What is an actuary?
An actuary is a professional who assesses and manages risks in a variety of situations, typically financial investments and insurance policies.
They use probability, computer science, financial theory, human behavior and business trends to help predict, manage or prevent undesirable events from occurring.
History of actuaries
Actuarial science goes hand in hand with insurance, so the history of actuaries dates back as far as the first instances of life insurance, which is the late 17th century. It was during this time that the practice of risk assessment became highly popular and fine tuned down to a science.
It was during this time that the first mortality tables were introduced. These tables separated the population into groups based on lifestyle factors so that insurance companies could make informed decisions before issuing an insurance policy.
CALCULATOR: What’s your life expectancy?
The role of an actuary
In short, the role of an actuary is to evaluate risk. Using numbers and statistics, actuaries can determine the likelihood of future events. These professionals also can offer ways to manage or reduce the risk of undesirable events from taking place.
Actuaries have a strong understanding of human behavior combined with analytical skills and business sense to help companies deal with risks and come up with ways to deal with the aftermath of any undesirable events that do occur. They are problem solvers and creative thinkers who work in a variety of fields.
Actuaries commonly work with life insurance companies and construct mortality tables to help companies make decisions about their policies. They also employ the similar practices for liability and property insurance companies.
Overall, actuaries help these companies determine which groups of people are more expensive to insure due to increased risk.
Skills and training of an actuary
While actuarial science is a study in which many people can obtain a degree, actuaries can come from several different backgrounds. More often than not, actuaries have a strong background in mathematics, statistics and finance. Additionally, actuaries should have a deep understanding in the sector in which they wish to work, such as health care, pensions or insurance. Actuaries also should have strong communication skills to relay their thoughts and ideas effectively.
Actuaries must have a bachelor’s degree and will receive on-the-job training once hired. To become an actuary, people must pass an exam to obtain a certification. Each part of the exam requires approximately 100 hours of independent study per hour of the exam for preparation. The first exam takes three hours, so the preparation would amount to 300 hours.
Places that employ actuaries
Actuaries work in both public and private sectors. However, most actuaries work for and with insurance companies. Here, actuaries use mortality tables and analyze lifestyle factors to help predict a person’s lifespan. Additionally, they can help identify and encourage certain behaviors that might extend someone’s lifespan and lower their risk, thus reducing insurance premiums as well.
Financial companies also are likely to employ actuaries because they can help predict fluctuations in the market.
In many instances, the market can be less predictable than human behavior, so actuaries must have a firm grasp of the industry. Companies that handle a number of portfolios and financial transactions might keep an actuary on staff. Others may hire an actuary on a case-by-case basis.
Actuary career outlook
The job outlook for actuaries from 2014 to 2024 is good. The number of jobs needed in this field is expected to grow by 18%, which is much faster than the average.
Many actuaries work in an office setting, but others travel across the country and around the globe to meet with clients. The work of an actuary is challenging and interesting, but also low stress and rewarding.