Documentos de Académico
Documentos de Profesional
Documentos de Cultura
ACTURIAL
PRINCIPLES
AND
WORKING
Dr. S N Ghosh
1
DEFINITION
• A a financial expert who applies
mathematical and statistical methods for
assessment of financial and other risks
Dr. S N Ghosh
4
DUTIES AND OBLIGATION OF
ACTUARY
• Rendering actuarial advice to management
- product design, pricing, insurance contract
wording, investments and reinsurance;
• Ensuring solvency of IC - at all times;
• Proactive role - violation of any IRDA
provisions; interest of policyholders;
guidelines issued by ASCI
• Certify - Actuarial Report and Abstract and
other Returns; Solvency Margin; Assets and
Liabilities; bases of premium; valuation;
recommendation of interim bonus or bonuses;
insurance tariff (for general insurance);
Dr. S N Ghosh
5
MORTALITY RATE AND MORTALITY
TABLE
• Mortality Rate - Measure of number of
deaths, per unit time.
• Expressed in units - deaths per 1000
individuals per year
• Mortality Table - a life table (also called a
actuarial table) which shows:
a) probability of surviving -year of age
b) Remaining life expectancy
c) Proportion of original birth cohort still
alive (group of people sharing common
factors)
d) estimates of a cohort's longevity Dr. S N Ghosh 6
PUBLISHED MORTALITY TABLE
(EFFECTIVE 01. 01. 2005)
Indian Assured Lives Mortality (1994 -96) (modified) Ult.
AGE (X) MORTALITY RATE (QX)
1 0.001630
2 0.000960
3 0.000670
4 0.000620
5 0.000470
---- ----
81 0.114992
82 0.126553
---- ----- Dr. S N Ghosh
7
UNDERWRITING
• Selection of a policyholder after recognising
and evaluating hazard, fixing a premium and
deciding all other terms and conditions
• Safeguards - against any moral, morale or
general hazard
• Limiting factors – capacity, skilled human
resources, compliance of regulatory provisions,
availability of reinsurance
• Line underwriting – Where daily underwriting
carried out; underwriters usually located in
offices of insurer
• Staff underwriting – Where underwriter helps
management in formulating and implementing
underwriting policy. They are usually located at
H.O. Dr. S N Ghosh
8
CONCEPT OF RISK
• Chance of having a loss - due to
occurrence of an event
• A condition - in which there is
possibility of an adverse deviation
from a desired outcome
• Risk always associated with loss -
word itself has the association of
`Danger of loss`
• Probability of the occurrence - an
event resulting in loss/ gain Dr. S N Ghosh
9
PERILS AND HAZARDS
• Uncertainty – a situation where outcome not certain
or unknown, its state of mind characterized by
doubt, based on lack of knowledge
CAUSES OF LOSS
(A) PERILS – immediate causes of loss
(i) General (Ex – Fire may affect building, machinery,
equipment and also human)
(ii) Specific (Ex- Collusion in automobile-financial loss)
(B) HAZARDS – conditions that increase severity of
loss/perils
(i) Physical – Property conditions (Ex- crackers stocked
in packed commercial complex)
(ii) Intangible – Moral Hazard (Ex –Fraud); Morale
Hazard (Ex – Indifference)
(iii) Societal Hazard (Ex- Legal and Cultural) 10
Dr. S N Ghosh
HOW THE LOSS IS CAUSED?
• Loss is caused by operation of perils -
refers to the causes for the losses
Ex - fire, explosion, flood, storm etc
• Loss potential ( extent of loss) depends on
- conditions which are favourable for the
incident to assume large proportions.
• Known as hazard or potential of the loss.
• More the potential - severe will be the extent
of loss
• PERIL (CAUSE) ------------- LOSS (EFFECT)
HAZARD
11
Dr. S N Ghosh
RISK AND MANAGEMENT
• Risk - chance of an event happening resulting
in loss/ gain
• To appreciate the need for loss prevention and
implement measures to achieve the same
• The efforts are aimed to prevent a loss
happening but also to make it manageable if it
happens
• This aspect is to be achieved in all activities of
the organization be in production, storage,
handling, transportation and distribution
12
Dr. S N Ghosh
RISK ANALYSIS & RISK
IDENTIFICATION
• Initial steps of Risk Management - Risk
identification and Risk Analysis
• Risk identification – all those events
which may bring about a deterioration in
one's present welfare for :-
a) Physical and mental well-being
b) Current income
c) Value of his assets
d) Any other event that may frustrate
fulfillment of future plans
13
Dr. S N Ghosh
RISK EVALUATION
• Involves two elements :-
a) Probabilities of loss-producing events occurring –
frequency, severity of loss; and
b) Potential losses
• Collect, collate, analyse and interpret
historical data – number and size of fire
losses suffered in last one year, data to be
shown orderly to reveal loss trends, patterns
of behaviour, relation between variables
• Highlight possible trends
• Identifying and analysing loss exposure -
probability concepts using statistical tools
14
Dr. S N Ghosh
REPRESENTATIONS AND
WARRANTIES
15
Dr. S N Ghosh