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<p>CONTENTS" FROM THE PRESIDENT 4 " THE HEALTH INSURANCE INDUSTRY IN INDIA AND ITS GROWING POTENTIAL 17-18WALTER DE OUDE AND RAJAGOPALAN KRISHNAMURTHY EXPLAIN THE STATE OF HEALTH INSURANCE INDUSTRY IN INDIA.</p> <p>PRESIDENT R KANNAN DEPICTS SOME INTERESTING DEVELOPMENTS OCCURRED IN THE ACTUARIAL FIELD GLOBALLY</p> <p>"</p> <p>FROM THE CHIEF EDITOR</p> <p>5</p> <p>K P NARASIMHAN WRITES ABOUT A REGULAR FEATURE IN ACTUARY AUSTRALIA MAGAZINE, WHICH IS REPORT ON SURVEYS, CONDUCTED EVERY MONTH ON CURRENT ISSUES.</p> <p>"</p> <p>ACTUARIAL ASPECTS OF HEATH INSURANCE PRICING 19-20HERBERT MEIZER DETAILS VARIOUS CRUCIAL ASPECTS ABOUT HEALTH INSURANCE PRICING.</p> <p>"</p> <p>INDIAN HEALTH ACTUARIES IN A CHANGING ENVIRONMENT 7-11RICHARD KIPP AND RONALD G HARRIS WRITE ABOUT INDIAN HEALTH INSURANCE INDUSTRY.</p> <p>" " "</p> <p>ANNOUNCEMENT</p> <p>21</p> <p>SEMINAR ON CURRENT ISSUES IN RETIREMENT BENEFITS (CIRB), MUMBAI, 23-24 DECEMBER 2005.</p> <p>CURRENT HAPPENINGS THE GROWTH OF PRIVATE INSURANCE MARKET IN JAPAN</p> <p>21 MEDICAL 22-27</p> <p>"</p> <p>PRESS RELEASE</p> <p>11</p> <p>INSTITUTE OF ACTUARIES ANNOUNCES NEW PRESIDENTELECT.</p> <p>"</p> <p>TAIWANS NATIONAL HEALTH INSURANCE AN INTEGRATED APPROACH TO SOME ISSUES 12-14CHIU-CHENG CHANG GIVES INTRODUCTION ABOUT THE TAIWANS NATIONAL HEALTH INSURANCE (NHI) PROGRAM</p> <p>TAKAHITO OTOMO ENLIGHTENS ABOUT THE GROWTH OF PRIVATE MEDICAL INSURANCE MARKET IN JAPAN</p> <p>" "</p> <p>ANNOUNCEMENT</p> <p>21</p> <p>INDIA FELLOWSHIP SEMINAR ON 15-17 DECEMBER, 2005 AT HOTEL SEA PRINCESS, MUMBAI</p> <p>8TH GCA</p> <p>28</p> <p>"</p> <p>INTERVIEW MYTHS DECODED</p> <p>15-16 " "</p> <p>BEYOND THE KNOWN LANDING YOUR FIRST ACTUARIAL JOB</p> <p>OFFICE ORDERS ABOUT CONSTITUTION OF 8 TH GCA STEERING COMMITTEE AND 8 TH GCA PROGRAMME COMMITTEE.</p> <p>"</p> <p>UPDATE- HEATH INSURANCE BOARD</p> <p>16</p> <p>PUZZLE CORNER WEB COLOUMN AND WORLD VIEW</p> <p>29 30</p> <p>P A BALASUBRAMANIAM, CHAIRMAN HEATH INSURANCE BOARD REPORTS ABOUT VARIOUS ACTIVITIES OF THE BOARD</p> <p>LETS BE INFORMED ABOUT WHATS HAPPENING ON THE NET!</p> <p>the</p> <p>www.actuariesindia.orgEditorial Board Liyaquat Khan, Chairperson Liyaquat.khan@watsonwyatt.com Members: K P Narasimhan anjaliarv@hotmail.com Heerak Basu Heerak.Basu@tata-aig.com G N Agarwal chief_actuarial@licindia.com Sunil Sharma Sunil_Sharma@swissre.com Shilpa Mainekar shilpa.mainekar@kotak.com Varsha Joshi library@actuariesindia.org V Jagannathan v_jagannathan@yahoo.com Sitanshu Swain Sitanshu@vsnl.com Chief Editor Narasimhan, K P Tel + 91 44 26433669 E-mail anjaliarv@hotmail.com Managing Editor Agarwal, G N Fax + 91 22 22028321 E-mail agarwalgn@rediffmail.com Deputy Managing Editor Joshi, Varsha Madhav Tel +91 22 2269 1051 (Ext. 209) Fax +91 22 2269 1052 E-mail library@actuariesindia.org Features Editor Basu, Heerak Tel + 91 22 55060304 Fax + 91 22 56492106/07 E-mail heerak.basu@tata-aig.com News Editor Sharma, Sunil Tel + 91 22 56612160 Fax + 91 22 56612123 E-mail sunil_sharma@swissre.com Puzzles Editor Mainekar, Shilpa Tel +91 22 56635082 Fax +91 22 56635111 E-mail shilpa.mainekar@kotak.com COUNTRY REPORTS De Oude, Walter Singapore, Malaysia &amp; South East Asia E-mail walter.de.Oude@WatsonWyatt.com Batliwalla, Minoo R Australia E-mail mubarak@ozemail.com.au Smith, John Laurence New Zealand E-mail johns@fidelitylife.co.nz Burra, Pravin African Continent E-mail pburra@bw-deloitte.com Chakraborty, Dilip C European Union (EU) E-mail dilip.chakraborty@canadalife.co.uk Chung, Phuong Ba Taiwan, Hong Kong &amp; Japan E-mail Phuong.Chung@aig.com Akers, Peter China (Mainland) E-mail Peter.Akers@sleb.cn Wason, Stuart Canada E-mail stuart.wason@sympatico.ca Ali, Syed Asad USA E-mail SAli@smlny.com Cheema, Nauman Pakistan E-mail nauman02@lhr.comsats.net.pk Guerard, Yves Indonesia E-mail Yves.Guerard@id.ey.com Iyer, Subramaniam N Switzerland E-mail sniyer_geneva@yahoo.co.uk Published Monthly By: Actuarial Society of India 302, Indian Globe Chambers, 142, Fort Street, Off D N Road, Near CST (VT) station, Mumbai 400001 Tel +91 22 2269 1051 Fax +91 22 2269 1052 E-mail actsoc@vsnl.com Website www.actuariesindia.org For circulation to members, connected individuals and organizations only. Disclaimer The Actuarial Society of India or any of the Editors are not responsible for opinions put forward in this Magazine. The contents of the advertisements published in the magazine are entirely of the advertisers and the Actuary India does not own any responsibility for it or any consequences arising out of it.</p> <p>Indian</p> <p>Actuarial</p> <p>Profession</p> <p>Serving the Cause of Public Interest</p> <p>the Actuary India December 2005!