Subhrajit Mukhopadhyay, Chief & Appointed Actuary, Edelweiss Tokio Life Insurance speaks with BW Businessworld on the unique challenges facing actuaries, the role of foreign partners in insurance JV’s, and the evolution of actuarial science as a career option in India.
What are the key challenges facing actuaries nowadays? Has the steady digitisation of Life Insurance distribution influenced the business from the actuarial point of view?
Insurance products provide long term solutions to customers for managing their morality, longevity and investment risk. However the current declining interest rate environment coupled with volatility in the equity markets continue to pose challenges around Asset Liability Management stemming from lack of two suitable long duration assets to match the long tailed liability. Managing longevity risk is also one of the key challenges. In addition, availability and quality of data especially for newer and emerging risk categories also limits innovation.
Digitalisation of Life Insurance so far has had two major impacts in addition to providing superior customer experience. First impact is in extending the reach of Life Insurance beyond the conventional means & second is on cost of acquisition. All these elements are at a nascent stage but are expected to have a larger impact than one imagines today. An actuary today has to estimate the long term impact of these factors. The product design as well as the customer journey also has to be well thought through. Only those product designs which efficiently envisage the customer behaviour and transfer the impact of cost to the prospect will stand the test of time.
In addition, digitalisation would help in further segmentation of risk and would allow the insurers to provide customised benefits basis the underlying risk thereby creating new opportunities.
You’ve had an interesting career, starting out with a stint at LIC… Fundamentally, do you feel that LIC functions differently from private insurers? If yes, how?
The primary reasons for customer attraction vary a lot between LIC and the private players (especially younger ones). For LIC, the trust in the brand and extensive distribution makes them easy to attract new prospects. Most private players have to work long and hard at it. It takes lots of effort, resources and time to build the brand and distribution. In such scenarios, attractively designed products catering to multiple needs of customers and superior service delivery helps the younger private players find their space in this highly competitive market.
In your view, how has the role of foreign partners evolved over the years? Some seem to believe that their influence and role has been shrinking.
At the advent of the private life insurance industry in India, the foreign player’s involvement was in multiple domains like actuarial, distribution, technology, underwriting, risk management, etc. in addition to bringing the required capital. The role of the Indian partner was primarily to marry the foreign player’s inputs with local flavour. Over the years the Indian partners as well as the company management have gained experience and built expertise in most of these areas and are hence starting to contribute much more every passing day.
However, this doesn’t underplay the foreign players’ role. Most of the foreign players operating in India have a long history of operations with most of them at least 100 years old. These companies have experiences the impact of two world wars, multiple recessions and depressions and many major economic and political events. These companies have exposure of multiple markets across continents ranging from first world to third world countries. They have seen multiple cycles of interest rate movements, extreme capital market volatilities as well as other macro-economic factors. The experience gained through such events is unparalleled and allows maintaining a long term focus. They are also able to bring the best practices from across globe. In my opinion, the foreign players will thereby continue to contribute in the Life Insurance industry in India in the foreseeable future.
Please share your views on the recently released IRDAI guidelines titled ‘Outsourcing of activities by insurers Regulations of 2017’
These regulations are reflective of the evolving insurance market and help insurers to differentiate the core and non-core activities keeping customers interest at the centre.
This will also help insurers to optimise cost structures and allow for better management of risks arising out of outsourcing through effective oversight and due diligence. This in turn should provide a superior value proposition to the policyholder.
Lastly, how do you see actuarial science shaping up as a career option? Not many people consider it. Are the opportunities in this area scarce?
Actuarial Science continues to provide one of the best in class career option that has its root embedded in deep understanding of the financial (especially insurance) risks. Globally, it continues to be one of the most sought after profession. The skill set developed over a rigorous examination process coupled with practical experience helps ones to apply their knowledge at multiple disciplines not necessarily limited to the traditional actuarial work.
However, in India unlike early days of private insurance opening up, the demand in the direct insurance companies is getting limited especially for young inexperienced student members. At the same time, offshore consulting, KPOs and BPOs are providing opportunities to a large numbers of actuarial students with varied experience. The profession is also working hard to create many opportunities for the young actuaries as well.
The areas of opportunities for actuaries are expanding beyond the traditional realms of insurance companies. Of late, we have seen actuaries transitioning to the other roles as well. I believe it’s a matter of time before actuaries will seriously consider taking up roles around data science, artificial intelligence and analytics.
Source: BW BusinessWorld