there or do you think the market and the good are various matters which we are looking sense of the insurance industry will take at in that context. We have yet not come it that way? to any firm conclusion on it but that is a concern and a primary one. These are some of the questions relating to Health faced by IRDA. The health of the Health Care Insurance Sharing thoughts is the KEY

I noticed also that there is a section on Mr. Khan, thank you again for providing health care insurance which has been me this opportunity to be amongst all of programmed some time tomorrow. The you and share my thoughts on number of current concerns on health care as far issues that have potential of lifting the as regulatory perspective is concerned, insurance industry to a higher pedestal is what we do about managing the cost and march forward. in health care. As a beginning to address that problem, the IRDA has created a platform for mutual discussions as between the service providers and the insurance companies and that forum

10 The Actuary India March 2012 REPORTAGE

2012 Actuarial Gala Function and Awards (2012 AGFA) by Avdhesh Gupta

he 2012 Actuarial Gala Function why one should be positive about the ‘Kalbelia’ tribes to celebrate any joyful T and Awards organized by insurance growth in India even though moment in the community, it being an Institute of Actuaries of India (IAI) in currently there are barriers to increase integral part of their culture. It perfectly collaboration with Munich Re was held the protection products’ sale. Munich reflected the mood of the evening. at the Renaissance Convention Center, Re also organized a quiz of 6 questions All the cultural performances were Mumbai on 19 Feb 2012, an evening from which a lucky winner was randomly greatly appreciated and applauded by prior to the first day of 14th GCA. It turned chosen and awarded an Apple ipad. the audience. But as there can be only out to be grand visual delight. It began one winner, the spectacular display of with an opening speech by Liyaquat It was followed by felicitation of Fellows talent by the Mumbai group led them to Khan, President of IAI. He briefed the and Associates admitted in the Year victory. audience about the history of GCA and 2011. Awards were also given to actuarial the way it has evolved over time from students for academic excellence in year Another very noble trend which was being an International conference to a 2011. During the award ceremony, audio started last year was continued at the more Global conference which attracts video (AV) featuring family members’ 14th GCA too; awarding the students speakers and participants from all of the awarded Fellows was shown. It from the three NGOs of Mumbai: over the globe. He mentioned about proved to be an instant success with Muktangan, Salaam Balak Trust the recent developments in India with the audience and they expressed their and Door Step. Prof. Fatta Bahadur, regards to the off-shore actuarial work appreciation with frequent rounds of Chairman Nepal Insurance Regulatory from various parts of the world such as cheer and clapping. The video aptly Authority and Desmond Kentsmith, US, UK, Canada, Europe and Australia. reflected the emotions that families go President International Actuarial These entities, including the regulators, through during the whole examination Association gave away prizes comprising expect Indian Actuaries and particularly process leading to qualification and how of books & wrist watches to the winners actuarial students to exhibit global they feel equally elated and proud when of a slogan writing competition. standards and high ethical principles. their family member gets the coveted Fellowship of the Institute. This year, many participants were sur- He also briefed about the new strategy prised to see seven paintings on display initiatives taken by the Institute of A trend of cultural performances which during the event. These paintings were Actuaries of India including its vision, started last year continued during the made by members of actuarial profes- mission and values. He further talked 14th GCA. Diwakar and Sonia winner sion and were part of an event called about IAI’s much awaited ambitious of ‘India’s Got Talent 2010’ held the ‘Art-e-actuary’. This competition was ACET initiative aimed to build a new audience spell bound with the phenom- organized to showcase the ‘arty’ side of credible and ethical system which enal acrobatics in their performanc- actuaries. in the long run will produce a brand es. Their dance style was ‘Acrozeal’. To sum up the Actuarial Gala Function of actuaries which aptly fit in the Mumbai actuarial students gave a folk and Awards night concluded on a very continuously evolving environment and dance performance with ‘Rain’ being successful note. meet the global standards which many its theme. Their graceful synchronized employers currently look for. act enthralled the viewers. Delhi par- About the Author Munich Re was the prime Partner ticipants also performed a dance de- for the evening and they conducted picting Modern India with a mix of folk a session which was chaired by and contemporary art forms. Bangalore David Hughes, CEO of Munich Re students presented an amusing skit, India Services. Andrew Rear, Chief which depicted the typical problems Executive of Africa, Asia Pacific, UK faced by young actuarial students. Last and Ireland made a presentation about but not the least; the IAI staff performed [email protected] a vibrant, colorful, foot stamping tribal the Insurance potential in emerging Avdhesh is the Head of Modeling team dance form of Rajasthan called ‘Kalbe- markets particularly in India. He at Aegon Religare Life Insurance pointed out interesting reasons as to lia’. This dance form is performed by the

The Actuary India March 2012 11 REPORTAGE

The 14th Global Conference of Actuaries, held from 19th Feb to 21st Feb 2012 at Renaissance Convention Center, Mumbai was organized by Institute of Actuaries of India (IAI) in collaboration with International Actuarial Association (IAA). The conference attracted more than 600 illustrious and eminent global speakers from all the areas of actuarial discipline and was well attended by actuaries all over the globe. The theme of the conference “Meeting the Challenges of Change” was an award winning entry of Amrita Kaur. J. Hari Narayan, Chairperson, Insurance Regulatory and Development Authority delivered the key note address on the first day, 20th February 2012, which was followed by Global Round Table and Plenary Sessions. This was followed by Concurrent Sessions on the second day, 21st February 2012 under the various actuarial practice areas. More information on the presentations can be downloaded from the Institute of Actuaries of India professional website http://www.actuariesindia.org. PLenary sessions

by Avdhesh Gupta

ession 1 – Inaugural session Desmond Smith, President of S The first session was chaired by International Actuarial Association (IAA) Amit Punchhi who welcomed discussed the current structure of IAA presenters and participants to the along with its strategic objectives and

J Hari Narayan

of the many challenges currently faced by the insurance industry. He stressed the importance of ERM and development Desmond Kent Smith Amit Punchhi of a risk based approach for solvency th 14 GCA. The Keynote Address was calculations. On pensions, he talked delivered by J Hari Narayan, Chairperson how the Congress meet of IAA every about the current burden on LIC from IRDA. He began by stating that the year serves as a forum for discussions the annuity business and consequently protection of policyholders’ interests among different Actuarial Associations the importance of developing a healthy and growth of the Insurance industry are of different countries. Heerak Basu annuity business in the private insurance the two main objectives behind every concluded the inaugural session by a action taken by the IRDA. Along with industry as well. He said the use of equity vote of thanks after a presentation by improving intermediation particularly the hedging and interest rate swaps were Allan O’Bryant who discussed how life Agency channel and developing actuarial amongst a few areas which could be insurance market today is different capability in the non-life industry are one explored for the pensions business. between US, Europe and Asia. Where

12 The Actuary India March 2012 14thGCA. Mark Saunders, MD Towers Ton Cheng, CEO of RGA Reinsurance Watson Asia Pacific, talked about the Company, Hong Kong highlighted the dual interpretations of ‘Change’, one strategic roles that a Reinsurer could being imposed by the regulator and the play for insurers and how technology other that arises due to the developments can direct insurers towards responsible

in the economic environment in which intermediation. He touched upon the REPORTAGE insurers operate. India is currently under lessons that could be learned from the the influence of both these kind. Apart developed countries such as Agency from the many positives, he described owned life insurance companies, many that there were few worrying reasons as of which have observed relatively better mortality experience. Gautam Bhardwaj, well about the Indian Insurance Industry Director – Invest India Micro Pension such as being over bureaucratic, unfair, Services Pvt. Ltd stressed on the Heerak Basu pushy, and too aggressive. Actuaries importance of distribution in the Micro must try towards becoming more US is struggling to improve growth Insurance sector where mis-selling are customer centric rather than being solely and returns, Europe is focusing more likely to happen and at the same time focused on designing products which towards centralization and facing it being a sector with huge business satisfy distributors and the shareholders. opportunity. Innovation needs to Dr. Wolfgang Droste, Chief Executive happen in designing products which are Gen Re Asia Pacific discussed the customer centric, and simultaneously accountability of distributors and also incentivize intermediaries. Ticket brought out the contrasts between size being low, makes the bundling and banks and insurers as being responsible selling of different products together distributors. He considered internet to important to attract distributors. Towards play an important role in distribution the end of the session, a discussion was held on different measures that industry in future. Importance of keeping the could adopt to improve intermediation. products simple and improving the Fee based approach was talked about agency education standards were also but was considered an option which spoken about. Sabbir Patel, Sr VP & has showed few success stories around Allan O' Bryant CFO – International Cooperative and the world. It was widely agreed that if significant regulatory changes. Asia on Mutual Insurance Federation, UK talked customers are given the top most priority the other hand, is observing rapid growth about what it takes to be a successful then objectives of each stakeholder gets accompanied by capital strain due to high mutual. Close involvement with the achieved. investment in business development. customers after sales, building long term Session 3 – Enterprise Wide Risks Session 2 – Global Round Table: relationships, paying out claims quickly, Responsible Intermediation- Lessons being responsive to the feedback of This session was chaired by Brad Smith, from emerging and developed markets customers are one of the few aspects President, Society of Actuaries, US. observed in a successful mutual in The first speaker was Caroline Bennet, The second session was chaired by the UK. He emphasized on servicing Practice Leader – Deloitte, Australia Ashwin Parekh, Partner and National customers being just as important as the who gave a presentation on ERM. She Leader- Ernst & Young who initiated price and how the agency plays a vital focused on the significance of building the discussion around the theme of the role particularly in Micro Insurance. ERM framework in organizations

Session 2 : (L-R) Gautam Bhardwaj, Mark Saunders, Ashwin Parekh, Wolfgang Droste, Sabbir Patel, Tony Cheng

The Actuary India March 2012 13 Session 4 – India: Global Destination for Service Delivery

The fourth session was about the current consideration given to India globally as a hub of service delivery to many REPORTAGE geographic locations. It was chaired by Parag Saigaonkar, Regional Managing Director of Deloitte Consulting India. He started with a presentation about how India is gradually moving from the ‘bottom of the pyramid’ and delivery centre focus to an innovation hub. Although finding the right talent continues to be a challenge but the demographic situation is still in India’s favour. The Session 3 : (L-R) Liyaquat Khan, Caroline Bennet, Grace Wong, Peter Von Richthofen, Gavin Maistry, Peter Haslebacher second presentation was given by given Sameer Dewan, SVP & Business Leader especially in these days when in today’s Gavin Maistry, Chief Actuary Munich Re for Insurance at Genpact. He mentioned time they are experiencing high market Asia who talked about an interesting that current trends in insurance show volatility and many regulatory initiatives new concept in risk management called more end to end and complex work such as introduction of Solvency II, ‘complexity’. The idea is that each of being outsourced to India. With changing Basel III. Rating Agencies are also the letters of the word ‘complexity’ regulatory environment, demand for risk laying high importance on the risk talks about an important aspect of and compliance outsourcing is also management practices and have started risk management. For instance first increasing. Although there are challenges incorporating them into their decision two letters denote the Cycle of risk such as insufficient infrastructure, high making. The second presentation was identification to risk modeling to risk inflation, and high attrition; but with given by Peter Von Richthofen, Head of steering, and the Ordering of different measures such as augmentation of Insurance solutions, Asia Pacific –Bank risks that companies are faced with. budget for basic infrastructure, moving of America Merrill Lynch, Hong Kong. The last presentation was given by to tier 2/3 cities, and right employee He spoke about the current trends in Peter Haslebacher, COO – iWorks Asia engagement, these challenges can be the insurance solvency requirement Pacific Sungard, who talked about the addressed. and ALM. Insurance accounting with the importance of automation and the way adoption of IFRS 4 Phase 2 will move it could reduce operational risk for an Next presentation was given by towards a mark to market balance sheet organization. It could improve data Debashish Banerjee who is the Practice which will be harder to manage with management, security, and governance Lead of Actuarial and Analytics for regard to capital and earnings volatility. &control. Other business benefits Deloitte Consulting LLP. He talked about Solvency II has strengthened credit risk could include high volume scalability, the current actuarial off-shored activities capital requirement based on a spread production of executive dashboards and carried out in India. Valuation, pricing, movement applied to the duration of the spreadsheets. experience analysis, loss monitoring, bond, which will entail substantial capital requirement for long dated bonds. He raised interesting questions such as, how exceptional was 2008 widening of credit spreads and what really is the correlation between interest rates and credit spreads.

