This article is written by Mita Sarker of 7th Semester of University Law College, Bangalore, an intern under Legal Vidhiya
Abstract
The Actuaries Act of 2006 is a legislation passed by the Government of India that regulates the profession of actuaries in the country. It outlines the qualifications and standards required for individuals to practice as actuaries and establishes the Institute of Actuaries of India (IAI) as the regulatory body overseeing the profession.
The Actuaries Act of 2006, including its background, definitions, objectives, qualifications for membership, composition and functions of the Council, and various provisions within the Act.
Keywords
Meaning of actuaries, Background , Definition, Institute of Actuaries in India, Objectives, Qualifications for becoming a member of IAI, Ground for disqualifications from IAI membership, Composition of Council, Functions of the council, Features of the act
Introduction
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 “The Actuaries Act is a legislative framework designed to oversee and advance the field of Actuarial Science, as well as address various aspects related to actuarial societies. This legislation grants members the privilege to engage in the practice of actuarial science and apply its principles. Undoubtedly, the Actuaries Act plays a pivotal role in bolstering the economic sector in India.”
Background
The Malhotra Committee recommended in 1994 that the government should consider granting a charter to the society at an appropriate time.
In late 1996, the Insurance Regulatory Authority, an interim authority, was established through an executive order to take action in this regard.
Following extensive debates at the professional level and discussions with the IRA, the draft Bill to be submitted to the government was finalized in 1997.
The IRDA Act was officially passed in December 1999.
The IRDA continued to pursue the matter, and the draft Bill underwent further review.”The Bill, upon its introduction in the Parliament, was directed to the Standing Committee for further examination.
After engaging in discussions with different stakeholders, the Standing Committee provided its recommendations, leading to amendments in the Bill.
(1) This Act may be called the Actuaries Act, 2006.
(2) It extends to the whole of India.
(3) It shall come into force on such date[1] as the Central Government may, by notification in the Official Gazette, appoint:
Provided that different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the commencement of that provision.
In August 2006, during the monsoon session of the Parliament, the Bill was approved and subsequently received the President’s assent on the 27th of August 2006.
The Actuaries Act of 2006 was officially published in the Gazette of India on the 28th of August 2006.
Definition
Section 2 of the Actuaries Act, 2006 (referred to as ‘the Act’) provides definitions for key terms crucial to the law. These definitions are outlined below:
An ‘actuary’ is a professional skilled in ‘actuarial sciences’, which involves assessing the current impact of future contingent events, financial modeling, and risk analysis in various areas of insurance. This also includes valuing life interests, formulating and financially estimating policies, and recommending 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 1982. Initially, it was the apex body regulating actuarial affairs in the country. Established in September 1944, it was a full-time member of the International Actuarial Association of India. Starting from 1989, ASI began conducting examinations for professionals up to the Associate level and for Fellowship level in 1991, leading to the professional qualification of an actuary. Prior to this, accreditation was based on examinations conducted by the Institute of Actuaries in London. Under section 4 of the Act, ASI’s assets and liabilities were transferred to IAI.
‘Year’ specifically refers to the financial year starting on April 1st and ending on March 31st in India. Institute’ is an abbreviation for the Institute of Actuaries in India (IAI).
‘Authority’ stands for the Appellate Authority, ‘Board’ for Quality Review Board, and ‘Council’ for the Council of the Institute.
‘President’ and ‘Vice President’ mentioned in the Act primarily refer to those of the Council.
‘Member’ is an individual listed as a registered member of the Institute.
‘Register’ pertains to the registration of Institute members, while ‘fellow’ is another term for a fellow member of the institute.
When an actuary is considered to be ‘in practice’:
Section 2(2) of the Act outlines the conditions that qualify an actuary to be recognized as practicing, either individually or in association with other partner actuaries in a company or under an employer. These conditions include:
Active involvement in the actuarial profession by the individual.
Providing services related to the application of actuarial techniques in areas such as insurance, pension, investments, finance, and management.
Also offering services that, in the opinion of the Council, are suitable to be categorized as actuarial practice.
