What is an Actuary

What does an Actuary do?

The actuary's responsibilities date back to the early 1800's, when most actuarial work centered on developing mortality tables and life insurance policies. Today most actuaries are best known for their work in the insurance and pension fields, where they design financially secure benefit programs to protect people. But that is changing, and actuaries are finding themselves involved in many other areas.

Trained to analyze uncertainty, risk, and probabilities, actuaries create and manage programs which will reduce the adverse financial impact of the expected and unexpected things that happen to people and businesses. These programs focus on areas such as life, health, property, casualty, and investment possibilities. Projects with which actuaries may be involved can be as varied as:

• Determining a company's monetary value in a merger or acquisition.
• Estimating the impact of seat-belt laws in automobile losses and determining appropriate rate discounts.
• Projecting Social Security benefits so money can be collected to pay workers planning to retire in 20 years.
• Determining why malpractice insurance costs for doctors are skyrocketing.
• Projecting what the AIDS epidemic will cost life and health insurance companies in five, ten, and twenty years.
• Determining the price for a liability policy.
• Collecting and investing enough money so that an insurance company can pay claims.
• Designing a new retirement program for a company.
• Calculating the price to charge for insuring a satellite launch.
• Estimating the benefit costs for a labor union contract.
• Answering questions like, "What risks are insurable," and "How much and where shold companies invest money?"
• Estimating the costs of a major earthquake on the West Coast.

While actuaries work on all sorts of projects in diverse business environments, they have one thing in common: they use quantitative skills to analyze and plan for future financial situations. This broad involvement in business has taken actuaries well beyond the traditional mathematician's role and placed them in an environment where they must be aware of evonomic, legislative, and social developments which will affect their company and clients. Their comprehensive understanding of both financial and technical intricacies makes them the most influential of professionals, whise work affects virtually every industry in existence.

Indeed the actuarial profession today offers a career path leafing to significant leadership positions in the business community.

Where do Actuaries Work?

Actuaries in life, health, property, and casualty insurance companies.

As a life or health insurance company actuary, some of the responsibilities might include:

• Investigating the effects of medical impairments on long life
• Applying mathematical models to insurance company problems
• Participating in carious aspects of corporate planning
• Calculating a fair price for a new product
• Developing new ways to compensate insurance agents
• Identifying the benefits a new insurance contract will cover
• Preparing the company's financial statement.

As a property / casualty actuary, some of the responsibilities might include:

• Conducting studies of rates by geographical area and type of insurance, such as automobile rates or homeowners rates
• Preparing supporting materials to substantiate rates at a hearing on rate changes which the company files with the insurace regulatory authorities
• Developing plans for the company to enter a new line of insurance
• Conducting research on new statistical models and methods for estimating claims.

Actuaries in consulting firms

• testify in court about the value of potential lifetime earnings lost by a person who has been disabled or killed in an accident.
• provide figures representing the current value of future pension benefits in dovorce cases.
• give evidence on how automobile insurance rates are determined.
• be the authority a labor union calls to a collective bargaining session to esptimante what a new health benefit proposal would cost.
• give investment advice.
• evaluate a company's insurance program costs.

Consulting actuaries work with and advise chief medical officers, chief operating officers, and often chief executive officers, especially in the finanical services, risk management and health care fields.

Actuaries in government

Most actuaries working in the U.S. government are employedby the Social Security Administration, Health Care Financing Administration, Internal Revenue Service, Public Health Service, Department of Defense, Veterans Administration, Railroad Retirement Board, and the U.S. Treasury Department. Responsibilities in these departments might include supervising the financial operations of insurance and retirement plans which protect federal employees and servicement or providing testimony before a Congressional committee on the long-range costs that changes in the Social Security program of Medicare financing would generate.

Actuaries working at the state level in the U.S. are usually employed by state insurance departments. Here one may be in charge of examining an insurance company or employee benefit plan to make sure it is financially sound or that the rates charged are proper. The work may also involve supervising the financial operations of insurance and retirement plans which cover local and state employees. Also, one might advice legislative committees on what standards are needed to license new insurance companies.

An actuary working for the Canadian deferal government will probably be employed in the Department of Insurance or a department administering social security programs. The responsibilities may include being asked to prepare cost and funding information on proposed changes to a program. One may also be involved in projecting population trends which will affect medical insurance or pension systems. If employed in the provincial government, the work may entain advising lefislative committees on regulations dealing with insurance or pension matters.

Rating bureaus, such as the National Council on Compensation Insurance (NCII) and the Insurance Services Office (ISO) in the I.S. or the Insurers Advisory Association (IAA in Canada, seek the service of actuaries to develop industry-wide rates by area for various types of insurance and classes of risk. As a rating bureau actuary, one might be working on research projects to determine more appropriate methods of recognizing differences in risk. Perhaps one may be more involved in bureau and inter-company committee assignments to make recommendations regarding rates and the specific factors used in calculating them.

Other areas

Who to contact for more information

Society of Actuaries

Casualty Actuarial Society

American Society of Pension Actuaries