Next presenter was Grace Wong who is the Head of Life & Health Actuarial Control at Swiss Re, Zurich. The emphasis of her presentation was on the importance and the rewards of embedding risk management in the business. It is important that organization’s strategy, capital allocation, target setting, portfolio and performance measurement are all linked to the risk management principles. The fourth presentation was given by Session 4 : (L-R) Parag Saigaonkar, Sameer Dewan, Liyaquat Khan, Debashish Banerjee, Alok Kumar 14 The Actuary India March 2012 benefit calculations came out to be the activities employing most of the actuarial resources in outsourcing. He stressed that good communication skills, efficiency gains, finding the right talent,

REPORTAGE and cost arbitrage are the key pillars REPORTAGE for successful outsourcing. The last presentation of the session was given by Alok Kumar, Head Risk Management at Swiss Re Shared Services, Bangalore. He explained the way the profile of actuarial work outsourced to India has improved over the years. From data cleaning and simple generation of results, India has lately observed the inflow of more complex work such as capital modeling, ERM, and Solvency II. Actuarial Session 5 : (L-R) Sachin Sondhi, Colin O' Hare, Liyaquat Khan, Patricia Teufel, Steven Haberman, Ronnie Bowie outsourcing can further evolve towards and ability to manage in diversity as Research & Development Actuary more functional ownership and providing being few of the key skills that Actuaries of Munich Re who mentioned how valuable inputs to internal capital and should possess. He quickly went through reinsurance can be used as a tool for the risk management process. a typical MBA curriculum which reflected capital management. He talked about the different tools for increasing assets Session 5 – Educating Actuaries for it being oriented towards business or decreasing liabilities for an insurer Business Leadership leadership and proposed employers, business school, and professionals and the ways regulator view these This session was chaired by Sachin working together to provide an integrated arrangements. The second presentation Sondhi, Strategy & Operations Consulting solution to develop business leadership was given by Paul Sauve, Sr VP, Global Practice Leader – Deloitte Touche. He amongst actuaries. Ronnie Bowie, the Financial Solution, RGA. He started with initiated the discussion by pointing out Immediate past President of Institute and the history of life insurance in India few characteristics that make a good Faculty of Actuaries, UK also stressed the and then talked about the recent IPO business leader and how Actuaries fair importance of actuaries broad basing regulations of IRDA (Issuance of Capital in them. For being a good actuary, one themselves on top of the technical skills. by Life Insurance companies Regulations needs to have an eye for detail, but that Constructive challenges in work can help 2011). GN-10 which was soon released might hinder in developing high level develop business acumen. after the IPO regulations talks about how business decision making abilities. Indian insurers seeking an IPO should He also raised few questions such as, Session 9 – Insurance markets: calculate the EV of their organization. not having CPD credits for enhancing Reinsurance solutions EV methodology prescribed in GN-10 to soft skills, and what are the Institutes This session was chaired by John Poole, some extent is towards market consistent doing towards grooming actuaries as Advisor to the Board of Max New York but at the same time is allowing some business leaders. Colin O’Hare then Life Insurance Co. Ltd. It started with freedom. gave a presentation on how education a presentation by Madhu Sridharan, of actuarial students can be enhanced to develop business awareness in them. This can be done by providing them access to real data, providing industry work experience, and the use of real life situations to explain actuarial concepts.

Particia Teufel, President of Casualty Actuarial Society, US laid down the skills that employers value the most in the Actuaries. Few of the mentioned skills were business acumen, professionalism, strategic thinkers, and motivation to carry beyond technical work. Professor Steve Haberman, Director and Deputy Dean of Cass Business School talked about teamwork, leadership, negotiation, Session 9 : (L-R) Torben Thompsen, John Poole, Madhu Sridharan, Paul Sauve, Chantal Blackie,

The Actuary India March 2012 15 In the third presentation of the session, Session 10 – Microinsurance & help remove poverty, and the existing Chantal Blackie, Chief Business Microfinance: Defining the Minimum challenges faced in Serbia to implement development Office, Hannover Life Re, Financial Security it. She further commented on the Bermuda spoke about the prevailing role of government in implementing This session was chaired by Arup myths in the industry with respect to Public Private Partnership models and Chatterjee, Senior Financial Specialist – REPORTAGE Financial Reinsurance. Some of these particularly the roles actuaries could REPORTAGE Asian Development Bank. myths being: financial reinsurance play in it. Sabbir Patel, Sr. VP, ICMIF, UK bringing no benefit to policyholders, He defined micro insurance as a gave a presentation about Microtakaful, it contains no risk for the reinsurer, form of risk protection operating on its principles and practices, evolution of it causing the failure of insurance basic principles of insurance which this sector, and opportunities. He further companies, and financial reinsurance can be accessed by the lower income mentioned about inherent challenges diluting shareholders’ investment. The population. Financial inclusion is not such as determination of shareholder emphasis of her presentation was on just enabling delivery to banking but income, limited Retakaful market, and clearing these myths by pointing out the it encompasses improving the range, a global shortage of Islamic scholars. desired purpose of financial reinsurance quality and availability of financial The last presentation was given by transactions. Reinsurer faces the risk of services for the underserved and the Mayur Ankolekar, a Consulting Actuary actual experience being worse, financial financially excluded. He further added at Ankolekar and Co. He explained the reinsurance allowing greater capital that for micro insurance to develop indemnity and weather index based freedom and improves solvency ratio its true potential, insurance sector types of crop insurance and stressed which eventually enhances policyholder development and enabling policy and particularly on advantages and protection. Apart from providing a regulatory environments are the essential disadvantages of each. He then detailed cheaper source of capital, it also protects prerequisites. The next presentation the two methods commonly used for its shareholders from downside risk of was given by Kumar Shailabh, General pricing; historical burn out rate and Binary actual profits being less than anticipated. Manager of Uplift India Foundation. He Logistic Regression. Where the former elaborated about a community owned calculates risk premium as expected The last presentation of the session Health Protection Program called ‘Uplift frequency multiplied by expected yield was given by Torben Thompsen, Chief Mutuals’ where communities share estimates, logistic regression uses Pricing Officer, Life and Health, Swiss their health, life risks when in built as time series and predictive modeling Re UK. He talked about the essence of a system and with technical guidance techniques to model the probability of Insurance Linked Securities (ILS) and and support. The risk is managed by claim. the way it repackages insurance risks the communities themselves on the and transfer it to investors via capital principles of risk pooling and self- market instruments. He distinguished solidarity. For instance deciding their own About the Author between the indemnity based and claims using parameters such as earned index based securities. Global longevity premium, claims ratio, fund guidelines in exposure is estimated to be approx USD a technical unbiased manner. There are 20 trillion of pension assets reflecting however challenges such as regulations, a disproportionate demand and finite patience and set up resources. capacity in the insurance market for longevity transfer. ILS could be practical The third presentation was given by [email protected] to insurers by providing capital relief, Svetlana Cavoski, Certified Actuary of Avdhesh is the Head of Modeling team monetizing EV, and become a part of the Dunav Insurance Company, Serbia. She at Aegon Religare Life Insurance long term risk management strategy. highlighted how micro insurance can

Session10 : (L-R) Dieter Kroll, Arup Chatterjee, Mayur Ankolekar, Shabbir Patel, Kumar Shailabh, Svetlana Cavoski

16 The Actuary India March 2012 Concurrent Sessions on Pensions, Employee Benefits and Social Security REPORTAGE

Organized by : Advisory Group on Pensions, Other Employee Benefits and Social Security Venue : The Renaissance Mumbai Convention Centre

Date : 21st February, 2012 Gautam Bhardwaj

by R Arunachalam; FIA FIAI

he Concurrent Session on Pensions, in the old age. He requested the panel T Employee Benefits and Social to discuss both the medical and non- Security was conducted on the second medical needs during the old age. day, 21st February 2012. The themes for Ronnie Bowie presented his the concurrent session were selected perspectives on the improving longevity carefully to reflect the current global issues and how the demography is economic and demographic issues in the changing as a result of this in India arena of Pensions, Employee Benefits Phil Wadsworth and China. This he said has brought and Social Security. The sessions also an exponential increase in healthcare provided a platform to exchange the spending both in terms of the cost and general and technical update involved also the increased lifetime. He also in the design, management, accounting stressed need for engaging with the and evaluation of all type of employee employees and the role of employer’s in benefit schemes. The sessions were this respect in the future. He concluded well attended with a mixture of senior the importance of Actuaries in the professionals and junior students with whole process – especially by designing active audience participation. private and public pension schemes, Session 1 : Financial Challenges in insurance products and making sure Old Age: Roles and Responsibilities of they are well run and deliver on their Sundeep Raichura Stakeholders promises. Phil Wadsworth presented a UK perspective and how Defined Benefit The concurrent session started with pension landscape has changed in Round Table on the topic Financial the UK. He shared the statistics from Challenges in Old Age: Roles and the Purple Book 2011 and how the Responsibilities of Stakeholders. number open schemes have almost The Chairperson Gautam Bhardwaj, halved since 2006 as a result of large Director – Invest India Micro Pension solvency deficit, volatility and business Services introduced the panel: Ronnie impact. He explained how derisking Bowie, Immediate Past President – as a shared objective work well for the Institute and Factulty of Actuaries, Phil stakeholders. He further explained Wadsworth, Executive Director & Chief the range of actions from the point of Ramani S. G. Venkatramani Actuary – Jardine Lloyd Thompson view both Financial Impact and Ease of and Kulin Patel, Director – Client Implementation. Kulin Patel explained Management – Towers Watson. the needs in the old age, the changing The Chairperson Gautam Bhardwaj Indian demographic profile and what suggested that we look at the Financial the employers could do and how they Challenges and how they had been could be enabled. He also explained handled in the past from a European, UK how the employer could set up a Health and Indian perspective. He stressed the Accumulation Plan and Long Term Care importance of this topic and explained Insurance to help meet the old age how India has moved over the past needs. few decades in terms of culture and Kulin Patel how this has created new challenges

17 The Actuary India March 2012 17 DC Schemes – An Australian Stock- the various underlying principles for take. He explained the traditional role Data and Models under the new UK of Actuaries in the Defined Benefit world standards. and how this has changed in the defined Session 4 : The Future of Pensions contribution world. He hypothesized

