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Interested in knowing who prices your policy and how?
In a tete-a-tete with Mr Nick Taket, Actuary, HDFC Standard
Life Insurance know this and a lot more
What are the challenges confronting actuaries today?
The main difficulty facing actuaries today is a lack of data
on which to price products. The actuarial profession has traditionally
made use of historical data to help in the pricing of products.
All of the limited historical data that is available relates
to the nationalised insurance companies and it is by no means
certain that even this data is relevant to the new private
companies.
What exactly goes into the pricing of an insurance product?
This really depends on the type of product that is being
priced. However, in general terms the actuary has to make
assumptions about a large number of factors that affect pricing.
These include:
mortality rates (the rates at which people die),
morbidity rates (the rates at which people fall ill),
investment returns,
expenses,
lapse rates, and
taxes.
Based on these assumptions the actuary will calculate premium
rates that are financially sound while at the same time are
fair to policyholders.
When will your company be able to declare a bonus for
your policyholders?
As with all the other new companies, my company is not expecting
to make a profit in its first few years of operation. However,
my company intends to declare a bonus this year which will
be subsidised by the shareholders.
When can individuals expect low priced quality risk covers?
I think it is important to concentrate on value for money
rather than low price. There is little point in producing
a product that is very low priced, if it does not also meet
the needs of the customer. My company will be concentrating
on understanding the needs of our customers, and then producing
products that meet those needs at prices which offer good
value for money.
With the entry of private insurers, individuals looked
forward to innovative insurance products. But so far almost
all the products introduced seemed to be very much similar
to those of LIC's except for a slight variation. Why
so? When will innovative products happen?
I do not think it is entirely fair to say that there has
been little product innovation. Looking at the product offerings
of all the new players there are many product designs and
features that simply were not available previously in India.
In some cases the innovation is not so much to do with the
features as giving customers choice.For example, my company
offers a choice of 4 additional rider benefits that can be
added on to the basic endowment and money back products, so
that rather than the insurance company dictating the benefits,
the customer can choose any combination of these riders to
suit their own needs.
It is true that there are products in the rest of the world
which are notyet available here in India, however, these products
will come in future years. If these products had been introduced
immediately to the Indian market it is likely that there would
have been some resistance to them from consumers because they
are so different from the familiar LIC products.
I think it is a question of informing the India consumer
about these new products and their benefits, once this is
done I am sure that the Indian consumers will prove to be
as enthusiastic about new types of insurance policies as they
have been about every other type of innovative product.
Lack of available data on investment preferences of the
investing community is said to be a major hurdle as far as
India is concerned.How do you plan to tackle these issues?
I do not see this as an issue for us. The majority of policyholders
are quite happy to leave the choice of investments to the
life insurance company, provided the company produces good
investment returns then there is little concern about investment
choice. There is a smaller number of individuals that are
concerned about how their money is invested and my company
will cater for their needs by developing products that offer
the customer a range of investments to choose from.
What are the duties of an actuary in life insurance?
The principal duties of the life actuary are to ensure that
the life insurance company is run on a sound financial basis
and to protect the interests of the company's policyholders.
Are you planning any tie-ups with TPAs?
Explain. No, third party administrators are usually employed
to manage the indemnity type health policies offered by general
insurance companies. For the moment my company only intends
to offer non-indemnity health policies so we have no need
for tie-ups with third party administrators.
How different is the Indian insurance scenario from others?
Each insurance market is different in its own way. While
each of the various circumstances that make up the India insurance
scene will have happened somewhere else in the world at sometime,
the combination of events and circumstances in which we are
currently operating is unique to India.
How do you plan to take on the monolith - the Life Insurance
Corporation considering its product pricing and the reputation
it holds?
I do not look at it as taking on the Life Insurance Corporation.
The penetration of insurance in the Indian market is much
lower than in most other countries in the world. It should
be possible for the new companies to write considerable volumes
of business by extending insurance coverage. My company intends
to compete by offering products that meet people's needs,
offer good value for money and by providing excellent customer
service.
Which are the products most sought after by the Indian
masses?
There is no one product that meets everybody's needs. Each
individual has different needs, indeed the needs of each individual
change over their lifetime, from starting work, to getting
married, to bringing up a family, and to retiring. Life insurers
will have to offer a range of products to address these varying
needs.
What are the qualifications required to become an actuary?
To become an actuary in India it is necessary to become
a Fellow of the Actuarial Society of India. In normal circumstances
this is achieved by clearing the professional examinations
of the Society. The examinations consist of 15 separate papers
that cover all the subjects that the actuary needs to master
in order to practice successfully.
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