The individual is employed by someone who provides any or all of the services mentioned in the above three points.
Institute of Actuaries in India (IAI)
The Institute of Actuaries in India (IAI) was established in September 1944 as the exclusive professional organization for actuaries in India. In 2006, it was restructured into a corporate entity under The Actuaries Act, replacing the Actuarial Society of India. This transition was formalized on November 10, 2006, following a government notification on November 8, 2006. Consequently, the former Actuarial Society was dissolved, and its assets and liabilities were transferred to IAI under Section 3 of the Actuaries Act.
IAI possesses perpetual succession, a common seal, and the authority to acquire, hold, and dispose of both movable and immovable property, and can be legally represented. The institute’s headquarters are determined and designated by the government.
The Actuarial Society of India, established in 1944, became a full member of the International Actuarial Association in 1979, acting as a global umbrella organization for actuarial bodies. In 1982, it was registered under the 1860 Act of Registration of Literary, Scientific and Charitable Societies, as well as the 1950 Bombay Public Charitable Trust Act. The Actuarial Society of India introduced examinations up to the Associate level in 1989, and in 1991, it initiated fellowship-level examinations, leading to professional qualification as an actuary. Before this, accreditation was based on exams conducted by the Actuaries Institute in London, now known as the Actuaries Institute and Faculty.
Section 6 of the Actuaries Act addresses the registration of individuals who were associates or fellows prior to the appointed day, those who passed the Actuarial Society’s examination and completed specified training, and those who passed the Actuarial Society’s examination and completed their training.
Section 3 of the Actuaries Act, 2006 establishes the Institute of Actuaries in India (IAI) as a statutory body responsible for overseeing and regulating the actuarial profession in India. This institution was created to replace the former Actuarial Society of India, which was dissolved upon the enactment of this law. All assets and liabilities of the former society were transferred to IAI as a result.
Objectives
The Institute of Actuaries in India, as outlined in section 5 of the Actuaries Act, 2006, has the following key objectives:
Enhance and maintain the standards and quality of technical education, industry training, and knowledge required for the practice of actuarial profession in India.
Promote the recognition and prestige of actuarial practice as a professional career in the country.
Regulate and oversee the professional conduct of actuarial practitioners.
Foster awareness and dissemination of research and knowledge in the field of actuarial sciences and its applications for the betterment of public welfare, particularly in light of the growing business activities in the country.
Pursue any additional objectives that contribute to the advancement of the aforementioned goals of the IAI.
Qualifications for becoming a Member of IAI
The members of the institute are divided into two categories: associates and fellows. Section 10 of the Act grants eligible members the right to use the designation of Actuary. Section 6 of the Act outlines the qualifications for becoming a member of the Institute, which are as follows:
A person who was an associate or fellow (including honorary) of the Actuarial Society before the appointed day.
An individual, who is a resident of India, has successfully completed the examination and training conducted either by the Actuarial Society (prior to its dissolution) or by the Council.
Any person who has passed the examination and completed the required training for Institute membership.
Any foreigner or Indian who has completed training and passed an examination of an equivalent level, as determined by the Actuaries Act, 2006.
Grounds for disqualification from IAI membership are:
The individual is under twenty-one years of age at the time of applying for entry into the register.
The individual has been declared legally incompetent by a competent court.
The person is either an undischarged insolvent or, if discharged, has not yet obtained a clearance certificate from the competent court.
A former member who has been previously removed or terminated from the Institute cannot reapply for membership.
The person has been convicted of a moral character-related offense for which imprisonment is a possible penalty, whether within or outside India.
Composition of council
The Council is comprised of:
A minimum of nine and a maximum of twelve individuals, chosen from fellow members through election by both fellow and associate members of the Institute.
An officer, not below the rank of joint secretary in the Government of India, appointed by the central government.
One representative from the Insurance Regulatory and Development Authority, as mandated by the Insurance Regulatory and Development Authority Act, 1999.
Up to two individuals with expertise in areas such as general and life insurance, finance, economics, law, accountancy, and other relevant disciplines, as determined by the central government.