REPORTAGE greater actuarial involvement in DC Dr. K. Sriram, Appointed Actuary – plans is both necessary and desirable Max Bupa Health Insurance Company in the best interests of beneficiaries. Limited chaired the final session under He went on to share his Australian the theme The Future of Pensions. experiences including focus on risk Michael Winkler, Head Financial Lance Burma management and financial conditions Solutions Life – New Re, made an report for superannuation funds. interesting presentation Variable This was followed by a session on Annuities and the Pensions Accounting for and Measuring Opportunity in India. He started with Employee Benefit Risks in India by the introduction of Unit linked pension Kulin Patel. He provided a snapshot funds in Europe, then went on to of Defined Benefit scheme liabilities of explain the Variable Annuity Features BSE 100 companies and how they have and Guarantees. He explained how the changes during the past few years. He pensions in India fit into this category then explained the proposed changes and how financial market restrictions in AS 15 (Revised 2005) under the are affecting their performance. He draft Ind AS 19 and key updates that then explained the volatility issues, how Martin Elcoate, Jagadish Salunkhe will affect India. He concluded that they could be managed through target compliance changes have provided volatility funds. more and evolving role for actuaries. Ian Rogers, Scheme Actuary – Aon Hewitt, presented on the Trends Session 3 : Measuring Approaches: in Global Benefit Governance. He Security and Quality covered three key policy areas covering: Jagadish Salunkhe, Mercer Consulting Operations, Financial Management chaired the next session under the and Benefit Design. He explained an theme Measuring Approaches: Operational Governance Model with Security and Quality. some example risk assessment metrics. He also presented a snapshot on the Michael Winkler, K. Sriram Lance Burma¸ Principal – Milliman, management actions on benefits; discussed the concept of Pension investments; liability and funding; Funding Index, an index measuring and projecting the funding ratio of various The Round Table and all the pension plans. He presented the presentations were followed by monthly index of 100 largest listed US interesting question and answer companies with DB plans and quarterly sessions. More information on these index of 26 Indian public sector banks. presentations can be downloaded The India Study highlighted the following from the Institute of Actuaries of India challenges: Lack of standardization of professional website http://www. pension related disclosures; Absence actuariesindia.org. Ian Rogers of Pension Funding rules and Asset allocations. About the Author Session 2 : Employee Benefits – Martin Elcoate, Director of Operrations Challenges and Risks – Jardine Lloyed Thompson presented on the topic Quality – A Culture The Round Table was followed by a Not A Checklist. He explained the session under the theme Employee requirements of clients and how they Benefits – Challenges and Risks. view quality, the difficulties in creating The session was chaired by Sundeep and maintaining a process for quality [email protected] Raichura, Chairperson – Actuarial – especially the way checklists are Arunachalam Rajaraman is a Society of Kenya. handled. He suggested that the quality Consulting Actuary in the Insurance Ramani S G Venkatramani presented be better embedded in the process and Pensions area based out of on the topic Actuarial Challenges in itself. He concluded by explaining Chennai.

18 The Actuary India March 2012 Concurrent sessions on Health Care Insurance

Organized by : Advisory Group on Health Care Insurance REPORTAGE Venue : The Renaissance Mumbai Convention Centre Date : 21st February, 2012

by Bhumika Bhatia J. Meenakumari ession 1: Critical illness. How views that the dread disease products S Dreadful? continue to sell well. It is mainly sold to the people of age 30-40 and children. The first concurrent session on Health China has shown increasing incidence insurance in 14th GCA commenced with rates of dread disease and Australia has an inaugural note by J Meenakumari, high declinature rate. Joint Director IRDA. She started the session by talking about existing critical The session was taken ahead by M. illness products in the market. She Karunanidhi where he focused on critical briefly mentioned about the demand of illness and its variations. He emphasized the product, scope of further innovation on the issues regarding critical illness and to reduce product complexities from the perspective of insured and Wolfgang Droste and expectations of customers from insurer both. In his address, he touched the insurers. She chaired the session upon the product options like single pay presented by Dr. Wolfgang Droste, Chief and multiple pay available in the market, Executive Life/Health- Asia Pacific, Gen considerations on including definition of Re, Hong Kong and M Karunanidhi, critical illness in the product, pricing of Director Actuarial Services, RGA a major Critical illness like cancer and Services India Pvt Ltd. Dr. Wolfgang survival trends after a critical illness shared the highlights on the survey on claim. He covered the variants of single dread disease. The scope of survey pay products available in the market covered 95 countries in the period and on what principles does the severity 2004-08 and the survey results were base products work. He discussed what discussed under the following headings. multi pay products offer, concluding M. Karunanidhi a) Market survey and Product features his note with the remarks that there is b) Claims analysis a need in product evolution from the c) Incidence analysis customer’s point of view, innovation in the product covering all aspects In the market survey, he presented like pricing, underwriting claims and the trends of policies in force for some documentation. countries on various dimensions such as age band, average sum insured, Session 2: Life within Hospitals. How product type, benefit type, waiting Painful? period, etc. whereas in the claims The session saw views on life within analysis he covered the no. of claims hospitals and how distressful it is. by market split into death and dread Sanjay Datta, Head Underwriting Nayan Shah disease, the declinature rate of claims and Claims – ICICI Lombard General for some countries over the two insurance chaired this session and the periods of survey. He also covered the honorable speakers Torben Thompson, declinature rate by various reasons of Chief Pricing Officer-Swiss Re-(UK), declinature such as non-disclosure, Herbert Meister, Chief Actuary- Munich exclusions, within waiting period. He Re and Andres Webersinke (Gen Re) shared a study on the thyroid cancer in presented their views on the topic. Korea, the age distribution that is most impacted by it and the likely reasons Torben Thompson talked on the medical for the bad experience in Korea. He insurance perspectives. He covered summarized his survey study on the the type of health insurance products Torben Thompson

The Actuary India March 2012 19 available in the market and their policyholder’s concern included the coverages. He shared the statistics of points like total health expenditure per capita, total • Affordability of a product and its health expenditure as a % of GDP for value for money. some developed, developing and under • Products meeting almost all health REPORTAGE developed countries, also covering needs of people of all ages the contribution of state government • Experience at the time of claims towards health expenditure as a % settlement. of country’s total health expenditure. • Loyalty of an insurer. He showed that USA tops the list of Herbert Meister countries in terms of total health While insurer as an important expenditure while India has still the stakeholder of health insurance market potential for further growth in health has more concerns like insurance and is yet to be tapped fully. • Risk of anti-selection He talked about government’s social • Ambiguous policy wordings responsibility to improve health care • Medical inflation markets, mechanisms for financing • Quality and Quantity of data private health care costs. He also said • Poor disclosure of material facts that he foresees significant growth • Competition in the market etc. in India in the coming few years. To support his views he underlined the He said that the regulators’ concerns following key drivers that will impact the the issues like tariff pricing, commission Andres Webersinke Indian insurance market: limits , portability that is one of the • Demographic- Population size is key issues in a product , guaranteed increasing due to high birth rate and renewability to safeguard insured’s also the improvement in longevity of concern for meeting cost at higher life. ages, product approval and no age • Macro-Economic -Increase in GDP restrictions. He further addressed that per capita and good economic it is a challenge to cover those to whom growth projected for next few years. traditional insurance cannot be offered. Industry has genuine concerns over this, • No major contribution by thus, more practical underwriting and government towards health apart appropriate premium charging should be from RSBY for BPL families allowed. He wrapped up his presentation Sanjay Datta • Inflating health costs on the point that government, insurer • Favorable tax treatment. and regulator should work together to He also shared that health insurance meet the challenges faced. market is a multi stakeholder market The presentation by Herbert Meister with TPA and health providers apart from focused on Trends and Drivers of the government, IRDA, agent and insurers Hospitalization costs in Asia. In his also being a part of the environment. presentation, he talked about the cost He brought forward the challenges of a drivers such as Economic development, new market that is to define a suitable Demographic development, Demand product meeting insured need, pricing and supply of Health care and Health it correctly with limited access to the systems and regulations. Jagbir Sodhi data, negotiating with providers keeping focus on volume of business, insurer’s He talked on how changes in economic business objectives in the market and factors lead to the change in behavior the state of insurance cycle. He shared in demand in healthcare and if supply his concern that in comparison to life is not matched with the demand, it insurance, health insurance policies are leads to an increase in premium rates. complex and it is a challenge to make In economic downturn, high lapse rates individuals understand their need and lead to anti selection so it can be said importance. that there is a correlation between economic developments and insured’s Then, in his presentation he covered behavior. the insured and insurer’s concern Richard Kipp and the regulatory involvement. The He also underlined the demographic

20 The Actuary India March 2012 factors like aging population, changing life expectancy longer the insurance old age reserve by reviewable premium disease pattern, changes in lifestyle cover is required. if still the lifelong renewal is demanded. that result in He said that insurer’s need to have Session 3: Round Table Current Trends • Higher incidence rates due to age proper systems and infrastructure in and Future Projections for Health • Complex medical treatment and place to cover such people and there can insurance in India. REPORTAGE REPORTAGE longer or shorter stay in hospital be no simple underwriting guidelines. The panel members of the discussion • Changing incidence rates due to He also pointed that HIV infected people were Sanjay Datta, Head of Underwriting new diseasesor advanced medical live longer but also for a longer period and Claims –ICICI Lombard General treatment with sickness and prediction for such Insurance, Dr. Nayan Shah, MD- • Inadequate supply of Health care health costs is still uncertain. In the Paramount Health Services (India) and • Increase risk of epidemics and presentation, he covered that HIV is an Jagbir Sodhi Director Swiss Re (UK). pandemics. expensive disease, initial investment on Richard Kipp, Consulting actuary – better treatment can defray later heavy He shared a study on the trends Milliman (US) chaired the discussion. investments, early detection and access of hospitalization burning cost, The discussion revolved around to care are the key factors. He said hospitalization incidence rates, burning various evolving market trend such as that regular payments under the policy cost by diseases in Japan, Taiwan, and the market being dominated more by are more appropriate than lump sum Korea. He talked on how customer inpatient hospitalization, increase in benefits under the cover. He indicated and provider behavior affect supply health savings account, insurers bent on how insurers want to know more and demand of health care. In the towards different distribution channels about co-morbidities of HIV and wishes presentation, he mentioned the impact such as Bancassurance. The panel to be flexible with the UW guidelines of regulations and controls, screening discussed about TPAs role in the health along with the diagnosis of HIV infection, programs for selected diseases and care industry. It discussed on how TPA additional data on HIV status, full health changes relating to underwriting on is expected to be involved in various questionnaire and medical report also changing utilization behavior of insured. aspects of health care such as it is being on all co-morbidities and the holistic asked to study fraud, its contribution He concluded on the statement that risk assessment of the individual’s risk towards the working of government health systems are very complex and if necessary. He focused that rather mass policies, its support to insurers subject to reforms. Impact of reforms than forcing industry to price a risk that in running loyalty programs and health is difficult to forecast and is often is difficult to price emphasize more on checkups. unexpected. education and prevention to reduce Dr. Nayan Shah talked explicitly about cost for HIV treatment, also encourage Andres Webersinke continued the the problems that a TPA faces in terms employers to become interested in session by sharing views on issues like of software, quality of data, expert group life cover with HIV prevention and insurance cover for persons living with manpower, organizing health camps at treatment cover and state sponsored HIV and lifelong renewal. He touched regular interval. The panel highlighted programs for masses and needy. upon on the IRDA’s recent proposal of that issues like survival of inhouse TPAs extending insurance cover to people In his second agenda of the and that primary care management with HIV who are in the normal course presentation, he covered the issue of can be very challenging while it will out of the scope of traditional health lifelong renewal. He discussed on how still want quality of treatment to be insurance cover. He stated that there insurers are reluctant on offering lifelong assessed properly. Towards the end of is a need to set clear underwriting renewal after a certain age due to steep the discussion Richard Kipp contributed guidelines about all the risks that can increase in the health costs. He shared his views on the quantity and quality of be considered, risks that will be denied a study on hospitalization expenses data and the challenges faced if the two also indicating the specific loadings. and days of hospital stay, emphasizing are not met. He cleared the view that an insured that an insurer should keep in mind contracting HIV after being accepted the steep curve of hospitalization costs About the Author by an insurer under the health policy while pricing lifelong renewals. Also that cannot be denied a cover at the time of insurer should not price the risk if it does renewal. He shared a study on the UK not have the expertise to do so as one population that were detected as HIV+, of the study shows that hospitalization showing that with advancement of expenses of an insured aged 90 years treatment, life expectancy is increasing may be 12 times more than an insured [email protected] rapidly. He also emphasized that the aged 43 years. Bhumika works in actuarial time of diagnosis of disease is the key He suggested that instead of demanding department of Apollo Munich Health factor in expenses incurred in treatment lifelong renewal, introduce incentives insurance co. Ltd and is involved in of HIV; a highly specialized product is or regulation for (tax-efficient) medical reserving, product pricing & IRDA needed for such people as higher the savings accounts or otherwise set up reporting.

