Life and Health Insurance Companies
All insurance companies need three basic actuarial roles to be played: valuation actuary, financial actuary, and marketing actuary. I have played, and I am currently playing, all three roles with my clients.
The valuation actuary is, essentially, an in-house regulator. He or she determines the assets that need to be assigned to meeting future obligations to policyholders. Most insurance regulatory jurisdictions in the US and abroad require an opinion from a valuation actuary be attached to the annual financial statement when it is filed. Some of the requirements for reserves are objective, but others are subjective and require professional judgement. An effective valuation actuary can smooth relationships with regulators as well as help control the capital required for an insurance company to operate.
The financial actuary represents the interests of company owners. He or she helps determine whether or not existing and new programs meet the objectives of owners for risk and return. Financial actuaries are heavily involved in preparation of financial statements that are provided to investors and the public (those prepared according to Generally Accepted Accounting Principles). Financial actuaries also get involved in capital management, reinsurance arrangements, and mergers, acquisitions, and divestitures.
The marketing actuary considers the reserve requirements of the valuation actuary, the risk and return requirements of the financial actuary, and the realities of the marketplace (including product regulation) and strives to design and manage programs that create value. The six basic steps that marketing actuaries follow are:
- Market definition,
- Market research,
- Competitor research,
- Distribution system analysis,
- Product development, and
- Analysis of emerging experience.
Most insurance companies have staff to address these issues. However, sometimes an independent view is valuable. Also, sometimes staff turnover creates temporary positions that require immediate experience and knowledge. Finally, sometimes special projects come along that are important and time sensitive. These are the situations where I can make the greatest contribution.
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