Actuary - Definition
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Back To: INSURANCE & RISK MANAGEMENT
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.
A Little More on What is an Actuary
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.
References for Actuaries
Academic Research on Actuaries
- The financial actuary and the European consumer, Levay, E. J. (1991). In Proceedings of the 2nd AFIR International Colloquium (Vol. 3, p. 51). This article stresses that due to the unbalanced and dependent nature of investment risks that cannot be balanced automatically by any mathematical law, the Actuary of the Third Kind must start dealing with new tools created especially for this purpose such as options and futures.
- Opportunities for the International Actuary, Jaros, T. A., & Swerdlin, M. (1997). This is a study of the international opportunities that are available in the field of Actuarial science.
- Actuary Entrepreneur, Lin, K. This paper focuses on how people who are professional actuaries can also double in entrepreneurship and use their skills to create their businesses and practices.
- The Actuary Of The Future And The Future Of The Actuarial Profession, Corbett, G., Fibiger, J. A., Hickman, J. C., Kilbourne, F. W., Lautzenheiser, B. J., Rappaport, A. M., & Shapiro, R. D. (1989). This paper focuses on how actuary will be carried out in the future and also if the profession will still be available or will be taken over by computers.
- Non-traditional actuarial opportunities, Olivo, N. (2013). This is a thesis that discusses the academic preparation, the descriptions of the traditional and nontraditional roles, how traditional actuaries are becoming non-traditional as well as how students can best prepare to get the most out of their career.
- 2008 Presidential Address What is an actuary? Martin, G. (2008). Australian Actuarial Journal, 14(1). In this study, the presidential address is studied which covers an overview of 207 achievements, critical strategic and business foci for 2008 together with various thoughts on issues relevant to our outlook.
- Actuarial Opportunities for the 1980s and 1990s, Bartlett, D. D., Corey, M. J., & Emory, L. B. (1982). This is an examination of the various actuarial opportunities that were available in the 1980s and 1990s.
- The actuary: From academic to professional, Kuys, P. H. M. (1992). Insurance: Mathematics and Economics, 11(2), 91-96. This paper follows the development of an actuary from the academic level up to when he/she becomes a professional in this field.
- The actuary: the role and limitations of the profession since the mid-19th century, Bhlmann, H. (1997). ASTIN Bulletin: The Journal of the IAA, 27(2), 165-171. This study follows the development of the actuary profession over the centuries as the area of its competence gradually increased. It also discusses the limitations faced by this profession.
- Actuary of the Future, October 2003-Issue 15, Pask, A. R., Henderson, K. M., Lam, J., & Shenoy, S. (2003). In this study, how actuary will be done in the future is discussed and also the various industries to which it will have expanded.
- The Life Insurance Actuary and His Mathematics, Carpenter, R. V. (1929). The American Mathematical Monthly, 36(6), 312-319. This study investigates how life insurance actuaries perform their mathematical calculations to determine the police to be placed on the life of a person.