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 One of the main functions
of actuaries is to help businesses assess the risk of certain events
occurring and to formulate policies that minimize the cost of that risk.
For this reason, actuaries are essential to the insurance industry.
Actuaries assemble and analyze data to estimate the probability and likely
cost of the occurrence of an event such as death, sickness, injury,
disability, or loss of property. Actuaries also address financial
questions, including those involving the level of pension contributions
required to produce a certain retirement income and the way in which a
company should invest resources to maximize its return on investments in
light of potential risk.
Using
their broad knowledge of statistics, finance, and business, actuaries help
design insurance policies, pension plans, and other financial strategies in
a manner which will help ensure that the plans are maintained on a sound
financial basis.
Most actuaries are employed in the insurance industry,
specializing in life and health insurance or property and casualty
insurance. They produce probability tables which determine the likelihood
that a potential future event will generate a claim. From these tables,
they estimate the amount a company can expect to pay in claims. For
example, property and casualty actuaries calculate the expected amount
payable in claims resulting from automobile accidents, an amount that
varies with the insured person's age, sex, driving history, type of car, and
other factors. Actuaries ensure that the price, or premium, charged for
such insurance will enable the company to cover claims and other expenses.
The premium must be profitable, yet competitive with other insurance
companies.
Within the life and health insurance fields, actuaries help
companies develop health and long-term-care insurance policies by
predicting the likelihood of occurrence of heart disease, diabetes, stroke,
cancer, and other chronic ailments among a particular group of people who
have something in common, such as living in a certain area or having a
family history of illness. Such work of actuaries can be beneficial to both
the consumer and the company because the ability to accurately predict the
likelihood of a particular health event among a certain group ensures that
premiums are assessed fairly based on the risk to the company.
Additionally, life insurance actuaries help companies develop annuity and
life insurance policies for individuals by estimating how long someone is
expected to live.
Actuaries in other financial services industries manage
credit and price corporate security offerings. They also devise new
investment tools to help their firms compete with other financial services
companies. Pension actuaries working under the provisions of the Employee
Retirement Income Security Act (ERISA) of 1974 evaluate pension plans
covered by that Act and report on the plans' financial soundness to
participants, sponsors, and Federal regulators. Actuaries working in
government help manage social programs such as Social Security and
Medicare.
Actuaries help determine corporate policy on risk, for
example, and also help explain complex technical matters to company
executives, government officials, shareholders, policyholders, or the
general public. They may testify before public agencies on proposed
legislation that affects their businesses or explain changes in contract
provisions to customers. They also may help companies develop plans to
enter new lines of business or new geographic markets by forecasting demand
in competitive settings.
Consulting actuaries provide advice to clients on a contract
basis. The duties of most consulting actuaries are similar to those of
other actuaries. For example, some may evaluate company pension plans by calculating
the future value of employee and employer contributions and determining
whether the amounts are sufficient to meet the future needs of retirees.
Others help companies reduce their insurance costs by offering them advice
on how to lessen the risk of injury on the job. Consulting actuaries
sometimes testify in court regarding the value of potential lifetime
earnings of a person who is disabled or killed in an accident, the current
value of future pension benefits (in divorce cases), or other values
arrived at by complex calculations. Some actuaries work in reinsurance, a
field in which one insurance company arranges to share a large prospective
liability policy with another insurance company in exchange for a
percentage of the premium.
Note: Some resources in this section
are provided by the the US Department of Labor, Bureau of Labor Statistics.
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