Birla Sun Life Insurance appointed actuary K S Gopalakrishnan believes the appointed actuary system in India cannot succeed without a successful actuarial profession
When Birla Sun Life Insurance Company executive K S Gopalakrishnan was elevated to the position of an appointed actuary very recently, at 40, he became the youngest Indian to don that robe in a domestic life insurance company.
"It will be termed an understatement if I say I received the news with mixed feelings. Yes, there was this sense of euphoria at moving a step up in the actuarial ladder. But, more importantly, the regulatory aspect of the appointed actuary's role and the huge responsibilities that come with it overwhelmed me," he says.
But the exciting part, according to him, is working for a company that is quite focused on innovation, adding value to customers and recognising merit. Gopalakrishnan's elevation was always there on the cards as soon as he returned after a stint in Sun Life, Canada and Hong Kong.
"The Hong Kong and Canadian life insurance markets are quite different from India. The former is extremely competitive, sophisticated and the people's time horizon for investments is quite short," he says. In Hong Kong, Gopalakrishnan handled a project developing a sophisticated product aimed at topline growth.
On the other hand the Canadian market is still undergoing major consolidation through mergers. "The projects I handled were more on corporate actuarial such as valuation of policy liabilities and stress-testing capital requirements."
In Canada, Sun Life is a listed company whereas the company's Indian joint venture, Birla Sun Life Insurance, is an unlisted entity. In the following interview he talks about the role of an appointed actuary in listed and unlisted life insurance companies and the underwriting principles domestic life insurers could and should follow. Excerpts:
Is there a difference between being an appointed actuary of a listed life insurance company and that of an unlisted one?
The role and responsibilities of an appointed actuary are primarily towards policyholders and hence the structure of the company might not matter much. Having said that, I reckon there could be some subtle differences between working for a mutual company and a company with shareholders. Most of this comes from the shareholder expectations of adequate returns on their investments. This in turn drives companies towards increased operational efficiencies and efficient capital management. Another dimension of this is to reduce or eliminate exposure to risks that cannot be managed through appropriate tools. In fact, it is likely that in India too sophisticated risk management will emerge as one of the key business drivers in the coming years.
What are the challenges before you now? How different is Birla Sun Life Insurance's products from others in the market?
The challenges we face are quite similar to those that are faced by other new life insurers - products that meet customer needs, speed to market, delivering on the promises made to policyholders, rapidly gaining meaningful business volumes, quality of business, and maintaining high ethical standards. Birla Sun Life Insurance is perhaps unique because of its business model that keeps customer at the centre of its focus.
And when I speak of customers it is not only of acquiring customers but retaining them as well through superior service. This philosophy motivated us to lead the market with several firsts - unit-linked products (in individual and group), pure protection term products, alternate distribution channels, health riders covering high number of critical illnesses, free look period, customised and compulsory point of sale illustrations, sharing completed application forms (proposal forms) with policyholders, innovative medical underwriting and so on.
As part of prudent underwriting principles, can life insurers ask a prospect for genetic information?
I might guess it is not an issue of immediate priority for the insurance industry in India. There are several medical, ethical and legal issues that need to be sorted out first.
How do you - as a life insurer - view the AIDS threat and what steps can insurers take to protect themselves? Can a life insurer exclude the risk of death due to AIDS from the policy purview?
The number of HIV positive people among the Indian population is rising and this certainly draws our close attention. There are two stages to be taken care of - detecting the infected at application for insurance stage and managing the risk of worsening experience arising out of some existing policyholders getting infected.
To a large extent the former can be reasonably assessed through segmentation and underwriting. For the second we continuously monitor the experience and there are several ways to control the risk including revising charges, having margins in pricing and so on. Controlling the exposure to mortality through policy exclusions is not easy because for many HIV positive people, the actual cause of death might be something other than AIDS (like tuberculosis).
What are the new products and segments Birla Sun Life Insurance is looking at now?
We have a few interesting products in the pipeline. Products such as the critical illness covering 17 illnesses and the single premium bond that we launched in recently are quite useful products to customers. The early part of year 2004 will certainly see some more exciting products from us.
Coming to the company's performance, is it in line with the plans - premium income, claims, reinsurance outgo, investment income and yields, policy surrenders, expense ratios?
In general, our performance so far has been better than the plan. The quality of business and risk assessment process has, in particular, been quite favourable. For a new company in a recently opened up vast market it is quite easy to get carried away with a drive to acquire new business. The critical test is the company's willingness to take tough or unpleasant measures to write business without compromising on quality. I think there is a conscious culture in Birla Sun Life Insurance that has kept our focus clearly on the overall business.
What are the challenges here and how do you plan to overcome them?
The challenges are many and I can't even keep a tab on these. Two major challenges are managing the interest guarantees and maintaining the high quality of business we have. By the latter, I mean not just measuring, but also taking proactive steps, with regard to two areas - policy persistency and sales and underwriting processes.
How do you see the appointed actuary system emerging in the future?
I have closely seen the system working here for the last three years. The success of this system largely depends on individual actuaries, the company management, the insurance regulator and in equal measure the proactiveness of the profession. Developing a pool of actuarial talent, professionalism, open discussions and a keen sense of business orientation are, in my personal opinion, vital for the actuarial profession's success. The appointed actuary system cannot succeed without a successful actuarial profession in India.