This article is written by Dhawal Srivastava, a student currently pursuing B.A. LL.B (Hons.) from the Rajiv Gandhi National University of Law and Nivrati Gupta, a student of the Institute of Law, Nirma University, Ahmedabad. In this article, the authors have elaborately discussed the salient features and facts about the Actuaries Act, 2006 and how it regulates this profession.

Introduction

India, home to almost 1.3 billion people, has got approximately nine thousand actuaries to serve the entire population. There is an apparent disbalance in the demand to supply scale of this esteemed profession which requires scientific prowess in fields of mathematics and statistics to analyse, estimate and assess the risk management factors in the field of insurance, pensions, banking, financial liabilities, premiums and so on. The law that regulates this line of career is the Actuaries Act of 2006.

The term Actuary means one who calculates risks and premiums for the insurance. Actuaries calculate the probability that various contingencies of human life will occur, such as birth, marriage, unemployment, accidents, retirement, and death. An actuary is an enterprise professional dealing with risk and uncertainty measurement and management. The respective field name is actuarial science. These risks can affect both sides of the balance sheet and require the ability to manage assets, manage liability and assess. They also assess the hazards of property damage or loss and legal liability for other people’s safety and well-being. Most actuaries are employed by insurance companies. They conduct statistical studies to develop corresponding premium rates, establish basic mortality and morbidity tables, establish underwriting practices and procedures, determine the amounts of money needed to ensure benefit payments, examine company earnings, and advise the company accounting staff to organise records and statements. The actuary is a senior officer in many insurance companies.

Section 2 Clause 1(a) of the Actuaries Act, 2006 defines actuary as a person skilled in determining the actual effects of future contingent events or in financial modelling and risk analysis in different areas of insurance, or in calculating the value of life interests and insurance risks, or in designing and pricing policies, in determining benefits, in recommending insurance, annuity, insurance and pension rates on an empirical basis, tables and includes a statistician engaged in such technology, taxation, employee benefits and other risk and investment management who is a fellow member of the Institute and the term ‘actuarial science’ shall be interpreted accordingly.

The role played by the Actuaries Act, 2006

The Actuaries Act, 2006 was enacted on 27th August 2006 and came into force from 10th November 2006. The main intent behind the legislation of this law was of regulating, kickstarting the development and institutionalisation of the profession and other issues that are associated with actuaries. One of the professional laws in India, the Act has facilitated the corporatisation of this career with the transformation of the historic Actuarial Society of India into the Institute of Actuaries in India (IAI). The modalities and the details with regards to the membership and other related aspects have all been enshrined in the law. It was even more necessary and important to have a specific law on actuarial sciences as a career looking at the development of the insurance markets and financial growth in the country, which would inevitably lead to a demand for professionals adept with the detection and analysis of financial risks in both the insurance as well as insurance streams with the aid of statistical and mathematical instruments. 

Important definitions in the Actuaries Act, 2006

Section 2 of the Actuaries Act, 2006 (hereinafter referred to as ‘the Act’) entails the definitions of some pivotal terms that constitute the essence of the entire law. These have been discussed below: 

• An ‘actuary’ is a professional who will be skilled in ‘actuarial sciences’ that consist of calculating and assessing the current impact of future contingent events, finance modelling and associated risk analysis in various spheres of insurance, calculation of the value of life interests, the formulation and the financial estimation of different policies, suggesting rates for annuities, pension schemes, insurance liabilities and businesses.
• ‘Actuarial Society’ refers to ASI or the Actuarial Society of India registered as a society under the Societies Registration Act, 1860 and the Bombay Public Trusts Act, 1950 in the year 1982. It was initially the apex body that regulated the actuarial affairs in the country. Established in September 1944, this body was a full-time member of the International Actuarial Association of India. From 1989 onwards, ASI started the conduction of examinations for professionals up to the Associate level and for Fellowship level in the year 1991 which led to the professional qualification of an actuary. Before this, the accreditation was done on the basis of the examinations conducted for the Institute of Actuaries situated in London. Under section 4 of the Act, the assets and liabilities of the ASI were transferred to IAI.
• ‘Year’ is essentially used to denote the financial year which begins on 1st April and ends on 31st March in India.
• ‘Institute’ is essentially the short for the Institute of Actuaries in India (IAI).
• ‘Authority’ is short for the Appellate Authority, ‘Board’ for Quality Review Board and ‘Council’ for the Council of the Institute. 
• ‘President’ and ‘Vice President’ that have been mentioned in the Act primarily refers to those of the Council.
• ‘Member’ is the one who is listed as a registered member of the Institute.
• ‘Register’ is the registration of the members of the Institute while ‘fellow’ is another name for the fellow member of the institute.

