Have you heard of the fortune-tellers of the business world? The people who can look into the future and analyze the risk involved in any potential investment made by business enterprises. I’m talking about those numerical intellects who crunch numbers and analyse data to safeguard the financial stability of a business enterprise and thereby the society.
Yes, not all heroes wear capes. Some wear formals and go for their regular jobs every day. Actuaries are those kinds of heroes. They hold the business world together from falling apart using their analytical and mathematical superpowers.
As the phrase goes,
“An accountant is someone who attempts to value the present. An actuary is someone who attempts to value the future.”
Actuarial science in India: Who is an actuary?
If you are looking for a definition, actuaries are those people who measure and manage risk and uncertainty in a business organization. Unlike most other career streams for individuals who love playing with numbers, it is more of a business career that requires a strong base in mathematics.
Actuaries possess high levels of mathematical, analytical, communication and management skills and are behind most high-level strategic decisions made by private and government financial institutions. They are hired by companies to predict financial events of the future, analyze the financial consequences of risk and thereby protect the organization from facing a loss.
Actuarial science in India: What does an actuary do?
As I already said, actuaries are those people who predict the financial impact of probable future events on a business policy or a financial project initiated by an organisation. They help the institution that has hired them in planning ahead for the future and making informed decisions using the data they dig out. These numerates use mathematical, statistical, and financial theories to study and reduce the risk involved in the investment made and thereby safeguards the interest of both the firm and its clients. Their usual areas of work include the fields of insurance, pension and interest plans.
Not clear yet? That was expected. I wouldn’t have said that it is only for ‘numerates’ if it was that easy to understand. Let me simplify this for you. Imagine you’re working for a financial institution as an actuary. Let it be a bank, an insurance agency, or any other government or private financial institution. Your company is thinking about launching a new product. Maybe a new insurance scheme. What will you do here as an actuary?
The first thing, make sense of the policy’s financial implications on the future. This involves predicting the timing of events that may happen in the future and calculating the money that needs to be invested in the project so that the company will be equipped to deal with the financial demands created by those events. These events can be something like a sudden increase in the inflation rate, the continuation of an ongoing trend or a government policy which can have an impact on the project.
And how is that done? An actuary analyses large chunks of data using their expertise in the field of statistics, mathematics and finance to understand the pathway of current trends in the industry. Then, they estimate the amount of capital that has to be kept aside to deal with the impact of those events.
The process usually involves analysing the data from the past, modelling the future, assessing the risks involved, and communicating what the results mean in financial terms to the senior level management.
Then using their findings, they design the new project. For example, if it’s a new insurance policy, the actuaries will have a say in designing the policy. With the future financial implications in mind, they set the total amount, monthly premium rates, areas covered, etc.
They thereby play a major role in balancing the interest between the public and the business organisation.
Actuarial science in India: How to become an actuary in India?
In India, the Institution of Actuaries of India (IAI) is in charge of training actuaries. To become a member of this body of actuaries, one needs to clear the Actuarial course conducted by IAI. This course includes 15 exams divided into four stages. Namely, core technical, core application, specialist technical and specialist application. But to appear for this main course conducted by IAI, you’ve to clear Actuaries Common Entrance Test (ACET).
If you wish to become a member of other actuarial societies functioning under International Association of Actuaries (IAA) like Institute & Faculty of Actuaries, Uk (IFoA), you don’t have to appear for Actuaries Common Entrance Test (ACET). Instead, you can directly enrol for the main course. And also, if you’ve cleared at least 3 papers of the main actuarial course conducted by Institute & Faculty of Actuaries, Uk (IFoA), you’re eligible to appear for the main course conducted by Institution of Actuaries of India (IAI) even without clearing ACET.
Actuarial science in India: Cost of becoming an actuary
Let’s say you won’t have to break the bank to become an actuary. You do have to spend a good amount of money on the examinations and other required materials, but when compared to the money you’re going to make after becoming an actuary or even after clearing a few papers, the cost of education is minimal. Still, it depends on an individual’s economic status.
