What is an actuary?

Actuaries are professionals in the financial industry who use their expertise to perform risk assessments and develop plans for limiting the impact of financial risks. They research theory and case studies in the field of actuarial science to help businesses and organizations make decisions about their financial security and liability management. Actuaries must have a complex understanding of math, economics and computer science and be skilled in calculating probability and interpreting statistics to identify major and minor risk factors and help a business reasonably prepare for changing conditions.

Read more:How to Write an Actuary Job Description

Where do actuaries work?

Most actuaries work in the insurance industry to help insurers determine profitable, sustainable coverage policies. Actuaries predict insurance company costs, then help them set premiums and design policies based on those numbers. Actuaries can specialize in a particular kind of insurance, such as life insurance, health insurance, car insurance or liability insurance.

In addition to the insurance sector, actuaries work with executives in corporate environments to craft long-term strategic plans. The government employs actuaries to develop policies surrounding pensions and retirement plans, bonds and treasury notes, Medicare and other programs. Actuaries can also work as private consultants, as part of an investment firm, as underwriters in a financial firm or in human resources departments.

Actuaries usually work at a computer in an office setting but may also travel and meet with their client’s staff to gather data. Most actuarial jobs are full-time, although consultants may work on a part-time basis with several different clients.

What does an actuary do?

Actuaries use databases, statistical modeling software and other tech tools to design, plan, test and evolve strategic policies. They collaborate with accountants, financial advisors, economists and market research analysts to develop a well-rounded understanding of a company’s risks and challenges. The responsibilities and duties of an actuary include:

• Developing and testing hypotheses about company risk factors
• Gathering data and analyzing patterns
• Assessing the likelihood of different events occurring and predicting the possible impact
• Researching common and uncommon risk factors in different industries
• Auditing company policies to determine how they influence productivity
• Brainstorming solutions for managing financial risks
• Filling out and updatingrisk registersfor individual projects
• Justifying their predictions based on market trends and risk assessment theory
• Creating charts and tables to explain complex statistics and concepts to shareholders and company management

Actuaries emphasize different key tasks depending on the industry they work in. For example, life insurance actuaries create insurance policies and focus on life expectancy risk factors like drug use, age, gender and lifestyle. Property insurance actuaries focus on data about natural disasters and accidents based on geographic location and the type of property they insure. Enterprise actuaries focus on large-scale issues like long-term growth plans and how social, political and economic issues can impact them.

Related:What Is Strategic Planning?

Benefits of hiring an actuary

Hiring an actuary gives you access to highly specialized data-driven strategic advice from professionals who are trained to understand cause and effect in business. Businesses at any stage can benefit from actuarial assessments, from growing startups that want to predict viability to established corporations starting new initiatives or tailoring their current business practices.

Some of the key benefits of having an actuary on your team in the workplace include:

• Financial stability: Actuaries can help a company make well-informed investments and take measured risks that will ultimately benefit the business’ financial stability. They provide a wider context for budgeting decisions and ensure the company has the funds to cover key events.
• Consistent strategy:Actuaries develop the strategic framework for making business decisions, helping managers and staff be consistent in the way they implement policy.
• Improved preparedness:The advice of an actuary can help businesses respond appropriately if a worst-case scenario occurs. Knowing the approximate impact of accidents, economic downturns and other events allows businesses to act quickly and thoughtfully in crisis situations.

Related:How to Hire an Actuary

Frequently asked questions about hiring an actuary

What skills should I look for in an actuary?

Actuaries need to have sharp analytical and creative skills to do their job well. They need technical skills such as knowledge of calculus and economic theory, proficiency in modeling software and statistical analysis. Actuaries use creative thinking and problem-solving to envision different outcomes and predict how a company can influence their future.

What kind of training and education does an actuary typically possess?

Actuaries usually have at least a bachelor’s degree in a field like mathematics or data science. To become certified, actuaries need to complete professional development courses at a professional actuarial society and pass several exams. The basic associate-level certification can take several years, and the advanced fellow-level certification can take two or three more years. Actuaries take on more responsibility as they pass more actuarial exams.

How do I interview an actuary?

Wheninterviewing an actuary, ask a mix of questions about their past experience and hypothetical problem-solving questions. Asking candidates how they would perform a risk assessment in different scenarios gives you insight into their analytical process. Questions that focus on results-driven projects and researching industry trends provide candidates with an opportunity to showcase their expertise and precision when determining probability.