The Actuary India March 2012 21 issue not only to the intention and ability Concurrent sessions on of management to bring in profitability General Insurance but also the acute shortage of qualified, by Neel Chheda experienced actuaries. Mike Fowlds made a presentation of REPORTAGE REPORTAGE Organized by : Advisory Group on General Insurance interesting case studies on of the subject Venue : Renaissance Mumbai Convention Centre ‘Causes for failure of General Insurers Date : 21st February 2012 across the globe’. This study involved more than 1250 insolvencies or failures over the years, some of which included he topic for the sessions of the the topic was very relevant and valid for FAM Insurance in 1966, Transit Casualty T assembly gave full justice to the the Indian General Insurance Industry in 1985, & Mission Insurance Co. in ongoing theme of the conference: which was bleeding due to under pricing 1987. More than 65% of these failures Meeting the Challenges of Change. and under reserving across almost all were caused due to insufficient reserves, The chairperson of the Advisory Group the companies in the Industry. under-pricing and management frauds. for General Insurance Sharon D ‘Costa Hemant Kaul, CEO of Bajaj Allianz Other causes included overstated greeted all the speakers. General Insurance Company stated that assets, catastrophes, significant change Session 1: Round table on Anatomy of it was the opportune time for the Indian in business, impaired affiliate and Failure of General Insurers: Lessons industry to learn from other economies/ reinsurance failures. from HIH Australia and Other Failures. companies which have seen failures Panel members pointed out that in and insolvencies. He commented Chairperson: Patricia Teufel, President the Indian context, high business that the industry was bleeding in the of Casualty Actuarial Society (US), growth coupled with under-pricing, absence of any major catastrophe event inadequate reserving, inadequate Panel members: Mike Fowlds, post-detariffication, It would be difficult reinsurance protection and a reduction Hemant Kaul, Bhargav Dasgupta & to fathom the impact of a catastrophe in solvency margins from 1.5 to 1.1, Vikas Newatia. on the Industry. posed a significant threat. Hemant Kaul Patricia Teufel introduced the topic Bhargav Dasgupta, CEO of ICICI Lombard remarked that the current condition and supervised the proceedings of General Insurance Company, added of the Indian non-life industry was the session. The session was highly that the non-profitability of the Indian the result of a complete failure of the interactive between the panel members General Insurance Industry is on account corporate governance model. along with many interesting questions of insurer’s inability to understand the It was after this era that more from the floor. risks being underwritten and thereby regulations were brought in, extensive price accordingly. He attributed this Overall the panel members agreed that risk management tools were devised,

Mike Fowlds, Hemant Kaul, Bhargav Dasgupta, Patricia Teufel, Vikas Newatia

22 The Actuary India March 2012 solvency regime established and also deterministic methods and new improvements in information technology developments. He also discussed and infrastructure to have better approaches to reserve for non-traditional analysis and decision making for pricing exposures. He discussed reserving the business. methods like Mack’s, Bootstrapping and Berquist-Sherman, highlighting the pros REPORTAGE Mike Fowlds also presented case studies and cons of each method. from recent times like Teisei Marine & Fire and HIH (Australia) Insurance in He highlighted some new developments 2001, American Insurance Group in across the globe like time series 2008 and AMI (New Zealand) in 2011. modelling to analyze effects of reserve The underlying causes of failure in these Peter Lee cycles and to adjust for correlation companies. cases were catastrophe events coupled between accident years. The session with inadequate reinsurance protection, E.g. Netflix used to ask for reviews concluded on a note that it was better inadequate understanding of risks or comments for the films and to consider the variability of reserves from globalisation and other systemic then based on algorithms, it could rather than point estimates and it was risks like over reliance/dominance of predict the probable rating of any important to consider the diagnostics affiliates/leaders. upcoming movie. from triangles rather than to rely on • The second era constitutes the overly-complex models. The session concluded with remarks usage of predictive modelling in that new regulations have been framed Session 3: Natural Catastrophes: P&C Industry. Predictive modelling which include Solvency II framework Learnings for the Indian market from is used extensively for pricing the to address these issues. In the Indian 2011 gloabal experience business and also to inform the context, new regulations like Financial claims team to allocate resources Chairperson: R.R.Belle, CEO of SBI Condition Assessment Report and and tackle fraud. It takes form General Insurance Company. Economic Capital could be very effective of multivariate analysis and if the management use it well and gives Presenter: Jyoti Majumdar, Vice generalised linear modelling. In the de-facto position to the Appointed President Swiss Re – Cat perils many economies, it has helped to Actuary at Board meetings. identify profitable segments and Session 2 Global Advances in Pricing restrict the loss ratios significantly and Reserving • Third era constitutes usage based Chairperson: Ron Kozlowski, Director insurance (UBI) which would involve – Towers Watson Asia charging motor insurance according Presenters: Peter Lee and Debarshi to exact usage of the vehicle. This Chatterjee will involve installation of GPS devices in the vehicle to capture real time data of the location of the vehicle. R.R.Belle Debarshi Chatterjee spoke on global advances in reserving. Along with Jyoti Majumdar explained why insured brief introduction of traditional losses because of catastrophes were on a rise in recent years with specific examples of recent experiences of earthquakes and floods. He then

Ron Kozlowski summed up the lessons to be learnt for the Indian market from the 2011 Global The presentation by Peter Lee talked Experience. about the advances in the technologies used for pricing in insurance as well as The total insured losses from 2011 other industries. These advances could Natural Catastrophes were USD 47bn, be classified into 3 eras. which is several times more than predicted by any Natural catastrophe • The first one was usage of algorithms Debarshi Chatterjee Model. The main reasons for this and the rise of machines. He were increased sum insured value of demonstrated how algorithms were methods of reserving he discussed property, more concentration in exposed used in non-insurance industries by various stochastic methods, advanced areas, more insurance penetration than The Actuary India March 2012 23 earthquakes and New Zealand catastrophes was considered especially & Thailand floods. Some of the for floods. This could be done by reducing shortcomings of existing catastrophe exposure by applying sub-limits per models in predicting these incidence location and meaningful deductibles; rates were noticed. E.g. After shocks by writing reinsurance for catastrophe REPORTAGE affect short term incidence rates and only on non-proportional basis and by secondary loss agents like tsunami, analysing based on very granular data liquefaction, business interruption especially for flood risk as well analysing etc. also add a lot of uncertainty to accumulation of exposure. prediction. Further no allowance was

Jyoti Majumdar given to the duration of shaking in the event of occurrence of an earthquake. expected, climate change, rise in sea About the Author level, demand surge post any event and It was also observed that countries rapid development in recent years. which had a better insurance ratio i.e. ratio of insured loss to total There was no major natural catastrophe economic loss suffered, were more in India in 2011, however the hazard successful in rehabilitation and revival map for India states that around process especially where catastrophe 59% of Indian terrain is vulnerable to [email protected] reinsurance was majorly done earthquakes and 30% has major or internationally. Neel is an Associate member of IAI severe hazard. & ICAI and FRM Holder. He currently Also a need for better pricing and Recent catastrophe events were works in the Actuarial department at underwriting of these natural discussed which included Japan Future Generali India – Non Life

the Actuary India – Editorial Policy (ver. 2.00/23rd Jan 2011)

Version history; Ver. 1.00/31 01 2004 Ver. 2.00/23rd Jan. 2011

A: “the Actuary India” published monthly as a magazine since October, 2002, aims to be a forum for members of the Institute of Actuaries of India (the Institute) for; a. disseminating information, b. communicating developments affecting the Institute members in particular and the actuarial profession in general, c. articulating issues of contemporary concern to the members of the profession. d. cementing and developing relationships across membership by promoting discussion and dialogue on professional issues. e. Discussing and debating issues particularly of public interest, which could be served by the actuarial profession, f. student members of the profession to share their views on matters of professional interest by way of articles and write-ups.

B: The I Institute recognizes the fact that;  there is a growing emphasis on the globalization of the actuarial profession;  there is an imminent need to position the profession in a business context which transcends the traditional and specific actuarial applications.  The Institute members increasingly will work across the globe and in global context.

C: Given this background the Institute strongly encourages contributions from the following groups of professionals: • Members of other international actuarial associations across the globe • Regulators and government officials • Professionals from allied professions such as banking and other financial services • Academia • Professionals from other disciplines whose views are of interest to the actuarial profession • Business leaders in financial services.

D: The magazine also seeks to keep members updated on the activities of the Institute including events on the various practice areas and the various professional development programmes on the anvil.

E: The Institute while encouraging stakeholders as in section C to contribute to the Magazine, it makes it clear that responsibility for authenticity of the contents or opinions expressed in any material published in the Magazine is solely of its author and the Institute, any of its editors, the staff working on it or “the Actuary India” is in no way holds responsibility there for. In respect of the advertisements, the advertisers are solely responsible for contents of such advertisements and implications of the same.

F: Finally and most importantly the Institute strongly believes that the magazine must play its part in motivating students to grow fast as actuaries of tomorrow to be capable of serving the financial services within ever demanding customer expectations.