</p> <p>FROM THE PRESIDENTThe 8th Global Conference is scheduled on March 10 and 11, 2006 at Mumbai. You all know well that this is an important event for all of us. During the recent IAA meeting at Rio-De-Janeiro, Brazil I invited Presidents and other executives of various actuarial associations and also experts in various fields for this conference. I have also requested many of the subject specialists to present papers. Although I agree with you that this conference is used as a forum for exposing ourselves to the developments abroad, we should also consider this as an opportunity to review our own policies and practices from the actuarial angle. This will help policy makers to take decisions and improve wherever required. Hence I request all of you and in particular chief actuaries / appointed actuaries and senior actuarial students to present focused papers for this conference. I give below some of the developments abroad which are of interest to us. Almost all developed countries have moved towards risk based capital. In this context the adherence of solvency ratio is tested on a continuous basis and both the companies and the regulators take proactive view on economic capital, regulatory capital and the actual capital available. Experience of various countries had clearly demonstrated that moving towards risk based capital is a time consuming one and one has to prepare for this at least 3/5 years. Many European countries have introduced fair value accounting in 2002. According to these rules, life insurance provisions may not be smaller than the liabilities measured at best estimate plus a market value margin. The market value margin (MVM) is extra charge added to the expected value of the liabilities which an acquirer of the companys insurance portfolio would demand as a payment to take on the risk inherent in the uncertainty in the estimation of the sizes and / or dates of the payments except for the uncertainty which can be diversified by having a large portfolio. The MVM depends on the specific portfolio and the guaranteed benefits of the policies in this portfolio and not on other circumstances in the company. It is thus portfolio dependent and company dependent. When the fair value accounting rules were introduced, a method to calculate the MVM was not prescribed, but a simple rule was accepted. According to this simple rule the interest rate used for discounting could be multiplied by 0.95 and the extra provision which was a result by this was the MVM. Now many regulators expressed their concerns and they no longer accept this simple rule without specific justification based on the portfolio in question. The MVM is in principle a market price. Lack of a market for decomposed policies (policies stripped of the bonus obligations) makes it necessary to find a substitution and then different methods must be applied to calculate the MVM. Which models / methods can be applied? Various methods can be applied. The report identifies four groups of methods: 1. A margin is added to/ subtracted from the elements in the calculation basis. The simple rule with a 5% deduction in the discount rate is an example. The report suggests that it might be better to have a margin on the mortality and morbidity. A margin is added to the cash flows. A percentile on the proper probability distribution is used. The cost of the necessary capital is used.</p> <p>2. 3. 4. </p> <p>Two important developments in the pension sector are worth noting. Many corporates in USA and also in Europe feel that actuaries do not have an effective role in defined contribution schemes and financial economists have an important role to play in managing the funds in these schemes. It is somewhat unfortunate that the role of actuaries in defined contribution schemes is not well known to the public and it is the responsibility of the profession to inform how actuaries are equally important in running defined contribution schemes also. Secondly the funding of deficit and the companys asset liability management issues are becoming prominent recently and actuaries have to evolve a sustained funding of the deficit by taking into account implementable asset liability management techniques. In this issue, many aspects of health insurance are discussed in detail. Regarding general insurance I will outline some of the crucial issues, in my next column. In my last column I had requested senior students regarding their requirement for conducting coaching classes in SA/ST subjects. I have not received even a single reply for this. Shall I presume that senior students are not in need of any coaching classes? So far the Actuarial Society of India has not conducted any seminar/workshop exclusively for students, except the one for education strategy. As a beginning we are planning to conduct one day seminar for students in selected five metro centers so that students will be exposed to the latest developments in our field, various changes brought out in the educational strategy etc, including the performance of students in recent years. This seminar will also help ASI to understand better the expectation of students so that we in the ASI can serve them better to their fullest satisfaction.