Actuary working for a small insurance company?

Given the relatively small number of policies sold and hence even fewer number of claims for a small insurance company... I fail to see how an actuary could do a proper job given the data limitations.

For example, if a small general insurance company was concerned about its loss ratios in parts of its business and employed an actuary to advise on adjusting premium rates to mitigate those (subject to the constraints of competitiveness)... with a small volume of data to work with I don't see how an actuary could seriously make recommendations and provide value compared to a non-actuary.

Surely an actuary employed in such a situation could feel obliged to make spurious adjustments to premium rates to be seen to be doing something when deep down the most appropriate action could be to say "just leave all the premium rates where they are" because losses are probably just there due to economic or underwriting cycle.... or skewed due to a few big claims because there's so little data to go on to come to any kind of reasonable conclusion!

Discuss. lol.

 

working small

I see your point scarlet, but i'd have thought the actuary's skills and judgement would be particularly valuable in such a situation, as there is more subjectivity - you can't just put the numbers into a model and rely on the output to be reliable and appropriate (as a larger company may be able to do (and therefore not really need an actuary as they have lots of data)).

 

I can't see how it would be more valuable than a non-actuary when there's so little data.

Non-actuary- "so we're making losses here. OK let's put the premiums rates up for these types. Don't put them up that much or we'll lose sales."

Can't see what skills an actuary would have to make better decisions and justify a higher salary for doing it in this context.

I wonder if there's been any studies to compare actuaries vs non-actuaries in terms of their skill in setting premium rates.

 

working small

well mainly the actuary would be better placed to understand the statistical significance of the available data, but also do profit testing, understand capital implications etc

if there's no subjectivity involved, then there's no need for an actuary. however, but I guess at some point, if there is very little data it could ecome so subjective that an actuary's skill set may not be the best with which to make decisions.

 

yes that's what I mean, the skillset would be wasted in a sense as not utilised

 

Further question here- what salary level would be fair to pay for a lone actuary in a small insurance company compared to an actuary working for a big actuarial department in a big company?

It would appear that in the small company you would be making a lot of subjective judgements on the premium rate levels and could be held directly responsible for these- bad if the losses get worse or profits reduce because of your recommendations!

Seems a lot of responsibility compared to doing more detailed actuarial analysis work in one corner of a big actuarial department for a big company which arguably requires more technical skill... but ultimately you don't carry the can for setting the premium rate as your work would be reviewed up the chain to the chief actuary who would be signing off the rates.

 

Salary determined by supply and demand??

Previous experience might also be useful/relevant. You may have little data, but know someone who has a lot more, or know who to ask for help. Or company could just not bother hiring an actuary and pay a consultant to investigate!

 

Like any business, if it's big enough and or core/strategic you take it 'in house', if it's a small part of what you do, or some else can do it for you cheaper you outsource, sub contract, use consultants etc.
?