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What is an Actuary

What is an Actuary

What Is an Actuary?

Actuaries help businesses, organizations, and individuals to manage financial risk by evaluating existing data. Actuaries are very good at math and have a good understanding of economics and financial theory.

Unlike accountants who focus on past financial events, actuaries focus on future ones. Read on to learn more about this interesting, in-demand profession.

What is an Actuary – Definition

what-is-an-actuary-productsActuaries use math, financial theory, and statistics to analyze the financial consequences of risk. Many actuaries work in the fields of insurance, pensions, or healthcare.

Because actuarial science deals with a lot of numbers and complex equations, actuaries today often use modeling systems and advanced computer software. This means they are familiar with computer science.

However, unlike statisticians or other technical mathematical professionals, actuaries provide their service in a business context, which requires them to be familiar with the business milieu in which they work.

What Does an Actuary Do?

If the role of an actuary still seems a bit vague or unclear, let’s look at the common job descriptions connected to the role of an actuary. Here are a few key responsibilities that actuaries generally have.

  • Analyzing whether financial events are possible or not and if yes, how possible, through advanced mathematical formulas that may involve calculus, algebra, statistics, and more.
  • Using their creativity and knowledge to provide solutions for decreasing negative financial effects that may result from a potential event.
  • Advising decision-makers to help them make decisions regarding the future that ensure profitability and minimize risks and undesirable negative effects.
  • Gathering and analyzing data to assess risk and create policies that reduce the costs associated with those risks.
  • Investigating financial questions to determine the amount of contribution required by policyholders.
  • Recommending investment strategies to help a business maximize its return on investment.

As you can see, actuaries don’t only crunch numbers behind a screen and then raise warning flags. They are called upon to provide creative solutions to the cost management of risk and to do it in a timely and informed way.

Where Do Actuaries Work?

what-is-an-actuary-workplaceAccording to their area of expertise, actuaries fall into two broad categories—those who work in life and health insurance, including pensions and employee benefits; and those who manage financial risks related to liability insurance, automobile insurance, and compensation for workers.

Actuaries have to become an associate and then a fellow of the Casualty Actuarial Society or the Society of Actuaries, depending on their chosen specialization.

Most actuaries work in the insurance industry, the actuarial consulting field, or in corporate management. The skillset and technical expertise that actuaries provide are particularly important for insurance companies, which need to effectively assess risk and its cost to stay profitable.

However, actuaries today are not limited to insurance companies and consulting firms. Governments, hospitals, banks, investment firms, and large corporations all need effective ways to manage financial risk.

What is an Actuary – Education

Actuaries hold an undergraduate degree in actuarial science, economics, or commerce followed by associateship and fellowship certifications that require the completion of around 10 exams. Actuaries can start taking these exams before they obtain their undergraduate degree.

To become fully certified and attain the fellowship designation, actuaries will normally have to spend several years working in an internship and then in an entry-level actuary job after completing their undergraduate studies. Actuaries can benefit from studying computer science and programming languages since most of their work is done on a computer.

What is an Actuary – Final Thoughts

It would not be an exaggeration to say that actuaries are a modern version of financial fortune tellers. But instead of divination techniques and crystal balls, they use math and financial theory to analyze and distill large sets of data into an understanding of financial risks and possible solutions for avoiding the costs generated by those risks.