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A recognition that was overdue

The recent passing of the Actuaries Bill by Parliament paves the way for the development of a profession whose natural growth had been stalled by the circumstances in which the insurance industry in India had evolved over the past five decades. The Bill enables the creation of a statutorily empowered Institute of Actuaries of India (IAI) on the lines of the three institutes that have been regulating the professions of chartered accountants, cost accountants, and company secretaries. The IAI will replace the Actuarial Society of India, whose membership base and training and professional development programmes have not taken deep roots because the insurance industry had been restricted to players in the public sector till recently. The public sector in life insurance, no doubt, succeeded in mobilising huge savings and investment with a small capital base. But this was achieved mainly by propagating insurance as a savings product and on the back of income-tax concessions. Though the Insurance Act, 1938, recognised the crucial role of actuaries — highly skilled mathematicians and statisticians — in developing insurance products on the basis of assessment of risks and costs of insurance cover, there were no pressures from the market to develop the actuarial discipline. Similarly, non-life (or "general") insurance was restricted to the nationalised sector, which grew on the strength of the cover enterprises needed to comply with statutory requirements rather than by marketing of products based on the changing needs of various segments of customers.

Broad-basing and deepening of the actuarial discipline has become all the more important for two reasons. One is the direction of "de-tariffing" (or removal of regulated, mostly minimum, rates of premia) that the general insurance industry is set to take. De-tariffing requires compilation and analysis of huge volumes of data to enable the right pricing of insurance products so that cut-throat competition among insurance companies does not endanger their viability. The second is the ongoing negotiations under the General Agreement on Trade in Services (GATS) of the World Trade Organisation that will open up more and more services to foreign competition and also create opportunities for Indian insurers to tap the market in other countries. The creation of IAI should facilitate an informed and wider debate on issues related to GATS. It is significant that the Actuaries Bill has stuck to a traditional approach in barring companies (as distinct from individuals and partnership firms) from undertaking actuarial practice in India, despite pressures against it from professionals in developed countries. Given that even institutes of accountants and company secretaries consider the present situation hardly conducive to full-scale global competition in their spheres, the nascent IAI can be expected to evolve measured steps towards opening up the profession to trans-border practice.

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