When is an actuary said to be ‘in practice’?

Section 2(2) of the Act stipulates the conditions that make an actuary eligible to be recognized as one undertaking a practice, either solely as an individual or in association with several other partner actuaries in a company or under an employer. These entails: 

• The participation and engagement in the actuarial profession by that individual.
• Working and dispensing services that are correlated to the application of the actuarial techniques in the areas of insurance, pension, investments, finances and management.
• Also rendering such other services which in the eyes of the Council be deemed fit to be categorized as an actuarial practice.
• The individual is under the employment of a person who, in some way or the other, dispenses either or all of the services aforementioned in the above three points. 

Institute of Actuaries in India (IAI)

India’s Actuaries Institute is a sole professional actuaries body dealing the work professionally. It was formed by the conversion of the Actuarial Society of India in September 1944 into a corporate body under The Actuaries Act, 2006. The provisions of the said Act entered into force on November 10, 2006, with regard to the notification issued by the Government of India at the Ministry of Finance, Department of Economic Affairs, dated November 8, 2006. As a result, India’s former Actuarial Society was dissolved and all of India’s Actuarial Society’s assets and liabilities were transferred to and acquired by India’s Institute of Actuaries established under Section 3 of the Actuaries Act, 2006. 

1. By notification in the Official Gazette, with effect from the date on which the Central Government may appoint all persons whose names are entered in the Actuarial Society’s register at the beginning of this Act.
2. The Institute shall have perpetual succession and a common seal and power to acquire, hold and dispose of both movable and immovable property, and shall sue or be sued by name.
3. Head office as suggested and decided by the government. 

In September 1944, India ‘s former Actuarial Society was founded. The Actuarial Society of India has been a full member of the International Actuarial Association acts as an umbrella organization for all actuarial bodies worldwide since 1979 and is active in its affairs. In 1982, India’s Actuarial Society was registered under the 1860 Act of Registration of Literary, Scientific and Charitable Societies, and also under the 1950 Bombay Public Charitable Trust Act. The Actuarial Society of India began exams up to the Associate level in 1989, and in 1991 began conducting fellowship level examination leading to an actuary’s professional qualification. Until then the accreditation was based on Actuaries Institute, London exams now called by the name Actuaries Institute and Faculty. 

Section 6 of the Actuaries Act provides for the registration of names of persons who were associates or fellows immediately before the appointed day, persons who passed the Actuarial Society’s examination and completed training either as specified by the Actuarial Society, persons who passed the Actuarial Society’s examination and completed their training.

Section 3 of the Actuaries Act, 2006 provisions for the establishment of the Institute of Actuaries in India (IAI), a statutory body that supervises and oversees the actuarial profession and practice in India. This body was formed at the expense of the previously existing Actuarial Society of India which was eventually dissolved, subsequent to the passage of this law and all the assets and liabilities of the same were transferred to IAI.

Objectives of IAI

The objectives of the Institute of Actuaries in India mentioned under section 5 of the Actuaries Act, 2006 can be summarized in the following four pointers:

• To encourage, uphold, strengthen and expand the standards and quality of the requisite technical education, industry training and knowledge, occupational practice and conduct of the actuarial profession in India.
• For the promotion of the status and repute of the practice of actuary as a professional career in the country.
• In order to regulate and supervise the professional practice of the actuarial career.
• One of the primary aims of the Institute of Actuaries in India is to increase and spread awareness about the research and related knowledge associated with the field of actuarial sciences and its applications for the general public welfare, specifically taking into consideration the rising rate with which businesses are being carried out and thriving in the country.
• To perform or achieve any of the supplementary objectives that are, in some way or the other, related or help in the furtherance of either of the above-mentioned objectives of the IAI.