24 The Actuary India March 2012 • characteristics of Indian Financial CONCURRENT SESSIONS ON Market - narrowest bid-ask spread LIFE INSURANCE in the region in spite of small average transaction sizes By Kailash Mittal • an explanation of desirable features Organized by : Advisory Group on Life Insurance REPORTAGE of market consistent calibration, Venue : The Renaissance Mumbai Convention Centre including: Date : 21st February 2012 o yield curve construction using interpolation, extrapolation and he concurrent session was split into • regulations on the use of importance of smoothness T three sessions; each session was genetic testing and associated o determination of volatility using relevant to the ongoing theme of the confidentiality conference “Meeting the Challenges implied volatility and the need of Change”. The chairperson of the • impact on a prospective for a long term volatility target Advisory Group for Life Insurance, policyholder’s decision and adverse Nelius Bezudenhout welcomed all and selection using a two state model Session 2: Regulatory control over set the tone. using loss ratios and relative risk. Pricing and Product Design in Life The study concluded that: Insurance was chaired by Anil Singh, Session 1: Aspects of risk in Appointed Actuary – Bajaj Allianz Life o adverse selection does not Life Insurance was chaired Avijit Insurance Co. Ltd. Chatterjee, Appointed Actuary – ICICI appear unless purchaser Prudential Life Insurance. This session insures a small proportion This session had a very interactive talk comprised of two presentations: of wealth, the elevated risks on Regulatory control over Pricing implied by genetic information and Product Design in Life Insurance Genetic Testing, Insurance are implausibly high and the by Gary Comerford, Chief Marketing Underwriting and Adverse Selection size of the low-risk stratum is Officer – RGA. presented by Pradip Tapadar, University unrealistically small. of Kent covering: He shared the results of a survey he o in circumstances that are conducted on 22 RGA country offices • introduction of relevant genetic plausibly realistic, private worldwide. The offices were split into factors, e.g. single gene disorders genetic information relating “Mature” and “Developing”, based such asHuntington’s disease which to risks only available to on the country’s own assessment of can be easily recognised by their consumers does not lead to its status. Some interesting points cause vs. multifactor disorders adverse selection. highlighted were: such as cardio-vascular diseases and cancer for which genes and Calibration of Economic Scenario • various mature countries had no environment, and other such Generators (ESG) presented by Eric product pre-approval process factors play a role Yau, Barrie & Hibbert Asia covering: • average processing time for product • affect of adverse selection on the • arecap of ESG, its importance and approval in countries having a pre- companies generally modelling of a typical workflow approval process varied from one to twelve months, India currently ranking last

Using special voting meters to record real time responses, Gary also conducted an on the spot interactive feedback session. The majority of respondents agreed that:

• the products should be pre- approved by IRDA

• a reasonable turnaround time for product approval was one month

• the most important issue facing IRDA was protecting policyholders’ interests

• inappropriate sales practices are (L-R) Pradip Tapadar, Avijit Chatterjee, Eric Yau most common in agency channel

The Actuary India March 2012 25 Richard Holloway, MD, South-east Asia that the insurance companies should & India Life – Milliman be marketing the products and benefits instead of a push based sell. Ramnath Balasubramanian introduced the panel and set the context for The products should be sold depending subsequent discussions. He was on the needs and risk appetite of the REPORTAGE instrumental in facilitating the customer. He further questioned ‘what discussions. They key points raised by business are we in’? He suggested the panel members are summarised that the insurers should differentiate below. between simplified and complex products. The pricing and risk mitigation Anil Singh M. Suresh started the discussion with strategy for simplified products may be special emphasis on understanding based on the law of large numbers, but the actual needs of the end customer. for complicated products it has to be He further stated that if the product based on underwriting requirements offerings or the pricing of current and detailed experience analysis. products need to be revisited, the He stressed on the fact that there is insurers should proactively relook at the tremendous scope for innovation. suite of products offered by them. He highlighted that the premiums He recommended that the industry are currently higher than what the should focus on marketing of products people can afford. He emphasised instead of focusing on sales. The that the distribution costs are high and insurers need to bring down both initial Gary Comerford insurers should sell based on financial advice instead of a ‘push based’ sale. and subsequent maintenance costs. He further elaborated that customer Insurers could explore alternative ways communication should not be the fine- of distributing products, e.g. use of It was also discussed that the industry print but instead focus on the intent of technology enabled platforms, etc. needed to focus on the back end systems the product offering. He opined that companies switching to and processes, sort out implementation traditional business from predominantly Further, the insurer should generate issues and follow best practices for unit-linked earlier would not be able to trust and brand value. It is the duty appropriate risk management. contribute to a win-win situation for all of the insurer to ensure that the the stakeholders. The speaker concluded by summarizing intermediary is ‘delivering the last mile’ the key findings of the survey. While as planned. The agency should not be Richard Holloway started with a respondents in developing markets driven by scale but quality of business. comparison of the Indian market with the South-east Asian market. The Indian generally felt that protection of The only way for increasing the business market is perceived to have a great policyholders’ interest should be the was though enhanced productivity. priority of the Regulator, those in mature opportunity but it has substantially low markets voted for solvency regulations P. Nandagopal focused on the fact that profit margins when compared with as the key regulatory priority. With the insurance products should address ~70% in Indonesian market and ~80% regard to the product approval process, all the potential needs. He reiterated in Singaporean market. the regulatory focus is generally on product design in developing markets while in mature markets, it is the distribution method.

Session 3: A Round Table on “Marketing and Selling Life Insurance Products – A Global Challenge” was chaired by Ramnath Balasubramanian, Partner – McKinsey & Co. The panel members were:

Andrew Cartwright, Appointed Actuary – Kotak Life Insurance Co. Ltd.

M. Suresh, CEO – Tata AIG Life Insurance Co. Ltd.

Dr. P. Nandagopal, CEO – IndiaFirst Life Insurance Co. Ltd. (L-R) Ramnath Balasubramanian, M Suresh, P. Nandagopal, Richard Holloway, Andrew Cartwright

26 The Actuary India March 2012 Further, Indian market has high to a need-based selling. from the participants which lead to a operating expenses, lower commission He shared his thoughts on the ‘absence meaningful discussion. To summarise, payouts to intermediaries, and poorer of trust’ in the market. There is a lack the key takeaways from this highly persistency when compared with of trustworthy advisors. This may interactive session were that the other South-East Asian markets. In an be attributed to the fact that this industry needs to strike the right

REPORTAGE ideal scenario, the distributors should REPORTAGE profession is not a sought after one balance among all the stakeholders as be able to comfortably live-off the and parents typically did not encourage business is a collaborative effort. The commission paid. their children to become professional value proposition for each stakeholder According to him, the unit linked insurance agents. should be improved by reducing the products available in the Indian market cost of product offering and making it According to him, the current regulations are fairly simple but the term products financially viable for each stakeholder are instrumental in shaping the are still first-generation. There is scope and increasing trust though appropriate insurance market. But the insurance for improving the protection offerings and legible disclosures. companies themselves are developing in the Indian market. He highlighted and redesigning products in order to that the participating products are not differentiate themselves rather than actively regulated in the Indian market. develop products catering to customer The distribution channels need to evolve needs. However, product innovation is About the Author for products to be marketed and sold to not the crux of the issue. He reiterated the end customers. He drew a parallel that lack of professional and trustworthy with the sophisticated offerings made distributors is the main problem. by Independent Financial Advisors He also mentioned that black money in (IFAs) in Singaporean market. business community poses problems with financial underwriting and hence Andrew Cartwright said that the market [email protected] is currently in ‘product push’ mode. He affects the decision making and Kailash Mittal is a Fellow with the drew a parallel with a game of chess, providing appropriate solutions from the Institute of Actuaries of India and wherein the advisor was using every insurers. currently is the Pricing Actuary and opportunity to push the next move by There were many interesting questions heads the actuarial pricing team. pushing a product instead of migrating

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Kuwait Re is proud to be a regional leader in technical expertise and continues to invest in its human capital. Kuwait Re is now looking for a driven and experienced actuary to head up the actuarial department. The successful candidate will be a fully qualified actuary with a minimum of five years experience in general insurance and strong leadership, communication, analytical and IT skills.

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The Actuary India March 2012 27 Renaissance = (Math + Art) x Imagination by Krithika Verma

th th

EVENTS he 14 to 16 century witnessed some children get the perfect score at T a period of ‘Renaissance’, which mathematical expressions. The top 15 About the Author means rebirth and also referred to as scorers qualified for the final game – the glorious period of revival. A similar “Memory.” theme resonated at the 14th Global In “Memory” every child was tested on Conference of Actuaries (GCA) at the heir power to concentrate and embed Renaissance, Powai. Art and Math information within a short span of melded to produce enthralling sessions time. The children saw a collage of 20 [email protected] from young budding talents of Mumbai’s pictures for a couple of minutes, after public schools. Krithika Verma is a student member which the roster was to be penned. Two of the Indian Actuarial Profession and Being a member of the Indian Actuarial of the three young winners surpassed employed with Aegon Religare Life Profession, I volunteered to organize a our expectations by reproducing the Insurance. set of games for children participating entire list within an unbelievable two from over 12 public schools in Mumbai. minutes. Three NGOs namely Muktangan, Salaam Some of our dear actuaries helped Exuberating energy every second, it was Balak Trust and Door Step School have evaluate the 25 short-listed slogans to indeed a pleasure to spend quality time partnered with the public schools. declare the three winners of the slogan- with them. As the famous quote goes A set of 80 creative entries gushed writing competition. These winners “The grass is greener on the other side in and were judged for creative, but read out their slogans confidently to a of the fence”, the children wished to be mathematically underpinned slogan- packed GCA audience. Nadeem Jameer like the actuaries they saw and we felt writing. The topic read, “How can the Khan’s winning slogan read, “Addition nostalgic about our childhood. city get better using Math?” Twenty-five of cleanliness and subtraction of filth After enjoying the evening along the children were selected from the slogan will make my city 100% beautiful.” picturesque Powai Lake and followed by entries and math grades to attend the Desmond Kentsmith, President a hearty feast, the children left for their Actuarial Gala Function and Awards International Actuarial Association respective destinations glad to have got event (AGFA). The children played two and Prof. Fatta Bahadur KC, Chairman a glimpse of the actuarial world. The rounds of games. Nepal Insurance Regulatory Authority experience reminded me of a popular Math Magic, a game comprising of a felicitated the winners. axiom “A thousand words will not leave set of arithmetic equations to be solved so deep an impression as one good The children were ambassadors using BODMAS rules served as the deed.” of joy and dynamos of novel ideas. semi-final round. It felt proud to see

28 The Actuary India March 2012 Institute and Faculty of Actuaries event in india by Derek Cribb EVENTS n 20 February, representatives from O the Institute and Faculty of Actuaries About the Author held an event for our members. Our Immediate Past President Ronnie Bowie hosted the event, supported by myself, Trevor Watkins (Director of Education) and Karen Brocklesby (Registrar). This was a great success with around 120 [email protected] attendees, and we were thrilled to have Derek joined the Institute and Faculty an opportunity to meet some of our of Actuaries in May 2010 as a India-based members and listen to their consultant, taking the responsibility of views. Acting Chief Executive in September Having welcomed the participants to 2010. He has recently been appointed the event, Ronnie took the opportunity to take the role of Chief Executive on a permanent basis and will lead to speak about our new strategy. Trevor the implementation of the strategy followed by expanding on how we are released in June 2011. dedicated to providing more support to our student members in India when preparing for exams, and about the S N Sindhi, Debarshi Chatterjee and important links we continue to maintain Mamata Pandey. As Ronnie highlighted, and develop with our friends and there was an immense amount of hard colleagues at the Institute of Actuaries work put in by the new Fellows, but in of India (IAI). Trevor also explained the many cases their families had made arrangements for sitting the Institute great sacrifices to support them on and Faculty’s CA2 (modelling), CA3 their journey, and they too deserve all (communications) and CT9 (business our thanks. I would encourage you to awareness) examinations. visit our website, www.actuaries.org. Tom Jowett, an Institute and Faculty uk where there are photographs of the member from Swiss Re, then outlined awards being presented to these new our new Professionalism requirements, Fellows. On 1 March we were pleased including how these map across to the to welcome Debarshi Chatterjee to our IAI’s requirements and the fact that London offices which he visited to meet under the new requirements, members Ronnie, Jane and myself. will start to gain a greater understanding This presentation was followed by a of Professionalism while they are question and answer session. The studying, rather than waiting until they formal part of the event was drawn become Fellows. to a close and followed by informal The highlight of the event was the networking, where we greatly enjoyed presentation of awards to our newly the opportunity to speak to members qualified members in India. Ronnie and their families. presented each new Fellow with a I would like to extend our thanks to the pack which included a glass ornament IAI and Liyaquat Khan for their kind enclosing the Institute and Faculty hospitality, especially Aparajita Mitra for crest, pen, and a memory stick all of her help in arranging this event. containing video clips and information Congratulations again to our newly on volunteering, member interest qualified Fellows, and thank you to all of groups, our strategy, and our President our members in India for your continued Jane Curtis’ address to members. support. Congratulations to our new Fellows Mayur Ankolekar, Kirti Kothari, Pratyay Bhattacharya, Pranshu Maheshwari,

