Definition: An actuary is a person who analyzes future risk and uncertainty for financial considerations. An actuarial analyst has a strong background in statistics and analysis. They use that knowledge to analyze risk and calculate the value of things such as policy payouts or retirement benefits.
Examples of Actuary in a Sentence
- The Actuary advised the company to take out an additional life insurance policy.
- The Actuary determined that insurance rates will have to be raised.
First Known Use of Actuary
The earliest known mention of an actuary was in 1570.
What is an Actuary?
An actuary is responsible for closely analyzing the risk and costs associated with different scenarios and undertaking a systematic approach to resolving those issues.
The Actuary’s role is to analyze financial events, such as the effects of taxes and economic conditions. The role involves creating forecasts of an organization’s total future costs or profits and analyzing these against alternative scenarios. This is done with the help of statistical models, economic theory, modeling software, and other sources of information. Actuaries usually have advanced degrees in mathematics, statistics, business administration, or other similar fields.
Responsibilities of an Actuary
- To estimate the probability of some event, they collect statistical data of that event and other data on similar events.
- Actuaries help others estimate the probability of specific events, such as illnesses, injuries, or deaths, and often suggest economic ways to minimize their likelihood.
- Using probability and statistics principles, actuaries design insurance policies, investments, pension plans, and other business strategies to minimize risk and maximize profitability.
- Using charts, tables, and reports, actuaries help to explain calculations and proposals.
- Explain the results of their studies and proposals to company executives, government officials, and shareholders.
Most actuaries perform their work with the use of computer-aided modeling and forecasting software. They also use advanced actuarial tools to measure chance as well as help determine the probability of occurrence.
Depending on the company or organization, an actuary may work on a team composed of managers and workers from various fields. Some actuaries team with accountants and financial analysts to set the securities offered to investors.
Actuaries use their expertise in economics and statistics to assess the potential effects of proposed changes in legislation on any number of issues from coverage levels to provider reimbursements. Actuaries may also be responsible for estimating risk exposure and analyzing the cost-effectiveness of programs such as medical insurance.
Pay of an Actuary
Actuaries are professionals who work in the insurance industry, where they predict risk and calculate premiums. The median annual wage for a worker in this field is $111,030, around $55 per hour. The lowest-paid workers in this field earned less than $66,000 annually, and the highest-paid may have earned up to $196,000 per year.
Work Schedule of an Actuary
Although the actual number of hours will vary depending on each clients’ needs, an actuary is expected to work a minimum of 40 hours every week.
How to Become an Actuary?
To become an actuary, a student must complete a bachelor’s degree program in mathematics and finance. The program should include courses in mathematics, statistics, and economics.
Students may also pursue certification as a professional in one of several actuarial organizations. Once they have obtained the necessary education and experience, they can apply for corporate finance departments at insurers or other financial companies.
Actuaries need a strong knowledge of mathematics, statistics, and business. They typically have a bachelor’s degree in mathematics, statistics, actuarial science, or some other analytical field.
As an actuary, you will need to study math and business. You’ll need to master advanced statistics and probability, finance theories, and modeling techniques.
The education of an actuary involves using and developing computer science, especially programming languages, statistics, and databases. Classes in writing and public speaking will further students’ knowledge of the business world and build valuable communication skills.
- Analytical skills. Analytical skills are crucial for success in this role. Actuaries will need to use their analytical skills to analyze and interpret a wide range of complex data that includes demographic background, financial records, medical histories, or the personal effects of people.
- Communication Skills. To be successful as a highly employable actuary, you must have exceptional communication skills. While your peers may understand the math behind modeling risk, they won’t necessarily grasp the broader goal of determining the appropriate level of insurance for a given business. You need to communicate effectively with people from all walks of life if you want to advance in your career and become one of the best in the business.
- Computer skills. Computer skills are essential for any good actuary. A background in programming languages and the ability to create and run spreadsheets, databases, and special statistical analysis software allows actuary candidates to become an asset to insurance companies everywhere.
- Interpersonal skills. As members of an organization, actuaries must establish good working relationships with others in the organization.
- Math skills. Accountants must be able to analyze numbers and apply accounting principles to a variety of financial transactions.
- Problem-solving skills. These professionals analyze available information and develop strategies for minimizing risks to businesses or individuals.
- Analytical or scientific software
- Database user interface and query software
- Financial analysis software
- Object or component oriented development software
- Presentation software