Noida: In a country facing an actuary crunch, Patni Computer Systems Ltd is relying on many kinds of people to do the work of one.
A few years ago, when the software company wanted to get into the outsourcing business, it turned to someone with a proven track record in BPO: Sanjay Kapur, who had helped HCL Technologies Ltd set up its unit.
Patni told him that it wanted to do complicated finance and insurance work, the kind of stuff clients don’t even think of outsourcing. Actuaries assess financial risk, calculate insurance premiums and value pension funds, all of which require specialized training in math, statistics, accounting and insurance probabilities.
DIVISION OF WORK (Graphic)
“If I went to a client and said I want to do your actuarial evaluations,” Kapur recalls himself worrying, “he would have thrown me out of his office.”
So, instead of waiting for clients, Kapur, who now heads Patni’s BPO arm, thought of different routes.
If Patni was going to handle something like actuarial work—meaning evaluating whether or not a pension fund has enough assets to pay off promised benefits, and calculating prices and payouts for insurance policies—it would have to break it down into a process.
Its strategy is significant because it represents how BPO firms are moving into the more lucrative knowledge process outsourcing, or KPO—even amid rising salaries and a talent crunch. It also reflects a new role for clients, often based in the US and Europe, as mentors to industries that are new and skill-intensive for Indians.
When Patni looked into the practice last year, the prospective numbers looked good. Similar kinds of so-called KPO services generated $3 billion (around Rs12,000 crore) in revenue and were on track to quadruple by the end of the decade. Actuarial departments were running up big bills for Patni’s US clients since actuaries were both expensive and difficult to find in that country. Insurance analysis also seemed like a field well suited to India, with its mathematics-heavy education system.
Different levels: (R to L) Patni employees Siddhartha Kalita, who has finished 11 out of 14 papers administered by the Actuarial Society of India, and Kirti Kalra, who has a degree in math from Miranda House. (Sanjay Sharma / Mint)
The only hitch was that India shared the US’ problem when it came to actuaries. First, they were hard to find. The Indian insurance industry had historically been a small one, and there were only about 225 certified actuaries in the country. Then, they were also expensive.
“I would have to pay the earth and the moon for them,” Kapur says. More specifically, he would have spent anywhere from Rs18 lakh to Rs35 lakh per year to hire each one. To become certified, students have to pass 14 papers administered by the Actuarial Society of India, and the course often takes 10 years to complete.
After considering, then discarding, the idea of hiring as many actuaries as the company could afford, Kapur considered hiring actuarial students, a potential recruitment pool of around 6,000. When that also seemed unfeasible, Patni applied to actuarial work what BPO firms have already done to other fields—break it down into a process.
Patni brought in a couple of senior actuaries as consultants to divide the work flow into simple, mid-level and complex tasks. They estimated that 50-60% of the work fell into the easiest category, with responsibilities such as cleaning up data and crunching numbers. To staff that section, Patni scoured the country for the colleges with the best mathematics and statistics departments, and headed out to places such as Cotton College in Guwahati, Bishop Heber College in Trichy, and St Aloscious College in Mangalore to recruit.
For mid-level tasks such as actually analyzing the data, they took actuarial students who had completed between four and eight of the necessary papers. For the top-end work of preparing the final evaluation and report, which would be less than 5% of the total process, they hired two certified actuaries.
To convince his first client that it could even be done, Kapur ran a six-month pilot where the client continued to do its work, and Patni set up a parallel run, charged at cost. Once the trial was successful, Patni scaled the process up to 125 people, who are now spread over three clients.
Patni runs a two-month training programme for its new hires, but relies on a split staff to manage the work. In company lingo, there are the “doers” and the “checkers”. While the mid-to-senior level employees create and test out financial models, they also double-check the work of their junior counterparts.
The pay scale within the actuarial process is a sliding one and depends on how many papers an employee has cleared. The salary starts at Rs3 lakh at the entry level, moves to between Rs5.5 lakh and Rs7 lakh with five papers cleared, and doubles again with experience.
The field is still a relatively small one, and for those further along in their course work, even finding it was often a fluke. Siddhartha Kalita, a manager in Patni’s actuarial process who has finished 11 out of 14 papers, only came across the possibility when he was finishing a degree in statistics at the University of Delhi, and interviewed with an insurance company. He didn’t get the gig, which would have included a stint in the UK to study actuarial science, but it piqued his interest. After finishing nine papers in the UK, he put in a few years at an Indian insurance company and with an Indian insurance consulting firm before joining Patni via a newspaper ad.
Kriti Kalra, a more recent recruit to the actuarial profession, had a more clear-cut route to Patni. She was finishing a degree in mathematics at Miranda House in Delhi University, and heard about the company’s actuarial department from senior classmates in the postgraduate programme. Her resume made it to Patni through a consultant, and she got the job.
Other BPO firms that have actuarial departments pursued a slightly different tactic. Genpact Ltd, which started its group in 2003 at the behest of several clients, hired both statisticians and actuarial students in its first run with 20 staffers. The company then set up an in-house programme to cultivate talent, focused on guiding students through the exam process. The programme provides study leave and relies on actuarial mentors from their clients to advise the student-cum-employees, who now number 75, and make sure they are getting the right kind of experience.
“Could we have done this on our own? No,” says Mohit Thukral, a senior vice-president at Genpact who leads the company’s insurance business. “Only because we were able to partner with a customer” was it possible, he says.
The market for actuarial outsourcers isn’t a huge one. “It’s a niche area,” says Thukral, “the numbers are not in the thousands; they are more in the hundreds.” But it’s growing. Genpact plans to double its practice in the next two years, and Kapur expects Patni’s business to grow by 70- 80% this year.
For the market to grow substantially, says Thukral, it’s up to India’s colleges to invest in building an actuarial talent pool so that BPO firms aren’t poaching for recruits. He adds: “We need to build a programme where we’re not pinching each other.”