Peer or fear?

Venkatachari Jagannathan
22 April 2002

While some welcome the idea of a peer review, there are others who oppose it. And there are some who abhor the idea of having a foreign actuary in the peer review committee. (See ). Plus, there are concerns over the review modalities to be adopted by the proposed committee.

Explaining the reason for having such a committee, Actuarial Society of India (ASI) president Nalin R Kapadia says: "Overseas, a couple of big life insurers have failed suddenly. Such failures could have been detected in the early stages of the decay by the regulator if only the insurers actuarial filings were reviewed by experts." Canada, he says, has already started the system of peer review for actuaries.

Agreeing with the peer review concept, an actuary (who wish to remain anonymous) says the fruitfulness of the exercise will depend on the mandate to this group, the professional standing of peer review committee members and the further steps that will be taken after scrutinising the returns.

"The mandate for the proposed committee should be vivid and precise. It is not healthy if the mandate is to: (a) look into the assumptions and methods of valuing policy liabilities; (b) do sample calculations to check the value; (c) visit the company to see how data was extracted," says he. "Such actions have the potential to create conflicts between the appointed actuary, ASI and IRDA. It will also send a message of iron-grip of IRDA over all technical matters of companies."

On the other hand, if the peer review committee restricts itself to review the returns filed by the appointed actuary, then it should look deeply at the appropriateness of the returns in the context of companies selling various products. "At the moment the returns ask for certain details that do not make meaning for some of the lines of businesses. And I have a strong feeling that the peer review committee will actually end up doing a, b and c mentioned above," says he.