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Actuarial jobs, puzzling role or puzzling demand?
The presence of more competent actuaries is crucial to narrow the demand-supply gap in the insurance industry
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he presence of more competent actuaries is crucial to narrow the demand-supply gap in the insurance industry.
To most people, actuarial science sounds as much fun as observing paint dry. Why then is this field of study so highly demanded nowadays? Why is an actuary one of Indonesia's most rewarding careers?
'Most of us are not aware of what an actuary does and the importance of the role in an insurance company,' said Ronald Sumampow, vice president of a major financial institution. 'Undoubtedly, an actuarial job may seem quite dreary, but it is one of the most thought-provoking and highest-paying jobs.'
Insurance companies have found the number of qualified actuaries is lacking in Indonesia.
'While demand is on the rise, we simply do not have enough [actuaries],' said Kasman Ilyas, vice president of a major insurance company. 'We are now hiring people from neighboring countries to meet the critical business requirement.'
According to the Society of Actuaries of Indonesia (PAI), there are 180 fellows and 200 associates of actuarial professionals who have earned recognition from the Fellowship of the Society of Actuaries of Indonesia (FSAI).
Insurance industry executives believe that insurance companies in Indonesia need an estimated 800 actuarial experts over the next few years.
'The demand-supply gap is huge and significant to our business,' Kasman said.
What is an actuary?
References define that actuaries are the financial engineers of the insurance industry, specializing in either life and health insurance or general insurance. 'Basically they formulate probability tables or employ dynamic modeling methods to predict the probability that a potential event will generate a claim,' said Hendro Sasongko, faculty member of a major university.
'From these tables and computation, they ascertain the amount of money needed for claim payouts,' Hendro explained further.
Insurance industry practitioners believe that actuaries' work is essential to the insurance industry.
A manager at a major life insurer, Sulistyo, said that 'Actuaries play an important role in analyzing the financial costs of our business, which includes risk and uncertainty by nature. They use mathematics, statistics and financial models to assess the risk that an event will occur and they help businesses develop products that minimize the cost of that risk.'
Why the shortage?
One of the reasons is that many actuarial graduates are not working in the insurance industry.
'One of the attractions of an actuarial career is there are many roles you could undertake,' actuarial graduate Nellyana explained.
'There are openings for those who like to do very complex backroom calculations and there are openings for those more inclined to building a successful business in consulting,' she explained.
However it seems that the capacity to produce actuary professionals is not yet in line with the demand.
'We only enroll one class consisting of 25-30 master's degree candidates each year,' said a faculty member of a major actuarial school in Jakarta. 'This program is still relatively new; we will adapt to the market demand as required.'
Insurance companies are also actively teaming up with schools and universities in developing actuarial programs.
In a press release, Prudential Indonesia stated that the company had signed a partnership agreement with the University of Indonesia (UI) to support and improve faculty training, in which two lecturers annually will be sent to undergo international actuarial training, and the company will also bring an international lecturer to the UI campus. The release also said that the company has committed to at least two scholarships annually from 2015 for students to study the Actuarial Specialization in MM-FE at UI.
Another major insurer, Manulife, also said in a press release that as a form of support for development of the actuarial profession in Indonesia, the company had signed an agreement with the faculty of mathematics and science at Gajah Mada University (FMIPA UGM) in Yogyakarta. The release made it clear that the partnership would be part of the company's Actuarial Development Program, which aims to enhance interest and potential among university students for the actuary field, starting from undergraduate level, to produce competitive actuaries.
How much do actuaries earn?
A Kelley Services Indonesia Salary survey showed that an actuarial manager with 5-7 years experience could earn between Rp 20 million (US$1,712.75) ' Rp 30 million per month. While with 12 years of experience, a senior vice president in the field could earn between Rp 55 million ' Rp 80 million per month.
In the US, according to a report, the median salary for actuaries is around $90,000 per year with 27 percent projected job growth.
What are the challenges in becoming an actuarial professional?
'It is quite a complex task for actuaries to evaluate the financial consequences of risks that people or, more often, corporations take,' said a senior professional who preferred to remain anonymous.
'It is not easy to price complicated things that include financial risks, operational risks, reputational risks and longevity risks,' he explained further.
Insurance business practice dictates that the figures calculated by actuaries ensure that insurance companies charge sufficiently for premiums in order to cover predicted costs.
At the same time, however, experts also say that actuaries have to make sure that the premium charged for insurance is affordable for the public as compared to other insurance companies.
Although the pay is good and the stress is manageable, another senior professional said he would be cautious in recommending the actuarial profession to someone because of the 'very challenging and rigorous program' in order to become certified.
Regulations stipulate that to become a qualified actuary, there are at least 10 examinations that one must pass. Once a person passes those exams, he or she will become a qualified actuary and will be given a title ' Fellow of the Society of Actuaries of Indonesia (FSAI).