</p> <p>the Actuary India December 2005</p> <p>Thank you</p> <p>R. KannanIndian Actuarial ProfessionServing the Cause of Public Interest</p> <p>"</p> <p>FROM THE CHIEF EDITORI continue with material from issues of Actuary Australia that I had drawn on for my earlier piece. Another regular feature in the magazine is a report on surveys conducted every month on issues current as they could seem, with the respondents being members of IA&amp;A. In fact, members are even invited to indicate questions on which they would like general opinion to be elicited. A series comes under the head Actuarial Pulse. I have been a little more selective this time in picking on the surveys and the particular questions posed, to remain of some relevance and interest to our readers. The May 2005 issue has three questions on the proposed requirement for general insurance actuaries in Australia to prepare Financial Condition Reports (FCR) for their Boards. The FCR will be to inform the insurer boards of risks to solvency and profit. The questions and responses have been as under: a. Do you believe that actuaries are well-placed to do this? Choice Yes No Count 244 18 % answering 93.1 6.9 thought that FCR should comment more broadly on the insurers business rather than the traditional actuarial risk areas. Leading naturally to the question of the extent to which the training that actuaries receive prepare them to report on broad issues, the response level of 66% did indicate a level of equipment to perform the duties required. The comment, in a further analysis of the 34% negative response, saw the issue as less around training and examinations and more around the experience requirements. A strong view was noted that there should be strengthening of CPD requirements, peer review, etc., to make sure that the appropriate skilled professionals are involved in these assignments. In our context, how do we see the perceptions of Australian actuaries and the need however fast be the process to move to the wide responsibilities spelt out as such for appointed actuaries under the IRDA regulations? What could be measures to be taken in ASI, IRDA, et al. to have actuaries in the numbers required who could confidently take to their larger role in general insurance companies? Apart from arranging to have added CPD programmes for the existing actuaries in general insurance, what do we do to bring up the numbers newly qualifying with general insurance specialization and, more seriously, to be induced to take the subject at the ST level instead of avoiding it in the choice that is now available? How do we target in the meanwhile on those who have passed subject 303 under the earlier syllabus? The next issue I have drawn from is the one from June 2005. The survey questions here are addressed in the context of a revision being made to the Code of Professional Conduct. There are some differences apparently between the present code in Australia and what we have adopted to apply to us. Some of the questions posed have been as under with responses also being given alongwith: a. Currently actuaries are not required to comply with Professional Standards. It is proposed that non-compliance with a professional standard be considered actionable conduct. There will be no exceptions. Do you agree with this change? Choice Yes No, why not Count 107 61 % answering 63.7 36.3</p> <p>Choice Broad scope Limited scope</p> <p>Count 206 54</p> <p>% answering 79.2 20.8</p> <p>c. Do you think actuarial education and training equip us to prepare this report? Choice Yes No Count 171 87 % answering 66.3 33.7</p> <p>The comments in the Australian context were that the issue investigated was around the breadth of actuarial opinion and the responses sent a clear message to the nay-sayers, with more than 90% considering actuaries well-placed to provide the required FCR, the primary reason having been seen to be that actuaries are the only professionals with skills to do it. While some thought that actuaries did not have all the skills required at this stage, by a process of elimination there was no one better. What was considered even more reassuring was that almost 80% hadIndian Actuarial Profession</p> <p>b. Currently the Code of Conduct requires that all actuarial advice must be unbiased and that any constraints on the independence must be disclosed. It is proposed to drop the requirement for independence given the well-defined concept of independence following recent legislative and corporate governance requirements in Australia and overseas. The focus in the code will therefore be on unbiased advice. Do you agree with this change?</p> <p>Serving the Cause of Public Interest</p> <p>the Actuary India December 2005#</p> <p>b. Do you think that actuaries should comment broadly on the insurers business or just limit our comments to issues around actuarial pricing and reserving?</p> <p>Choice Yes No, why not</p> <p>Count 121 46</p> <p>% answering 72.5 27.5</p> <p>Judgement is key, spirit not letter should be applied The actuarial profession is OVER-REGULATED as it is</p> <p>Quite a few of our members may well agree with the averments quoted above in relation to mandating professional standards. The comment on second question was that the respondents had not generally understood the subtlety of the issue and felt that it would be best to retain the independence tag....</p>