International Actuarial Association Building up the Actuarial Profession in Africa The Actuarial Profession in Kenya Sundeep K Raichura Presented at 3rd International Meeting of Leaders of the Actuarial Profession in Africa June 2007 Agenda  About The Actuarial Society of Kenya     History Objectives Structure The actuarial profession in Kenya     Numbers and areas of practice Actuarial education Statutory roles Pensions and insurance sectors in Kenya  Challenges facing the actuarial profession in Kenya and industry issues  Update on some relevant TASK initiatives About TASK The Actuarial Society of Kenya      Registered 1993 Launched in 2005 Brings together qualified and trainee actuaries in professional, educational and research organisations with an aim of promoting the actuarial profession in Kenya and E Africa TASK functions through its governing Council and Committees (functional, administrative and ad hoc) Work on three year Strategic Plan in progress TASK Vision “To position the Actuarial Profession in Kenya and the region as the leading profession in the areas of modeling and management of financial risks and contingent events” Key TASK Objectives – – – – – – – – To develop and strengthen the actuarial profession in Kenya To create a forum for members of the actuarial profession to meet and exchange ideas To support and protect members and present common professional interests to Government and policymakers To play an active role in actuarial education and the development of local actuarial expertise, professional standards and guidance To encourage research in the development of actuarial ideas To improve the education of financial consumers and raise public interest issues To broaden the scope of the actuarial profession and promote our contribution in wider fields To establish links with other professional associations in Kenya and internationally with similar objects TASK Progress to Date  Revised constitution still in draft – –  Considerable time spent on membership categorisation Strong pressure to include special Associate categorisation for nonstatutory work Intent to become full member of IAA by end 2007 – – – – Committee working on professional code of conduct, which includes IAA common principles of GCAE And Disciplinary process Formal process for adoption of standards of practice Borrowing heavily from other actuarial associations for code of conduct and guidance notes TASK Progress to Date  No of working committees – – –  Membership & PR, Retirement and other Employee Benefits, Insurance and Health Care, Professionalism, Education and Research, Investments and Wider Fields, Secretarial Finance and Fund Raising Disciplinary and Appeals Performance erratic Strategic Plan – needs wider input The Actuarial Profession in Kenya Numbers  qualified actuaries – –  40 partly qualified currently working in field – – – • Fellows of the Institute of Actuaries Associate of the Society of Actuaries Excludes those who have graduated from local Unis with actuarial science degrees Many have given up on actuarial examinations Good number has dropped actuarial examinations for CFA Over 500 actuarial students at three local Unis: – – – UoN - started 2000, currently about 240 students, intake of 60 per year, 60ish already graduated JKUAT - started 2002, currently over 500, intake of 200 Maseno – started 2006, first intake of 30 students Planning mindset  Consider following key questions as part of insurance business planning and review to add focus to all areas of insurer’s business, all new initiatives or ventures: – – – – – – – – – How much capital is required and what is timing of these capital requirements? What are the options for funding (debt, equity,o/d)? What impact does undertaking this have on our P&L? What are the potential returns under the different funding options? What risks does undertaking this impose on the company? Is the return consistent with the risk and the shareholders’ hurdle return? Where and how will this create value? How does this fit strategically with the company’s existing business; how does this contribute to the company’s vision and goals? Are there non-financial benefits to the company? Paradigm Shift: Marketing – – – – Who are our customers? How are we going to sell to them and service them? What are we going to sell them? Product is the final element since insurance “sold and not bought” Paradigm Shift: Marketing  Who are our customers? – – – Analyse the population and its insurance needs Analysis of current and potential customers critical Divide into groups which have different characteristics    – – Same product need or group of product needs Distribution channel Population segments Consider whether any competitive advantage over others Have we thought of crop insurance, rural population needs, cooperatives, AIDS/HIV solutions Paradigm Shift: Marketing  How we reach them- Distribution channels? – Brokers Tied agents Direct sales force Other direct sales routes Telemarketing and call centres Other innovative structures – Internet? – – – – – Paradigm Shift: Marketing  Products and product development – – – – – – – What products appropriate? How does this compare with current offering? Any niche? Any unfilled needs? Level of awareness of potential customers Innovation Yet simplicity Paradigm Shift: Competition    Wave of competition - fierce under-cutting Competition not always on price alone Alternative strategies: – – – – – – – – – – – – – Better customer focus and products which fit customer needs Servicing, particularly after sales service Customer retention strategies Brand and brand awareness Claims settlement Niche marketing Financial strength Technology Distribution channels Better underwriting and controls Investment performance Efficient processes Loyalty rewards CSR etc etc           Paradigm Shift: Trained Manpower Holds key to managing for high performance Training and education, with IT skills Provide information and exposure CPD Proper KPIs Get right people in right places And incentive structures – align interests of your manpower with your business Internal environment Coherent team Communication            Paradigm Shift: IT is the name of the game No compromise on real-time online IT system Capturing all processes of the company Efficiency, integrity of information Checks, balances through system control Mitigates and guards against fraud and malpractices But no good unless critically analyse information Don’t overlook potential of data mining to your business Monitor, analyse, trend, dissect data and information for all processes Develop risk models, scenario tests Actuaries key here Invaluable tool for high performance! Paradigm Shift: Importance of the Actuarial Profession  Currently narrow utilisation in life insurance with some exceptions  Largely statutory valuation role and limited product pricing  Myth: Actuaries necessary evil in life, not needed in non-life, other parts of business and for risk management  Many of the issues addressed in this presentation look non-actuarial in nature  Myth: Actuaries too expensive – Do cost benefit analysis Paradigm Shift: Importance of the Actuarial Profession  Truth: Actuarial technical training/skill/approach/rigour/skillset is crucial in making a robust business case  Actuary/actuarial resource should be central to the planning process and should be key player in business planning, development, strategies for growth – – – –     Can play crucial role in ERM process even if limited implementation Actuary can assess and understand the complex interactions of insurance business across all areas and communicate these to all parties, board, management, shareholders and regulators Can help evaluate implications of courses of action and hence enable more informed decisions Can make contribution in helping insurers to avoid making potentially costly mistakes No claim on monopoly on wisdom, but can contribute managerially and technically as part of multi-disciplinary team Available and growing actuarial resource in Kenya The Actuarial Society of Kenya (TASK) will be doing its part Use this valuable resource to turn risk into opportunity!!! Paradigm Shift: Managing for High Performance  Will all this help? – – – – – – – Beating the odds through a disciplined, rigorous approach to insurance business management based on a proper understanding of the business Risk/reward optimisation Risk preparedness Effective enterprise culture Competitive advantage Isn’t this what our core business all about? Isn’t this what high performance is all about? Paradigm Shift : Managing for High Performance , ) Selected References  The Actuaries Role in Non-life Risk Management Issues, Jerry Miccolis, FCAS, MAAA, CAS Committee on Enterprise Risk Management Overview of Enterprise Risk Management (2004), Casualty Actuarial Society Enterprise Risk Management Specialty Guide, Society of Actuaries Understanding Actuarial Management: the actuarial control cycle, Australian Institute of Actuaries Risk Management for insurance companies and pension funds, Stuart Wason, Stuart Wason Consulting Limited, 3rd Contractual Savings Conference, Washingon 2005 Risk Mangement in a Deregulated Environment, Peter Beck 2000 Life Insurance Business Planning, Andrew Brown, 2000, FICCI Conference  Business planning by Stuart Wason, Edouard Merette and John Whitworth, 2000,       FICCI Conference, Questions Thank and Answers You Thank You