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  March 11, 2002

Math Professor Helping Shape
China's Insurance Industry
By Brent C. Evans

The Center for Actuarial Sciences and Risk Management is fostering collaboration with China, and Jay Vadiveloo, its new director, is leading the way.

Vadiveloo, an adjunct professor of mathematics since 1990 who simultaneously worked in the insurance industry, is also building bridges between academics and industry.

Now a senior manager with Deloitte & Touche, he also has been appointed director of the center at UConn, thanks to a $150,000 gift to the University from the consulting firm. One of Vadiveloo's first projects is to help lay the groundwork for actuarial science in a newly opened market: China.

In conjunction with selected Chinese universities, Deloitte & Touche, and an international consortium of insurance companies, Vadiveloo is spearheading the development of actuarial standards for China. These standards will govern insurance pricing and how insurance companies set the reserves from which they pay their claimants.

An Expanding Market
China's recent move toward a capitalist economy has created opportunities for foreign insurance companies, he says. "It's a very young market. For a long time, it was dominated by one big central company," he says. Now, however, there is an influx of foreign companies.

In China, it is difficult for consumers and insurance companies to know the value of an insurance policy, since the industry is so new, and lacks experience and credible data. The scarcity of data also makes it hard, for example, for insurance companies to project life expectancies, which is important in pricing insurance.

Vadiveloo is building an insurance database from Chinese census data, any available data from the Chinese insurance industry, and insurance data from other countries. This will be the first step in creating a comprehensive, credible insurance database.

This database will allow insurance companies to craft their products.

Vadiveloo is gathering the support to make his database and standards catch on. In October, he made a trip to China and visited several Chinese universities, hoping to spark collaboration with UConn.

He also plans to form an international advisory board of American and foreign insurance companies to ensure that the standards created from his database are reasonable, and to oversee their implementation. This consortium will also screen new insurance products to ensure that they are fair and provide the necessary protection to the Chinese public.

Vadiveloo expects his work to be attractive to the Chinese government, as it will give a boost to an entire industry. Deloitte & Touche, for its part, expects to make a profit from the insurance companies that benefit from the initiative.

Academic Programs
Besides garnering support for the initiative, Vadiveloo hopes his department's partnership with Chinese universities will help them enrich their actuarial science programs. To date, he has developed links with Fudan University, Renmin University, Tsinghua University, and the University of Science and Technology of China. He wants to work with Chinese actuarial science and math faculty to offer intensive courses to their students and hopes that, with help from the Office of International Affairs, UConn will become a magnet for Chinese actuarial science students.

Peng Zhou, a current UConn actuarial sciences graduate student from China, is working with Vadiveloo on a financial planning model for elderly people. This model will help retirees invest their money, while maintaining financial stability. Such a model, says Peng, will be attractive in light of the recent market downturn and the Enron collapse.

Stability is important to the model because retirees do not have a chance to recover from a bad investment. "Financial planning for old age is serious," says Vadiveloo, "and we've got a serious model."

Peng and Vadiveloo's model is innovative because it is built on comprehensive analysis of risks facing retirees, such as investment risks, and the costs of extended health care. "We're taking a holistic approach," Vadiveloo says. "We're looking at all the assets, and all the needs."

Peng is building the model through computer simulations of the possible results of financial choices across an array of investment and insurance products. The model determines probable outcomes, assesses risks, and finds the optimal strategies.

Deloitte & Touche will use the model to help insurance companies market products and services to the growing market of retirees.

Peng was attracted to UConn by the opportunity to work on projects like the financial planning model, which combine academic understanding with the real-world savvy required in industry.

UConn's proximity to Hartford, reputed to be the capital of insurance, he says, makes it a good place for students to add hands-on training to their classroom learning.

It's a combination that makes overseas students valuable in their own countries, since experience gained here can be applied back home. "People share common risks. They have to plan in the same ways," he says. "The underlying principles are the same."

Students like Peng also understand both sides of an international interaction.

Peng expects more students like himself to enroll in UConn's actuarial sciences program. "UConn is very well connected to international students from Europe, Asia, and Africa," he says. "We're going to get a huge influx."

Five Ghanaian graduate students, for example, are currently enrolled in the actuarial sciences program. Partly at the prompting of these students, Vadiveloo is doing preliminary work on an initiative in Ghana similar to his work in China.

Isaac Baah, one of the Ghanaian graduate students, echoes Peng in stressing the importance of blending academic studies with the real world. Vadiveloo, he says, embodies this spirit: "He doesn't only talk about books. He talks about the real world."

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