Actuaries Essay, Research Paper

Actuaries The question on your mind, like it was mine, probably is What is an actuary? Well I have the answer. Actuaries are professionals trained in mathematics, statistics and economic techniques that allow them to put afinancial value on future events. They are individuals who use statistical analysisto calculate the cost of future risks we all face. These include the financialeffects that various events have on the cost of insurance and the financialobligations of benefit plans and other financial security systems. Such financialeffects are: birth, marriage, sickness, accidental injury, fire, damages to othersand to property, retirement, and death. All these are insurable events. One ofthe actuary’s main functions is to calculate the cost of financing these eventswhether by insurance or other means. Actuaries play a major role in designingpension plans and developing their funding requirements. If soundly funded,pension plans will pay the benefits that are promised. Actuaries are of great value to insurance companies, investment firms,employee benefits consulting firms, and other types of companies that need toput a price tag on financial risks. Typically, it is with this type of firm thatactuaries work. Actuarial science is a well paid profession. Entry level salariesfall between $32,000 – $45,000. For good candidates, signing bonuses are alsocommon. Top actuaries with many years experience often earn over $100,000 ayear. Many actuaries eventually leave the technical work behind and move intosenior management of companies during the course of their careers. For an example, many chief executives of insurance companies are actuaries. Actuaries come from a variety of academic backgrounds. Although manyactuaries pursue undergraduate degrees in actuarial science, others choose tomajor in business, economics, mathematics, or the liberal arts. In the UnitedStates and Canada, actuaries earn their professional identification through aseries of examinations administered by the Society of Actuaries or the CasualtyActuarial Society. During the examination process, which typically requiresseveral years, prospective actuaries usually decide to focus their studies on oneof the major specialty areas: life insurance, property/casualty insurance, health,and pensions. Actuaries make a difference. Their calculations and projections are thebackbone of the insurance and financial security industries. Actuarial work involves lots of math, but actuaries must also be up to date on business issues and trends, social science, law, and economics. In other words, actuaries havea well-rounded business approach to problem-solving. And they must be goodcommunicators to explain things to non-actuaries. Actuaries are key players ona company’s management team. They are well paid, and they like what they do for a living. Some sample actuary questions: -What is the risk that a 16-year-old in the Chicago area will have an autoaccident in 1998, and what will the average dollar amount to fix the damage

be? -How many people aged 40 – 65 will have heart attacks in 2001 and what willtheir average claim be? -How much money does a health insurance company need to set aside to pay for all the claims it will have in a given year? -How much should homeowners pay for insurance? Actuaries can answer all these questions and any other risk-based questions by building and running mathematical models. Actuaries: the next generation For years, actuaries had a secure place as the mathematical experts ofthe insurance and employee benefits industry. Leaders of the profession see afuture that is more uncertain but much more exciting. In the insurance and employee benefits industry, computers have takenover some of the purely technical work in the actuary’s traditional area. At thesame time, the uncertainty of today’s rapidly changing economy is opening uppotential opportunities for actuarial problem-solving. On Major social issues,such as health-care costs, workers’ compensation, and the impact of AIDS,government agencies are asking actuaries to help develop and critiquelegislative proposals and estimate their potential financial impact. Changing theway health care is financed and delivered also presents an opportunity foractuaries. Insurance companies are calling on actuaries to help them respondto increased regulation and public pressure to hold down insurance rates. Newlaws in some states require the appointment of independent actuaries toevaluate the financial strength of insurance companies. There is also a whole new set of risks and business problems in othercountries as international business grows and private economies take shape inEastern Europe. How can a company determine the financial risks of running abicycle factory in China or funding a pension plan in Poland? By asking anactuary. To seize these opportunities, the next generation of actuaries must bebroad-based business professionals who are as good at communicating as theyare at calculating and projecting. What it takes: If you’re looking into an actuarial career as a way to use yourmathematical ability, that’s a good start. That’s what attracted many of today’sactuaries to the profession. Math is important, but reasoning ability andwell-rounded business skills are the key to success as an actuary. If you’re considering an actuarial career, you should be: -an above-average student who excels in mathematics courses -an inquisitive and curious person who enjoys learning and likes to solve complicated problems. -the kind of person who enjoys “strategy” games like chess -someone who enjoys writing and talking to people interested in historical, social, legislative, and political issues -a self-motivated achiever who gets results and knows how to lead others. If these qualities are a match, you may have what it takes to be anactuary.

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