What is an Actuary?

An actuary is a person conversant in the profession of mitigating and managing the risks associated with financial investments and other ventures that are potentially risky. Actuaries have excellent knowledge and skills in mathematics, statistics and business management. The aid managers in making strategic decisions that help in the growth of a business and in providing value to customers. One of the most critical jobs in an organization is risk management because it allows managers to act on the available information to minimize the impacts of problems that may occur. It is also used to assess the risk of a possible investment opportunity to determine if it might yield negative results for the company. The figure of the actuary has been growing over the years since it is the one that is responsible for determining the success probabilities of the decisions made in the organization.

What Does an Actuary Do?

Actuaries are people who have studied in the profession of Actuarial Science and Statistics and thus can analyze the financial risks faced by an organization when making decisions. They evaluate the level of risks existing in a company by using mathematical formulas and probabilities to facilitate effective decision making. Actuaries form an essential part in the insurance industry because they are used to study the actual probabilities of events occurring. They help insurance policies to be valued using calculations of the financial costs derived from all the possibilities that are available. Their work, however, extends to other areas and industries. In business and finance, this profession is essential since it allows managers to know the level of risk and the probability of an event occurring. It also helps to quantify the effects of the different possibilities that might be.

What are the functions of actuaries?

Actuaries apply mathematics and statistics to perform a risk analysis. However, since they work in a large number of industries, they are involved in performing different tasks. These include:

• In insurance companies: They assess the possibility of an event occurring and then quantify the financial costs of these possibilities. This information is used in the calculation of insurance policies.
• In Social Security: In this field, they assess the feasibility of public health systems, pensions among others. They also analyze the economic consequences of the situations that may generate a risk for the system.
• In business: They measure the probability of occurrence of the different risks faced by a company and the impacts they may have if they occur. They offer information to be used in making the correct decisions that mitigate the effects of these risks.
• In finance: They evaluate the level of risk in different investment ventures to determine their feasibility and also their profitability since high-risk investments also attract high-profit margins.

They then establish tools that enable investors to minimize the risks and obtain the maximum benefits. Although the actuary profession is relatively new and not well known, they attract some of the highest salaries due to the essential nature of their work.

Related Topics

• Insurance Law (Intro)
• What is insurance?
• Captive Agent
• Independent Agent
• Captive Insurance Company
• Underwriter 
• Combined Ratio
• Claims Adjuster
• Capital at Risk
• Assigned Risk
• Contingency
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• What is an insurance contract?
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• Insurance Regulatory Information System
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• American Association of Insurance Services Definition
• American Council of Life Insurance Definition
• American Insurance Association Definition
• American Risk and Insurance Association Definition
• LLoyd's of London
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• Underinsured Motorist Coverage
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• Health Maintenance Organization
• Capitated Contract
• Point of Service Plan
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• Incontestability Clause
• Waterfall Concept
• Annuitization
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• Clean Sheeting
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• Homeowners, Renters, and Fire Insurance?
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• Business Liability Insurance
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• Affidavit of Loss
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