Qualifications for becoming a Member of IAI

The members of the institute shall be categorized into two designations: associates and fellows. Section 10 of the Act provides for eligible members to use the designation of Actuary for themselves. Section 6 of the Act, which primarily provides for the registration of names in the register, also enlists the qualifications for becoming a member of the Institute. These are listed below:

• A person was an associate or fellow(can also be an honorary one) of the Actuarial Society before the appointed day.
• An individual, who is a resident of India, has qualified the examination and also completed the training conducted either by the Actuarial Society (when it existed) or the one conducted by the Council.
• Any person who has passed the examination and also finished the training that is required to be completed for the membership of the Institute.
• Any foreigner or Indian who has completed the training and passed the examination of an equal level (or deemed fit to be a counterpart) of the ones stipulated in the Actuaries Act, 2006.

However, grounds of disqualification of membership of IAI are: 

• The individual is below twenty-one years of age at the time of their application for the entry of name in the register.
• The individual is having an unsound mind and has been proven to be by a competent court.
• The person is an undischarged insolvent or being a discharged solvent has not yet received a clearance certificate from the competent court.
• An already removed or terminated member of the Institute can not re-apply for the membership.
• The person has been convicted of an offence involving moral character and is qualified for imprisoning him, outside or within India.

Composition of Council of Institute

Section 12 of the Act provides for the Composition of the Council of Institute for its management and dispensing the other required functions. Not less than nine and not more than twelve people from amongst the members of the Institute can be appointed to be a part of the Council. The Central Government shall also appoint a representative of the Finance Ministry who shall not be of a position below that of a Joint Secretary to the Government of India and also a representative from the IRDAI (Insurance Regulatory and Development Authority of India). A maximum of two persons from fields such as law, economics, or those having knowledge of different types of insurance and accountancy can also be appointed members of the council.

Section 17 of the Act also provides for the appointment of the President, Vice-President and Honorary Secretary of the Council from amongst its members right in the first meeting of their constitution.

Functions of the Council

The functions of the Council are also enlisted in Section 19 of the Act which has been summed up below in various points: 

• The organization of the examination for the interested candidates and stipulating fees.
• The laying down of the qualifications of becoming a registered member.
• The recognition of those qualifications and training secured outside India for the enrolment of the candidates.
• Looking into the matters related to fees of the individual candidates and others such as members, examinees, students and others.
• To be the recipient of the gifts, levies, grants and donations from the Central as well as the State Governments and also from donors, testators or transferors.
• To strengthen the interaction and communication with those educational or other institutions in or outside the country that serve the same functions as the IAI.
• Providing financial support and assistance and bestowing gifts, maintenance of libraries, facilitating or promoting research and publications of books and journals.
• Maintaining the disciplinary activities of the Institute and establishing such regional council(s) from time to time. 

Other key features of the Act

Provision for Appellate Authority

Section 32 of the Act provides for the recognition of the authority established under sub-section (1) of section 22A of the Chartered Accountants Act of 1949 as the deemed appellate authority under the Actuaries Act, 2006, with the modification being that the Central Government shall notify the appointment of two part-time members from amongst those who have once been a part of the Council for the least of one term. 

Section 33 stipulates the tenure of the members of the Authority for a term of three years or until they achieve the age of seventy-five years. The terms and conditions of service of the members of the Appellate Authority shall be the same as those in the authority established under the Chartered Accounts Act, 1949.

The aggrieved members of the Institute can approach the Appellate Authority within three months or ninety days of the issue of any such order against which they want to appeal in the Appellate Authority, which is provided under section 36 of the Act. Based on the records, the authority can either set aside, confirm or alter the order and in its penalties.

Penalties mentioned in the Act

Chapter VI of the Act mentions penalties for different offences enlisted below: 

• If a person is falsely claiming to be a member of the Institute.
• If the name of the institution has been misused for awarding degrees of actuarial science etc.
• If the companies start to act as actuaries or engage in the actuarial practice or engage in other offences.
• If the unqualified persons other than the qualified members of the Institute start signing the documents.