The Actuary India March 2012 29 Announcement for members of IAI The Actuary India Scheme of Awards for Best Article & Reportage for the Calendar year 2012 and thereafter till amended The objectives: recognition of the efforts put in and encourages members to write for the Actuary India magazine either in the form of Articles and/or reportage for various IAI events. A nnouncement Process of selection: Three member Selection Group will be appointed by the President in Dec. 2012 and every December thereafter to set parameters for selection and recommend best two Articles and best two Reportages in order of merit. The Awards and recognition: Based on the Selection Group’s recommendations, the following rules shall apply; a) The awards will be given by the Chief Editor during the AGFA held immediately after the end of the calendar year 2012. The awards will be in the form of cash prize and recognition plaque. b) The three member selection Group will send its recommendation by January each year based on editions published in a calendar year 2012 and each Calendar year thereafter.. Every member of the selection Committee will come out with his/her own list of best five articles/reportages. Thereafter, the Group will meet in the second week of January and come out with a commonly agreed upon best two. In the event there is no unanimity the Selection Group will decide on how to select the best two (e.g. going by majority view, draw of lots from the five best drawn by each or any other). This list, along with justifications, will be sent to the President well in time for him/her to announce. c) The Author/s of first best Article and Reportage will receive a prize of Rs. 10,000/- for the Article and the Reportage and the next best will receive Rs. 5,000/- accordingly. In case there are more than one Authors, the amount will be allocated equally, however the recognitions plaques will be given to each. d) In order to qualify each article/reportage should meet the following minimum criteria; I. at least about 500 words. II. should not be reproduced from articles elsewhere (while sending the article the author should give a declaration to this effect. III. Should be written by a member of the IAI (in the case of joint authors, all should be members of the IAI) at the time the article is published. IV. Reportage should be based on event organized by IAI only. e) The award winning authors along with the Selections Groups key points on selection will be published in the March issue of the Actuary India each year.

Liyaquat Khan

Awards for best articles in The Actuary India - 2011 In accordance with the framework published in the September 2011 edition of ‘The Actuary India’ the three member committee comprising of Nick Taket, Sunil Sharma and Meenakshi Malhotra, evaluated the articles published in the year 2011 and unanimously selected the following two articles for the award.

Edition Title Author Comments Ranking Sept. Ageing Interesting, and comprehensive review of some aspects 1 2011 population: and implications of the 2011 Census. policy The author has done an in-depth analysis of the problem responses that the Indian aging population is facing and has done and a pretty good analysis of the rapid social and economic challenges changes that are transforming the lives of old people. The author has also pointed out to readers various issues that needs to be addressed via timely formulation Hemamalini Ramakrishnan and implementation of the policies keeping in mind the rights of the old age people. Sept. Guaranteed Good, interesting, topical, short review of the implications 2 2011 renewability of recent regulatory changes for health insurance. of individual health insurance

Pal Reddy Vishnu Vardhan

30 The Actuary India March 2012 Vijay Balgobin – First fellow of IAI – 2011 from Mauritius

[email protected] FACE TO FACE

Your educational background insurance and pension market was similar to Mauritius , while UK was totally different . I completed my Advanced level (Cambridge, Higher School Certificate) at John Kennedy State Secondary School, I sat for the final SA4 subject, some 6 times with UK and failed. Mauritius in 1981 I came out 21ST in Mauritius. I studied As I went last April 2011 to take my exams, I told her that it Maths, Chemistry and Physics – I never studied subjects like was the last attempt after which I am closing down, I will not accounts, economics etc! go back in an exam hall !. I was just sick of exams. With these results I was eligible to get a scholarship to study at After coming out of the UK exam in April 2011, she just told a university in Europe. I applied and while waiting, I applied for me, ‘why not try this time with the SA exams in India? The a job as a clerk in an insurance company, because university Indian exams were just one month after , in May 2011, I did would start only in September, so I could work and get some not want to , but she kept at it and finally I gave up and said pocket money, have some fun while waiting to go to university. OK , but I am not studying anything and I am just going to do it to please you . How did you aspire to become an actuary You can imagine her joy when she learnt that I passed. I had no personal aspiration to become an actuary, I had never heard of it. I was planning to take a BSc in Electronics How did you celebrate your success Engineering. But when the CEO of the insurance company I I just distributed sweets at the office. joined for a temporary few months looked at my high school results, he told me – Why not go for actuarial science to How has been your journey so far become an actuary? It is much more valuable than a simple I have had a great time working in the actuarial department university degree. The Company would support my studies. and climbed the ladder very quickly to the Management That was where it all started; I never got into any university team of the Company. I am now Senior Manager of both and registered straight with the Institute of Actuaries (UK). At the Actuarial Department and the Pensions Department, that time there was not a single qualified actuary in Mauritius. with additional overview of the actuarial aspects of Life and By not applying anymore for any university, I was taking the General Insurance, quite a busy and actuarially fulfilling role. greatest gamble of my life. Completing the Fellowship was just the missing part of the I had no idea what it was, but I had heard so many good things fulfilment of my career as I was already quite active on the about it and the job prospects were so clear cut at that time actuarial front. I now feel more confident. Clients have a better that I took up the challenge. There was only one AIA (UK) in the appreciation and respect of your views and your abilities when company and no Actuarial Department. you are qualified. With my decision to go for it, and when I passed the first two Did you face any difficulties when pursuing this course subjects, the Actuarial Department was created. from Mauritius I completed my Diploma in Actuarial Techniques in 4 years, in Definitely, studying from Mauritius is quite difficult, especially 1987. I was awarded a prize from the Worshipful Company of after completion of the CT subjects. That was the reason Actuaries (UK) for my performance in the Exams. why I took a 12 year break. There is a total isolation from Since you are the first Fellow in Mauritius, what was major financial markets; there is no student environment, no your family‘s reaction tutorials, no exposure etc. If today I have completed the FIA, I would give the credit to my You have to rely on yourself. There is no actuarial society yet wife Saloshna. She was overwhelmed with joy and tears. in Mauritius though there are discussions about setting one up. There are only 13 fellows in Mauritius. The good thing is, First of all I took a rest of 12 years after completing my Diploma however, that the employers provide financial support for the in Actuarial Techniques; there was no inspiration, guide or tuition course and exams. mentor to go for completion to FIAI. At that time there was no FIA/F IAI in Mauritius. So I focused on my work, got married. Any message you would like to convey to other aspirants After I got married my wife encouraged me and pushed me in India and Abroad doing the course from IAI back to complete my studies. But when I resumed studies , I There are a very significant number of high flying students, did it through the Actuarial Society of India , as I felt that the who after completing their secondary school in Mauritius

The Actuary India March 2012 31 are entering the actuarial field. It is becoming more and Any ways as to how best IAI can help in supporting the more popular. But care must be taken to understand that actuarial profession in Mauritius. actuaries today can no longer operate in an ivory tower. Traditionally people know the UK Institute & Faculty much more Actuaries operate today in a highly regulated market and due than any other actuarial institute. I think the first thing to do is importance must be attached to legal advice and advice from to get the message through to actuarial students in Mauritius other professionals operating in the same business. FACE TO FACE TO FACE that studying through India has the same professional value. The actuary is being asked to communicate more and more These kinds of things usually take time. A regular channel effectively the science which he or she has studied, to non- of information to the Mauritian employers and students and actuaries. Considerable time has to be spent explaining the educational institutions will gradually get over that. why and how of an actuarial result to clients. It is important for students to know that the legal definition of an Actuary in Mauritius already includes ...’ A Fellow of the Any dictum that you have always believed in and which Institute of Actuaries of India ‘, has had considerable impact in your professional and personal life So there are no hassles required to look for equivalence in the Mauritian market, with the other actuarial associations. I am a firm believer of God and He provides me with the inner strength, and direction required to evolve in this hectic world. The cost of actuarial studies has always been a worry for some students.... studying through India will definitely cost less than I believe that however qualified a person is, he should always other countries through a more favourable exchange rate for keep his feet on the ground! the rupee. Humility is the mark of a professional, not arrogance. We have There are some facilities which can be offered through to decide whether at the end of our career we want to be tutorials / seminars /or one of the conferences may be held remembered as a good human being or a good professional. in Mauritius!

Nikhil Gupta Meena Sidhwani Award Winner- 2011 [email protected]

I am elated to have been rewarded the esteemed Meena been a long journey of successes and failures that have helped Sidhwani Memorial prize for scoring the highest marks in CA2 me develop both personally and professionally. – Modelling course.I am humbled and thank the institute for Career path so far this recognition. I have around 4 years of actuarial work experience. I started my Educational background career in 2007 with XL Insurance and worked for 1 year before I am pursuing Actuarial exams from the Institute of Actuaries pursing my higher studies. For past 3 years I have been working of India and Institute and Faculty of Actuaries, UK. I have with Torus Insurance in commercial lines pricing domain. completed all my exams and with few formalities outstanding, Pleasure of being an Actuary and would hopefully be receiving my fellowship soon. Pleasure and Pain are part of this profession. If you are on the I hold an MSc from Cass Business School, London where right track, then it’s certain that pleasure will make the pain I completed the course with distinction (Class of 2009). happily bearable. Prior to this I completed my engineering in Electronics and Communication from JIIT University, Noida (Class of 2007). My The profession offers a perfect balance of quality work; schooling has been from Delhi. financial rewards and work hours (take the exams out!). Just the realization of having the skills I have acquired as an actuary How did you get in to being an Actuary that make me stand out of the crowd is very satisfying. It feels My father introduced me to this profession. He knew about great to be a part of a small community of really smart people Actuarial Science, but chose to be a Chartered Accountant. that is going strong. After completing school, it was my time to decide and I went In India, ‘career is by chance and not by choice’ and you have with the former. to work equally hard in whatever you do to succeed. For me, I must admit that with all the fears of low pass results, exams enjoying a career that I chose is the biggest pleasure of being being difficult and quite a few of them, it was intimidating to an Actuary. start with. However a decision I am happy to have made. It has

32 The Actuary India March 2012 Arjun Nagal ACET January 2012 Topper

[email protected] FACE TO FACE

Tell us about yourself, your educational background and risk assessment and management is increasingly important for your hobbies which the Actuarial Profession is ideally suited. I currently work with the Business Intelligence Unit at ICICI How many hours of study on average per day did you Prudential in Mumbai. put in to top the ACET result where in 1,663 candidates appeared? I completed my MBA from the Indian Institute of Management, Bangalore in 2003 immediately after a degree in Electronics More than the number of hours, I tried to ensure consistent and and Telecommunication Engineering from the University of regular effort. Studying time would have been an average of an Pune. hour a day. I spend most of my free time playing or following a number of What do you think you can add value to the Actuarial sports. I play squash, basketball and golf. I often get up early Profession? or stay up late to watch sports matches live. I frequently trek in I have worked on projects with multiple functions as a part the Sahyadris in the monsoons and the Himalayas whenever I of the Business Intelligence Unit. This would help me bring a get the chance. I also like playing chess, reading fiction thrillers broader view to the Profession. A combination of actuarial skills and history. and an understanding of others functions would help facilitate How did you come to know about the ACET? decisions that would promote organizational objectives while minimizing financial risk. I came to know about the ACET once I decided to register for the actuarial examinations. Any message for the students wanting to take up the ACET in future. Having already completed MBA and having a good career It is a very interesting and relevant field of study, in India, as well already, what has motivated you to take up Actuarial as worldwide. Increased worldwide regulatory focus on BFSI professional course. industries requires will increase the demand for high quality As a professional, you consistently need to upgrade your skills resources in the Profession. I would like to wish all students to meet the demands of industry. In the life insurance industry, the best. the actuarial course does exactly this. Being a business where Any comments on your experience with ACET process. profits on business sourced today are seen with a significant The ACET process is clear on its objective, provides relevant time lag, the ability to understand and work with long term guidance and ensures that pre-requisite skills are evaluated financial and economic risks is essential. In addition, given the fairly. The entire process from registration to results is current industry and economic scenario, an understanding of straightforward and easy.

