Business, Legal & Accounting Glossary
An actuary makes assessments about the likelihood an event may happen and the associated costs. Actuaries may work for investment firms, where they research pricing and manage investments, particularly how to mitigate risks, and life insurance companies where they are responsible for providing data so the company can create policies and pricing schedules which ensure the insurance company has enough money to cover their claims. They also can work at pension funds, where they are responsible for placing a value on accumulated pension commitments, and management, banking and capital project companies.
An actuary applies advanced mathematical, statistical and actuarial methods to minimize the financial impact of future events.
An actuary is a business professional specializing in the statistical assessment of financial risk. They are typically employed by the insurance industry to calculate the level of risk an applicant for an insurance policy presents.
This isn’t done on an individual basis, but on a demographic basis.
Various factors will be combined to provide a calculation of risk for someone or a situation which meets certain set criteria, and this calculation will be used to set the level of premiums to be paid.
For example, a young driver will automatically fall into a higher risk demographic than a more experienced one, and this is down to the rules that actuaries formulate.
Likewise, more powerful cars will attract higher insurance premiums than smaller ones. This is not only because bigger cars are usually more expensive and therefore more costly to repair or replace, but it’s also because the trend is that the more powerful the car, the more aggressively it will be driven, and it is also more likely to be driven by a male than a female.
Thousands of similar trends and rules are used depending on the policy type, with the aim of predicting how much a policy is likely to cost an insurer on average and price it accordingly.
An actuary uses a variety of risk tables and statistical techniques and tools to perform and calculate risk assessments.
Determining the potential for future claims is the main responsibility of an actuary.
Typically, an actuary has a background in mathematics and accounting. Anyone considering a career as an actuary will need to understand mathematical concepts, have economic and statistical awareness and be able to apply their knowledge in the real business environment. Actuaries must also have good communications skills so they can translate information to non-specialists. Actuaries can also gather skills to move to different areas of business including teaching, alternative risk roles, consultants, business operations managers, and career advisers.
An actuary is most often employed in the insurance industry to evaluate risks associated with the underwriting and/or administration of insurance policies. An insurance actuary performs calculations associated with premiums, pensions, reserves, dividends and annuity rates, among others.
The term actuary is used primarily in the United States. In most other countries, an actuary would be referred to as a mathematician. To become a fully credentialed actuary, one must pass a plethora of examination sessions which can take several years to complete.
The actuary is working on a chart that shows the likelihood of flood damage for all of the properties in the area.
A certified actuary needs to have the ability to compress large amounts of data into precise equations and numbers.
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This glossary post was last updated: 30th March, 2020 | 0 Views.