Quality Review Board 

The Quality Review Board (henceforth the Board) has been established under section 43 of the Act by the Central Government by means of notification. The composition of the Board shall be of the Chairperson and not more than four members of which shall be nominated by the Central Government as well as the Council. 

Section 44 of the Act provides for the functions of the Board which have been summed up below: 

• The fixation of the standards for the services provided by the members of the institute.
• The review of the services provided by the members.
• To provide guidance and support to the members of the Institute in order to enhance the quality of services and compliance with the rules and regulations.

Register of members, misconducts, appeals and penalties 

Section 23 to 25 talks about the registration of the name, register guidelines and format and re-entry made in the register. Further Section 26 to 31 discusses misconducts on the part of the members or mentioned people. Formation of a disciplinary committee, the procedure for an appointment of Prosection Director. Various powers of civil court in respect to Authority, Council, Disciplinary Committee and Authority. Council actions to be taken on the disciplinary committee and various other professional and other misconducts. Section 32 to 36 talks about various methods of appeal and different appeal committees. This act also has a thorough chapter on various penalties like for falsely claiming to be a member and using the name of Institution, awarding degrees of actuarial science. Penalties of an unqualified number, various offences by companies listed down that are punishable and non-acceptable. 

Other provisions 

Other miscellaneous provisions include Maintenance of offices under Section 50. In practice, an Actuary or a company of such Actuaries has more than one office within or outside India, each of which is under the separate responsibility of its fellow member. Section 52 talks about various powers of the Central Government to issue directions for the discharge of proper functions, the opportunity of being heard and granting authorization to person or body of persons to take over the management.

Protection of action taken by them in good faith is protected under Section 53 of the Act. No action, prosecution or other legal action shall be brought against the Central Government, the Council or the Disciplinary Committee, the Tribunal or the Authority or the Board of the Prosecutor or any officer of that Government, the Council, the Committee, the Tribunal, the Authority or the Board for anything done or intended to be done in good faith in accordance with this Act or any rule, regulation. This act also discusses the members which will be called and treated under members to be public servants. Section 55 and Section 56 of the Actuaries Act, 2006 mentions about the Powers of the Central Government to make rules and regulations in regard to the provisions of this Act. It also discusses the power of the Central to issue various directions for making or amending the regulations. 

Conclusion

It’s amazing that in India we had so many actuaries when the Reserve Bank of India implemented strict exchange controls before the economy was opened up. It is quite fascinating that these actuaries formed and managed the society out of their personal contribution without any government support. It was unthinkable that the society would have a crore asset base (ten million rupees, or about $150,000) and yet today the total asset base is 44 Crore (440 million rupees or roughly $6.6 million). For the Indian actuarial profession, this was a remarkable journey and I hope the journey will continue in the foreseeable future. A person needs to register as a student and pass Institute exams to become a fellow. In addition to the examinations, the individual must acquire three years of experience and complete a seminar on professionalism. An alternative route is through mutual acknowledgement agreements. Any fellow members of the Institute and Faculty of Actuaries (IFoA), IAA or CAS can become a fellow member of India.

Hence, it can be concluded that the Actuaries Act, 2006 is a focused and specific piece of legislation incorporating all the required intricacies related to and governing the profession of actuaries. With India becoming a destination of rapid capitalism and economic development, assessment of risk management is a necessity which needs to be promoted amongst the people of the country and this law regulates this practice elaborately.

References

• Study actuarial science to understand the science behind financial risk management, Sheetal Banchariya for Times of India. Available at: https://timesofindia.indiatimes.com/home/education/news/study-actuarial-science-to-understand-the-science-behind-financial-risk-management/articleshow/74769665.cms
• Institute of Actuaries in India (IAI). Available at: http://www.actuariesindia.org/Index.aspx?AspxAutoDetectCookieSupport=1
• https://www.indiacode.nic.in/handle/123456789/2069?view_type=browse&sam_handle=123456789/1362
• https://lawsisto.com/Read-Central-Act/6/ACTUARIES-ACT-2006