(L-R) Arjun Nagal, N. K. Parikh, J. Hari Narayan

The Actuary India March 2012 33 IAI Student Event About the Author

by Colin O’Hare

th st th C olumn he 19 – 21 February saw the 14 opportunity to discuss with practitioners T Global Actuarial Conference hosted how the theory might be implemented by the Institute of Actuaries of India (IAI) and given the geographical location and and held at the Mumbai Convention young nature of the profession in India it [email protected] may be difficult for this to be addressed in Centre, Mumbai. In response to student Colin O'Hare is an actuary and academic feedback, this year saw the first time that the short term. An alternative to engage having worked in the pension consulting an event was held specifically for the with material in a more interactive field for around 10 years before joining students of the IAI and UK academics way may be the use of online tutorials Queens University Belfast in early 2008 Colin O’Hare from Queens University delivered by practicing actuaries in the as the program director of the BSc in tudents Belfast and Pradip Tapadar, from the form of video and audio lectures to which

S actuarial science and risk management. University of Kent discussed examination students could subscribe and listen He is founder and president of SoNIA technique, study technique and potential to at their own pace and at a time that career paths for student actuaries. suits them. This idea was discussed and a Northern Ireland society of actuarial Around 200 students attended the conversations with the IAI are in progress. practitioners and students tasked event and there were many questions As an alternative method to engage with with facilitating student employer around methods of study and how to be materials in a more interactive way it was engagement as well as growing the local successful in examinations. suggested that students take advantage actuarial market. The Indian actuarial profession is in a of the fact that many of them will be rapid growth phase and there are many sitting for the same examinations at the (CT4 or CT7 for example). In this way students actuaries with a relatively few same time. Establishing study groups of students would be able to bring together number of qualified actuaries. Students students on the same examination has the two sides of an actuarial student’s currently study for actuarial qualification worked very well in the UK and could also life - study and practice. As a final using written ActEd material but lack work well in India. Groups of students suggestion for improving study efficiency any form of tutorial support, either face it was suggested that students could to face or via distance learning. During select a particular section or objective the session a table outlining the way in and teach the concept to the rest of the which people learn was shared with the study group. By teaching the material students to help them think about how the student is encouraged to confront they might be more efficient with their any areas of weakness in their own study time. In particular it was shown that understanding first before teaching it study via reading and seeing material to their peers. This improves their own is a relatively inefficient way to engage engagement with the material whilst at with the learning process. On the other the same time offering a second view of hand it has been found that engaging the concept to their peers. The session ended with some discussions of career with concepts through implementation (L-R) Pradip Tapadar, Colin O’Hare and through teaching material is much paths and questions and answers. more efficient way of understanding the studying for the same examination meet In summary I believe that the Indian new concepts. The following table was regularly to discuss the concepts coming Actuarial Profession has come a long way discussed: up in the examination and consider in educating their actuarial students but how they might be applying some of still has some way to go in supporting Most people learn : the material in practice. In some cases and mentoring their younger members 10% of what they read this would be easily done (the concepts through the numerous pitfalls that are 20% of what they hear in CT1 and CT5 for example are being the qualification process of the actuary. 30% of what they see applied in the pensions and life arena) 50% of what they see and hear but for others this might be more difficult 70% of what they talk with other 80% of what they use and apply in real life 95% of what they teach someone else Currently with acted material support, most Indian students are studying by reading notes with some application through question practice. They are in effect learning at the lower less efficient levels. Without a strong level of tutorial support the students have a limited

34 The Actuary India March 2012 Coaching ST4 Students and About the Author a visit to India by Ian Rogers C olumn

hen the opportunity came up to work. This gave me the opportunity to

W tutor a revision class in Mumbai for meet the team, and help with some of [email protected]. the ST4 pensions exam, I jumped at the their training. Ian Rogers is an actuary and benefits chance. So I left the UK just as the February consultant working for Aon Hewitt in snow was melting, and arrived in the The IAI was keen to offer a class for St Albans, UK, and is a member of the students preparing for either the IAI or heat of Mumbai a couple of days before Education Committee of the Institute the UK exam, and the opportunity was the GCA. The Conference was very and Faculty of Actuaries. tudents

offered to members of the UK profession interesting. It was great to start with a S to tutor this. My “day job” is as a Scheme celebration of those qualifying – I loved think the examiners are looking for from Actuary for Aon Hewitt advising UK the family videos! – and to see the dance candidates: including showing a breadth pension schemes, but a couple of years performances. The main Conference of understanding of the subject, and an ago, I’d visited Yerevan in Armenia to then covered a broad range of different ability to write extremely fast for three coach a CT1 course, and I was keen to topics. It was good to learn about the hours! do some more tutoring. challenges and opportunities in the One evening I had the honour of meeting market in India and elsewhere. I had not been to India before, so I was with Liyaquat Khan for dinner. Then at looking forward to combining the tutoring At the end of the GCA, I flew to Delhi the end of the course I had a bit of time with seeing some of the country. When I for three days in our Gurgaon office, before my flight to have an evening in the mentioned this visit to a colleague, I then followed by a day at the Taj Mahal, and a centre of Mumbai. In fact, I wish I had found out that the GCA was being held day touring Delhi. Amazing. had more time – I left plenty of places to in Mumbai shortly before when I would And then back to Mumbai for the visit if I come back to India in the future. be there for the tutoring. “Would you like tutoring. The tutoring itself was a mix of I’d like to thank the IAI, and Guraraj to attend? Would you like to present a revising key parts of the syllabus, and Nayak for all the arrangements, and session?” Of course! working through lots of past questions. looking after me so well while I was in I also arranged to visit the Aon Hewitt We got through about 4 papers worth of India. And of course wish the best of luck office in Gurgaon, where we have recently questions in the 5 days, including a full in the exam to the students in my class! recruited a team to support UK valuation mock exam. We also talked about what I

F a r e w e l l

It is with mixed emotions that I write this note. I have accepted a position at a charitable hospital and have decided to move on. I have enjoyed my time here at IAI and will miss all my colleagues. I would like to take this opportunity to express my sincere appreciation to our president Mr. Liyaquat Khan specially, under whose guidance I have learnt a great deal. Thank you all for your support, insights and help you have provided me over the past one year. Merin Thomas W E L C O M E Ms. Manmeet Kunnar has joined on 1st March, 2012 as Executive Assistant to the president. She is commerce graduate and carries 7 years of experience. Her hobbies include music, travelling & yoga. We wel come Ms. Manmeet Kunnar to the family of Institute of Actuaries of India. Manmeet can be reached at [email protected], ph: 022 6784 3301. IAI Management

The Actuary India March 2012 35 Coaching ST2 (Life Insurance) About the Author students by Marjorie Ngwenya C olumn

[email protected]

Marjorie Ngwenya a is a Fellow of the Institute and Faculty of Actuaries in the UK. She was until recently the editor of The Actuary magazine in the UK. tudents S to sit the Indian examinations which are based on the same reading material. There were concerns expressed about the differences in marking approach be- tween the two countries however they acknowledged that detailed knowledge of the course would invalidate these was honoured to be able to serve the amount about the Indian insurance in- concerns in the long run. Some students I actuarial profession by volunteering dustry which has many similarities to that are hedging their bets by taking both ex- to coach ST2 (Life Insurance) students in in Europe but is subject to some unique ams – an expensive but well justified ap- Mumbai, at the invitation of the Institute regulatory conditions. The students were proach I am told! of Actuaries India. The course was set up good at drawing parallels with their own for the benefit of students who have tak- local situation and exploring how differ- I had a brief but extremely enjoyable visit en the examination previously and were ent regulatory requirements might im- to Mumbai, with excellent hospitality close to achieving a passing grade. pact upon approaches to valuation or from all those I encountered. I will par- ticularly miss the fantastic cuisine and The students and I spent four and a pricing of insurance contracts. sunny days. half days at the Institute of Insurance Initially the students were hesitant to in Mumbai, refreshing knowledge of the revise bookwork, believing that the true I wish all the students luck in the upcom- Core Reading and practising examina- value lay in practising exam techniques. ing examination diet and I hope that they tion questions. As an Assistant Examiner We persisted with the revision work will write and let me know about their for the same subject on behalf of the nonetheless. When we began the exam success! UK Actuarial Profession, I believe I was question practice, after a few hours it My thanks go to the Institute and Faculty in a good position to share some tips on became evident that knowledge of the of Actuaries, the Institute of Actuaries what makes scripts easier to mark and bookwork was fundamental to providing India, Munich Re (who partly sponsored how simply writing clearly and explaining a complete and well-structured answer to my costs) and in particular to Gururaj one’s points could be beneficial. many of the questions. Nayak, Sandeep Mahajan, Merin Thom- While the objective of the course was for While some students were preparing for as and Liyaquat Khan. me to teach, I also learnt a significant the UK examinations, all were entered

36 The Actuary India March 2012 IAA adopts Principles of Professionalism for its Member Associations IAA news release, 17th February, 2012

he International Actuarial Association on January 23, for adoption by its Full competent and appropriately THE PRESS T (IAA) has taken another important Member associations. experienced to do so.” step towards promoting the quality The development of the principles is in • Values and behaviour: “An actuary of actuarial practice globally by accordance with the IAA’s Strategic Plan shall act honestly, with integrity and unanimously adopting a set of Principles that includes the following objective: competence, and in a manner that of Professionalism for actuaries who Establish, maintain and promote fulfils the profession’s responsibility are members of the IAA’s Full Member common standards of actuarial to the public and upholds the associations. reputation of the actuarial education and common principles FROM These principles will provide guidance of professional conduct. profession.” to many aspects of the work of the Promote the development and • Professional accountability: “An IAA, including education, codes issuance of actuarial standards actuary shall be accountable to a of professional conduct and the in the jurisdictions of all Full professional actuarial association development of standards of actuarial Member Associations, and the or a similar professional oversight practice, and may also be used by global convergence of actuarial organisation.” Full Member associations to provide standards. The IAA will now embark on specific professional guidance to actuaries in The principles encompass the following actions, in collaboration with its member their own jurisdictions. These principles core principles: associations, which will endeavour to were developed by the Professionalism embed these principles in the work Committee of the IAA and presented • Knowledge and expertise: “An being done within the IAA itself and to the IAA Council in October 2011 actuary shall perform professional within the global actuarial profession. before being unanimously approved, services only if the actuary is