No person currently holding a position within the Central or state government.
One-third of the members conclude their term of service at the conclusion of every second year in the rotation.
Any individual appointed shall serve for a duration of six years starting from the date of nomination.
Functions of the Council:
The Council, according to Section 19 of the Act, is responsible for the following:
Conducting examinations for interested candidates and determining associated fees.
Setting the qualifications required for becoming a registered member.
Recognizing qualifications and training acquired outside India for candidate enrollment.
Supervising matters regarding fees for individual candidates, members, examinees, students, and others.
Accepting gifts, levies, grants, and donations from both Central and State Governments, as well as from donors, testators, or transferors.
Cultivating relationships and communication with educational institutions, both domestic and international, that share similar objectives as the IAI.
Offering financial support, providing assistance, managing libraries, and encouraging research and the publication of books and journals.
Managing disciplinary proceedings within the Institute and potentially establishing regional councils as deemed necessary.
Features of the Act
Provision for Appellate Authority:
Section 32 of the Act designates the authority established under section 22A(1) of the Chartered Accountants Act of 1949 as the deemed appellate authority under the Actuaries Act, 2006. The modification is that the Central Government will appoint two part-time members, who have previously served on the Council for at least one term.
Section 33 outlines the tenure of Authority members for three years or until they reach the age of seventy-five. Their terms and conditions of service are aligned with those of the authority established under the Chartered Accounts Act, 1949.
Appeals and Penalties:
Section 36 allows aggrieved members of the Institute to approach the Appellate Authority within three months of any order they wish to appeal. The Authority may confirm, alter, or set aside the order and impose penalties based on the records.
Chapter VI of the Act specifies penalties for various offenses, including falsely claiming Institute membership, misuse of the institution’s name for awarding degrees in actuarial science, engaging in actuarial practice without qualification, and unauthorized signing of documents.
Quality Review Board:
The Quality Review Board is established under section 43 of the Act by the Central Government. It comprises a Chairperson and up to four members nominated by the Central Government and the Council.
Section 44 outlines the functions of the Board, which include setting standards for services provided by Institute members.
Register of members, misconducts, appeals and penalties
The sections from 23 to 25 of the Act pertain to the registration process, including the guidelines and format for maintaining a register of members, as well as procedures for re-entry into said register. Sections 26 through 31 delve into the subject of misconduct by members or individuals mentioned in the Act. This encompasses the establishment of a disciplinary committee and the protocol for appointing a Prosecution Director. Additionally, it outlines the powers vested in civil courts with regards to the Authority, Council, Disciplinary Committee, and Authority. The Act outlines the actions that the Council is empowered to take concerning the disciplinary committee, as well as addressing various forms of professional and other misconduct.
Numbers of Actuaries in the country and scope of Actuarial Science
As of the current data available, there are approximately 325 actuaries in India. Students pursuing this profession may encounter some challenges during the entry process. The demand for actuaries in India is primarily influenced by factors such as insurance penetration and broader economic conditions. It is worth noting that actuaries are among the highest-earning professionals in the current job market. While there are numerous job openings in this field, they necessitate a qualified individual capable of effectively addressing risks and associated issues.
Conclusion
The Actuaries Act of 2006 is a pivotal piece of legislation that regulates the profession of actuaries in India. It establishes the Institute of Actuaries of India (IAI) and sets forth the standards and qualifications required for individuals to practice as actuaries. The Act empowers the IAI to maintain a register of members, oversee their conduct, and adjudicate on matters of professional misconduct.
Furthermore, the Act provides for the formation of a disciplinary committee to address any breaches of professional conduct. It also outlines the procedures for appeals and penalties for various offenses related to the actuarial profession. Overall, the Act aims to uphold the integrity, competence, and ethical standards of actuaries, ensuring they contribute effectively to the financial security and stability of the country. It plays a crucial role in maintaining public trust in the actuarial profession and safeguarding the interests of stakeholders in the financial industry.
References
[1] 10th November 2006, vide notification No. S.O 1912(E) dated 28th November 2006 , see Gazette of India Part II
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