If you’re going for the program offered by the Institution of Actuaries of India (IAI), the Actuarial Common Entrance test will cost you Rs 3000. Once you clear that, you will become a student member of IAI. This membership will again cost you Rs 1500 for a year.
Then comes the main course. For the main course, each exam will cost you Rs 2500. Along with it comes the study material. The soft copy of the study materials provided by IAI will cost you Rs 2500 for each subject. Let’s say each paper will cost you Rs 5000 in total. Also, most people don’t pass all the papers in the first attempt. Again, another 2500 each for writing those papers. So in total, you will spend around Rs 40000 per year to become an actuary if you go by the program conducted by IAI. That’s if you don’t opt for coaching. Coaching in private institutions alone will cost you at least another Rs 12000 for each subject per year.
But at the same time, you will be able to start working after clearing at least 3 papers. If you are good at it, your employer might take care of your academic expenses. Now, how does that sound? You make more money than what you spend even before becoming a fellow member of IAI.
But if you go for the actuarial program conducted by the Institute & Faculty of Actuaries, Uk (IFoA), it will cost you double this amount. A year’s membership itself will cost 199 Euros and each paper will cost 105 Euros. Now, that’s a lot of money.
Actuarial science in India: Salary of an actuary
Trust me, you will have to fix another pocket for your pants. Actuaries earn a lot. As they play a key role in the financial institutions they work for, qualified actuaries will go back home at the end of every month with a fat paycheque. The average yearly salary of an actuary in India is around 9 lakhs. At an entry-level, actuaries are expected to earn 3-5 lakhs. On gaining relevant experience of more than 9 years, actuaries can earn up to 20 lakhs in India. These numbers will be much more if you prefer to work outside India.
Actuarial science in India: How tough?
‘439’ that’s the number of fully qualified fellow members of the Institution of actuaries of India (IAI). And, the population of this country is more than 134 crores. How does that sound? I guess these numbers have already answered the question about the difficulty level of becoming an actuary in India.
This is no bed of roses. As an actuary, a lot of responsibility is assigned to you. And not everyone can take that up. You’ve a mountain to climb. You’ve a chance only if you are really good at crunching numbers and analysing data. The Actuaries Common Entrance Test (ACET) was introduced to filter candidates with the right aptitude before the actual exams. Even then, the pass percentage of CT3 exams is less than 10 percent.
If you are someone who expects to become one by mugging up the concepts, you’re probably wasting your time. It’s also about your ability to apply the core concepts in the real world. Unless you have great mathematical, analytical and problem-solving skills, better not go there. Along with that, you need to work hard as well. On average, it takes 5-10 years to clear all the hurdles and become an actuary. I guess that settles it.
Actuarial science in India: Job opportunities
Actuary is a highly sought out profession around the globe. It made it to the list of top 25 high paying jobs in the world released by Times. Though actuarial science is a less explored field of study in India, qualified actuaries have an immense number of job opportunities. They either work with the job title of actuaries or as quantitative analysts.
Actuaries are usually hired in the fields of life insurance, general insurance, health insurance, reinsurance companies, pension funds, consultants, investments, government, academics and risk management. But they are qualified to work in any field that deals with finance, statistics and scientific forecasting.
It’s already a highly reputed profession outside India. The demand for skilled actuaries are high in both developed and emerging economies. It is one of the highest-paid professions in countries like Sri Lanka, Indonesia and many European countries.
Actuary is one of the most sought out professions of the century. It has high demand all over the world and is of great importance to the business world. But becoming an actuary is really hard. You need to have a nose for business and a strong base in mathematics and finance to become a member of the actuarial society. The choice depends on an individual’s potential and career goals. Always remember that you make your own destiny. Make sure that you invest time and thought before making your life-changing decisions. I hope the illustrated analysis have powered up your insights and have widened your perspectives.