NOT too many people know about actuaries. In fact, there are still a lot of people who mistakenly call them “actuarians”. This is not surprising, considering that, as of June 18, only 59 fellows of the Actuarial Society of the Philippines (ASP) are in good standing. And, yet, for such a small group, their responsibilities are so big.
What do actuaries really do?
Actuaries determine the chances of future risks—birth, disability, accidental injury, need for medical care or premature death—and calculate the cost of financing these uncertain events through insurance or other related means. They use scientific actuarial principles, so that the financial aspects of these uncertain events can be exchanged for the certainty of a premium payment.
However, actuaries are more than just mathematicians. They apply not only mathematical, but also statistical, economic and financial analyses—all of which involve risk assessment for longer-term financial contracts—to make calculations and projections for a wide range of practical business problems. So while actuarial work involves a lot of math, actuaries are also up-to-date on business trends, social science, law, finance and economics. Incidentally, they also have to be good communicators, since they often find themselves explaining to nonactuaries.
An actuary is actually a combination of a business executive, mathematician, financier, sociologist and investment manager who is a key player in a company’s management team.
Little wonder, then, that actuaries move on to become senior executives of the companies they work for. Some even become president and/or chief executive officer.
Moreover, the role of actuaries has, over the years, widened as more industries recognize the relevance and potential value of actuarial skills in operating a company. Because of that, they can be now found in a wide range of companies, from private sector to government, from financial institutions to health-maintenance organizations.
Yet, for a career as lucrative as an actuary’s, why are there so few actuaries in the Philippines? Well, besides the fact that not all minds are created equal, with actuaries’ brains shining brighter than normal, the road to becoming a full-fledged actuary and getting accreditation from the Insurance Commission (IC) is long, laborious and costly.
The Insurance Code, as well as the Preneed Code of the Philippines, requires life-insurance companies, mutual-benefit associations (MBAs) and preneed companies to engage the services of an actuary, and both codes state that only ASP fellows or those who meet all the requirements for ASP fellowship may be accredited by the IC.
The ASP, which is the recognized professional membership organization for actuaries in the Philippines, has three membership classes: affiliates, associates and fellows.
To be an affiliate, a candidate has to pass at least one of the five Society of Actuaries (SOA) examinations on the following: probability, models for life contingencies, financial mathematics, construction and evaluation of actuarial models, and models for financial economics.
To be an associate, a candidate has to pass all the aforementioned SOA preliminary exams; complete the Validation by Educational Experience (VEE) requirements on economics, applied statistics and corporate finance; and attend the Associateship Admission Course (AAC). The examinations and the VEE may be completed in any order, while the AAC may be taken upon passing any of the SOA preliminary exams.
To be a fellow, an ASP associate must pass two ASP Fellowship Examinations—the ASP Integrated Exam A and ASP Integrated Exam B—and attend the Fellowship Admission Session (FAS) conducted by the ASP. Moreover, the associate must complete the SOA Fundamentals of Actuarial Practice (FAP Interim Assessment and FAP Final Assessment), and at least two of the SOA/Casualty Actuarial Society (CAS) Fellowship Modules.
A candidate is required to take the Financial and Health Economics module. For the other module, he or she may choose from the following modules: Investment Strategy; Pricing, Reserving and Forecasting; Regulation and Taxation; Financial Reporting; Social Insurance; CAS Risk Management and Insurance Operations; Enterprise Risk Management; Health Foundations; and CAS Insurance Accounting, Coverage Analysis and Insurance Law.
Moreover, the associate must pass at least one of the SOA/CAS Fellowship Exams (Advanced Finance Exam; Individual Life and Annuities CSP Exam; Group and Health DP/CSP Exam; Financial Economic Theory and Engineering Exam; Individual Life and Annuities DP Exam; FCAS Exam 5, 7, 8 or 9; Advanced Portfolio Management Exam; and Retirement Benefits DP/CSP Exam). The fellowship requirements may be completed in any order, except for the FAS, which may only be taken upon completion of other requirements.
With all the hurdles mentioned and technical expertise required, one can understand why only an elite few are given accreditation to sign and undertake pertinent determination and computations for benefits, pricing, reserves valuation, termination values, etc., for the products sold by insurance companies, preneed companies and MBAs.
On the other hand, it should be a relief for the insuring public to know the kind of academic and technical preparation, screening and sharpening that actuaries undergo to ensure that premiums are reasonable, adequate and commensurate to the promised benefits, and that actuarial projections are as precise as possible, thus, leaving minimal room for failure to meet policy and other contractual obligations.
The Technical Services Group of the Insurance Commission