Interview with Nikita Prabhu - General Insurance Actuary

Ques 1: Why did you choose Actuarial Science as a career? Ans: I came to know about Actuarial Science when I was in high school from my father who is an insurance agent. He showed me the Ready reckoner for premium rates and told me that ‘actuaries’ were behind the mathematics of it. I researched the profession and found it quite fascinating. I could apply the knowledge gained from the study of mathematics, statistics, economics, and finance to solve a range of real-world problems. It seemed highly rewarding. Ques 2: How is it like to work in both consulting and core Insurance based company environments? Ans: I was fortunate to start my career in consulting with Ernst & Young. Early on in my career, I got exposure to the different fields that actuaries work in, such as life insurance, employee benefits and general insurance. This initial experience aroused my curiosity towards general insurance (GI) and hence I chose to become a GI actuary. In a consulting firm, you get the

Do you know the types of risk faced by a General Insurance company ?

 Better to understand some types of General Insurance product first.

  • Third party Insurance ( You are driving a car and caused an accident then third party will be indemnified)
  • Aviation insurance ( related to Aeroplanes)
  • Marine Insurance ( related to ships)
  • Travel Insurance ( related to your travel journey)
  • Cyber Risk Insurance (related to cyber attacks)
  • Commercial property insurance (related to Fire in the house or any damage)
  • Contents insurance (related to moveable property such as contents in your house : theft risk)
  • and many more................

Some of the specific risks we are discussing today:

Motor Insurance

Claim frequencies being higher than expected
    • Society becoming more aware about claiming under insurance so they are now more litigous
    • Rainy season which caused a lot of motor accident
    • Flood, storms, riots
    • or your Policy document wording is loose that you (i.e. Insurer) has to pay claims that you has not intend to do. (So, what happens is that you created a document regarding terms and conditions but those T&C are misunderstood by policyholder then it is a big risk)
(Always remember that whenever talk about risks, think about its amount (i.e. severity) and frequency (i.e. likelihood)

Claim severity being higher than expected
    • It can be due to let's say court award inflation being higher than expected
    • Any catastrophes, accumulations happen
    • Catastrophe mean an incident which is defined in a policy document such as Flood and that caused a big loss within a short period of time

General risks

    • Errors in Pricing
    • Errors in Reserving
    • Wrong Data used to model the parameters
    • Liquidity risk such as major event happened but your company does not have enough financial resources as of now to pay immediately
    • Credit risk such as default by a third party
    • Expenses being higher than expected
    • Withdrawals being higher than expected
    • Moral Hazard
    • Fraud
    • Anti-selection
  • and many more..............

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