CAREER OPPORTUNITY

Applications are invited for the following position in Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd., Gurgaon Position Title: Sr Manager - Actuarial Job Summary: This role is expected to be very dynamic in terms of quantifying, monitoring and providing solutions for the mitigation and management of the various risks faced by the company along with developing the Economic capital / Solvency II framework for the Company. This person would report into Head - Risk and Modeling Team. Skills Required: • Good understanding of Actuarial concepts and financials • Good communication and managerial skills, pro-activeness • Good in building Excel models/Automation, analytical skills • Good Hands-on knowledge of Prophet • Prior experience on ALM / Economic Capital will be an advantage • 10+ papers (knowledge of ST2 advantageous) • 4-5 years of relevant work experience Key areas of work: • Monitor company's ALM framework • Develop risk mitigating strategies for various risks taken on-board • Carry out Solvency & Liquidity projections • Quantify the impact of various Financial Stresses • Carry out Risk Related reporting to the Regional office/IRDA • Experience analysis • Economic Capital reporting Apply to: Email ID - [email protected]

Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited(Regd. No. : 136) Corporate Office: Unitech Trade Centre, 2nd Floor, Sushant Lok, Phase-1, Sector-43, Gurgaon - 122009, Haryana, India

The Actuary India March 2012 37 From the Desk of CHAIRPERSON - Advisory Group on Communication (AGC)

THE DESK OF Sunil Sharma, MSc. FIAI, FIA [email protected] FROM

n my last communication with you via of the Indian Actuarial Profession comments in various different ways You, i “Actuary India”, I took the opportunity etcetera? having said the same thing may find to take you through how GCA was started reported differently by different reporters. In this column, I would like to brief you on in 1999 and further a brief of what It is what gets carried out which the our experience with media and PR preparations were on to ensure the public read is the ultimate result. agency during the 14th GCA. One thing success of the 14th Global Conference of Therefore your skills in articulated that I have learnt during my interaction Actuaries. communication is always at test when with Media, whether it’s print, TV or you interact with the media.

During the 14th GCA we had hired Hanmer MSL for a reasonable fee to manage the media. The invitations for the event were sent by the PR agency on behalf of President IAI to all major national dailies, TV News Channels and digital media. It was also decided to send the invitation letter directly to key media persons on behalf of chairperson, Communication Advisory Group ie myself.

We received exceptionally positive response from media houses. More than 50 reporters landed in at Hotel The 14th GCA is over and there is a lot digital, is they are prone to put the words Renaissance on the first day 20th that happened during this event. A into your mouth and have the ability to February, 2012. The reporters were very significant proportion of the members give a completely different perspective to enthusiastic about this event since it have not had the opportunity to attend your comments. Therefore, it’s extremely gave them an opportunity to interview this event. This issue of Actuary India crucial to think of the words that you are and interact with the leaders of not only provides glimpses of the 14th GCA from going to use in making your comments. If Indian but global insurance industry. various contributors. Similar to last year, you are not articulate enough, they could the profession shall also be conducting land you in trouble by interpreting your The main attraction for the media was surveys to collect feedback from the members and in particular from members who attended the 14th GCA. The objective of the survey is obviously to check the pulse and find answers to some of the questions like; did the event help as a step in moving towards meeting the vision and mission of the Indian Actuarial Profession? What are the top three or four topics that were liked by the attendees? What alterations, if any, could be made to the format of the GCA to achieve the objective of globalization

38 The Actuary India March 2012 a press conference that we organised ensure the profession gets the maximum • Hindustan Times leverage out of the publicity of this event. for reporters to interact with J Hari There were 33 online articles that refer Narayan, Chairperson, IRDA and All our efforts resulted into coverage of to 14th GCA and various comments made Liyaquat Khan, President, IAI. Learning 14th GCA and the interviews of J Hari during GCA. Further, interview of from the past experience, we planned to Narayan and Liyaquat Khan President, J Hari Narayan, was aired on NDTV Profit, conduct the press conference in an IAI in 8 major newspapers amongst CNBC Awaaz and Zee Business. THE DESK OF orderly and well regulated manner. The others. These include; Well, overall I am pleased with the reporters were allowed to ask questions • Times of India outcome of the efforts made by the or comments one by one by raising their • Deccan Herald Communication Advisory Group in hands. Before we commenced the press • The Economic Times making some contribution to the Indian conference, I personally addressed the • DNA Actuarial profession in its step towards media and thanked them for coming over • The Hindu th meeting its vision and mission. to cover the 14 GCA event. They were • Financial Chronicle FROM were specifically requested to include the • Business Standard 14th GCA platform in all their reportage to

The Actuary India March 2012 39 14th GCA – Press Coverage

Sr No Publication Date Headline Print Coverage 1 Times of India 21.2.2012 Halve life cover to ratio premium under DTC to 10: IRDA (Quote by Mr. Khan) 2 The Hindu 21.2.2012 Move to let insurers invest in derivatives (Quote by Mr. Khan) THE DESK OF 3 Deccan Herald 21.2.2012 IRDA Plans e-platform to bolster transparency (Quote by Mr. Khan) 4 Financial Chronicle 21.2.2012 IRDA plans electronic reinsurance platform (Quote by Mr. Khan) 5 The Economic Times 21.2.2012 Bancassurance deals with have to pass IRDA muster 6 Business Standard 21.2.2012 IRDA to give more hedging options to life insurers 7 Business Standard 21.2.2012 IRDA frowns on PNB to buy 30% of Metlife for Re 1 8 DNA 21.2.2012 IRDA moves to fix life cover anomaly FROM 9 Hindustan Times 21.2.2012 Low cover policies should be eligible for tax deductions Online Coverage 10 Times of India.com 21.2.2012 Health, home and vehicle insurance set to cost more 11 Times of India .com 21.2.2012 IRDA seeks changes in level of cover on life policies 12 The Hindu.com 21.2.2012 Move to let insurers invest in derivatives 13 Hindustan Times.com 21.2.2012 Low-cover policies should be eligible for tax deductions: IRDA 14 DNA .com 21.2.2012 IRDA moves to fix life cover anomaly 15 deccanherald.com 21.2.2012 Irda plans e-platform to bolster transparency 16 Indian express.com 21.2.2012 Irda plans to introduce electronic re-insurance platform 17 Economictimes.com 21.2.2012 Irda plans to introduce electronic re-insurance platform 18 Economictimes.com 21.2.2012 Irda hits out at finance ministry over broker fee paid by reinsurers 19 Economictimes.com 21.2.2012 Bancassurance deals will have to pass Irda muster 20 Businessstandard.com 21.2.2012 Irda to give more hedging options to life insurers 21 Businessstandard.com 21.2.2012 Irda frowns on PNB plan to buy 30% in MetLife for Re 1 22 Businessstandard.com 21.2.2012 Irda set to revamp packaging of life insurance products 23 Mint.com 22.2.2012 Bancassurance deals may face regulatory scrutiny 24 Moneylife.com 22.2.2012 Rethink on Single Premium 25 Moneylife.com 22.2.2012 Insurance web aggregators struggle to remain in business 26 Smartinvstor.in 21.2.2012 Irda to give more hedging options to life insurers 27 Café mutual 21.2.2012 IRDA proposes changes in DTC, media reports 28 IndiaInfoline.com 21.2.2012 India is emerging as a global hub for Actuarial outsourcing activities 29 IBN Live.com 21.2.2012 Irda plans to introduce electronic re-insurance platform 30 postnoon.com 21.2.2012 Insurance portability yet to catch up 31 yourmoney.com 22.2.2012 IRDA versus LIC? Meeting the Challenges of the Change as an Opportunity at the 14th 32 Prlog.com 21.2.2012 Global Conference of Actuaries The IRDA Chairman emphasized on the increasing need for strengthening the skill 33 Capitalmarket.com 21.2.2012 set of actuaries in India, particularly in the area of general insurance 34 Today.in 21.2.2012 IRDA seeks changes in level of cover on life policies Meeting the Challenges of the Change as an Opportunity at the 14th 35 Indiaprline.com 21.2.2012 Global Conference of Actuaries (GCA) 36 News-views.in 21.2.2012 Bancassurance Deals under Tighter Scrutiny Post Faulty Incidents 37 IndiaInfoline.com 21.2.2012 IRDA seeks changes in provisions of DTC: 38 icallinsurance.com 21.2.2012 Change in single-pay plans on cards: Irda 39 insurancedetails.in 21.2.2012 Irda plans to introduce electronic re-insurance platform 40 MSN.com 21.2.2012 Irda plans to introduce electronic re-insurance platform 41 myeasypolicy.in 21.2.2012 Irda set to revamp packaging of life insurance products 42 koiy.com 21.2.2012 Bancassurance deals will have to pass Irda muster: J Hari Narayan Electronic Coverage 43 Ndtv Profit 20.2.2012 Interview of Mr. J Harinarayan 44 CNBC Awaaz 20.2.2012 Interview of Mr. J Harinarayan 45 Zee Business 20.2.2012 Interview of Mr. J Harinarayan

40 The Actuary India March 2012

temptation to keep playing with them The note says,” Went to buy a new proved too strong, and he began building phone”. again. This time he built two cubes rather Correct solutions were received from: than three, and again no sugar cubes Puzzle No. 165: were left over. 1. Kailash Mittal What is the smallest number of sugar 2. Prasham Rambhia

SHILPA'S PUZZLES SHILPA'S cubes that could have been in the box when Thomas started playing with them? 3. Saraswathi S.

Puzzle No. 170: Puzzle No. 166: What word, expression, or name is 1. Anshul Sood depicted below? 2. Vasudha Ramachandran 3. Gurleen Kaur ICA 4. Sudhanshu Kalsotra Shilpa's Puzzles ME 5. Sanjeev Gupta Puzzle No. 169: 6. Jitesh Borkar Solutions to puzzles: While playing unattended one day, Thomas decided to build larger cubes Puzzle No. 165: out of a box of individual sugar cubes. This number system is with base 8. So, emptying out the box onto the floor and using the sugar cubes as if they were Answer: 214 building blocks, Thomas made three Puzzle No. 166: larger, solid cubes, with no sugar cubes The numbers are the numbers on the left over. telephone as shown here: At this point the family dog bounded into ABC DEF GHI JKL MNO PQRS TUV WXYZ [email protected] the room and sent the sugar cubes flying 2 3 4 5 6 7 8 9 in all directions. The dog then picked up A left slanting stick before the number one of the sugar cubes in the mouth and indicates that the left-most letter of that left, crunching noisily. grouping is the letter to be used. If the Knowing he would be blamed for the stick is slanted towards right, the right- mess if he didn’t clean up it up, Thomas most letter is the choice. Numbers that picked up the remaining sugar cubes. are straight represent the center letter. Once he had done this, however, the Quotable Quotes Exert your talents, and distinguish yourself, and don't think of retiring from the world, Many Happy Returns of the day until the world the Actuary India wishes many more years of healthy life to the following fellow members whose Birthday fall in March 2012 will be sorry R. C. Chadha S. Krishnan that you retire. G. Chidambar H. C. Mehta K. K. Dharni Mark Edmund Turner Samuel Johnson (Birthday greetings to fellow members who have attained 60 years of age)

42 The Actuary India March 2012 hkadblack.pdf 1 1/18/2012 11:55:14 AM

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