How many people know that actuaries have been working in general insurance for over 250 years? Back in the Lloyd's coffee house days there were numerically-minded individuals quantifying the risk of marine voyages. What did they call themselves? The fact is that general insurance actuaries have kept their talents and contribution very much under wraps, until recently.

It could be argued that, since the first actuaries moved out of life and pensions and forayed into the non-life arena, they have been so busy that they have not had time to put their heads up and shout about what they are doing.

There are certainly many areas within general insurance where actuaries can and do add value. Be it pricing business from motor insurance to high level catastrophe covers or advising on how much money should be set aside to meet claims that may not be made until many years into the future, general insurance actuaries are bringing a sound, structured framework of approaches to problems which would have been solved by educated guesswork in the past.

Statutory role
Even beyond these basic areas, general insurance actuaries are now involved in producing detailed models that help senior management understand their business better. These efforts enable more informed decisions to be taken to manage capital and the risks inherent in the insurance industry.

As actuaries are becoming more important to the operations of insurance companies, their profile is growing.

General insurance actuaries now have a statutory role in signing opinions on the reserves held by Lloyd's syndicates and the profession is in discussion with the FSA regarding further formal roles in a risk-based supervisory framework.

Public interest issues
So it would appear that the general insurance actuary has reached a point where he or she feels able to speak up on industry issues. And what better issues to address than those that affect the public interest, the protection of which has always been central to the role of the actuary?

Recently, actuaries have tackled a number of public interest issues, including selling practices, redlining and volume-related commission. So what have they been saying?

Actuaries are keen to insure that individuals are able to make informed decisions over their purchasing of insurance products.

This includes understanding the cover available on one particular product and avoiding duplicate insurance with another product.

A potential solution here may be to have a benchmark standard approach similar to that used for ISAs but without any control over the level of premium rates.

For example, you take a ski trip. You may be offered travel insurance by your bank or credit card company. You will certainly be offered insurance by your travel agent. You may well be offered insurance when you hire your skis and even when you purchase your lift pass. Does anybody know how many, if any, of these products will indemnify you against your skis being stolen?

As insurance pricing becomes more and more refined, there is a danger that some personal lines insurance products will become prohibitively expensive, or otherwise unavailable to some sections of the community.

The actuarial profession is concerned at the negative impact the creation of an uninsurable underclass would have on industry and society. A statement outlining the profession's position on this issue is available on its website (http://www.actuaries.org)

Brokers getting a higher rate of commission if they place more business with a particular insurer, is another major area of concern.

The profession is making a stand on this issue as it believes it undermines the independence of "independent" intermediaries. The profession has recommended that this practice is prohibited and has also called for the disclosure of commission received by independent intermediaries.

Commitment
So general insurance actuaries have decided to take a stand in the arena of public debate. And this is not before time.

The general insurance actuary has considerable knowledge of the industry, particularly of its technical aspects, and draws respect from years of rigorous training.

Coupled with his or her ability to communicate these ideas and the profession's commitment to the protection of the public interest, these attributes make the general insurance actuarial profession an ideally placed to comment on the industry, identify key issues, raise awareness and aid understanding.

The actuary's voice in these and other areas can only get stronger over time.

Soon you won't be able to miss it.

  • Gregory Overton is a fellow of the Institute of Actuaries and works for PwC.