What Is Actuary Science?

Actuary science (or actuarial science) is the science of assessing the risk of events occurring and creating insurance policies that mitigate those risks for customers. In insurance companies, actuaries usually create a rate at which the insurance company can cover an organization for those risks at a price that is reasonable for the customer. Becoming an actuary requires that you pass a series of exams and become certified to practice the science professionally.

Function

Actuary science combines several other sciences and skills, such as statistics, finance and business. Calculating the risk of a given accident or disaster requires that an actuary not only be familiar with statistics and probabilities, but that they also understand the business that the customer is engaged in. In addition to accident probabilities, actuary science lets actuaries predict the income levels necessary to generate a certain retirement income, for example.

Significance

About sixty percent of all registered actuaries are employed by the insurance industry. Without actuary science, insurance companies could not afford to protect individuals in case of disaster--these companies would not exist.

Significance

Actuaries serve an important role in the financial services industry, where their knowledge and expertise help them to rate financial instruments and securities. These ratings directly affect the price of a given financial instrument, so it is important that they are as accurate as possible. When a financial organization releases a new financial instrument, actuary science provides a way to calculate the risk and the reward that accompany that instrument.

Types

Some actuaries provide services to a single employer, such as those employed by most insurance companies. These actuaries practice a single facet of actuary science all the time, and become experts at it. Other actuaries operate on short- or long-term contracts, and may practice many different facets of actuary science. Contract actuaries may be used to testify in court about lost income due to accidents, future values of assets in divorce proceedings and other complex calculations.

Training

As mentioned above, actuaries use a combination of statistics, finance and business to complete their jobs. Prospective actuaries often have a grounding in these topics, and possibly a bachelor's degree, before pursuing professional certification. Beginning actuaries often rotate among different jobs in an organization to learn all steps related to the business of actuary science.

Licensing

There are two societies that license individuals to perform actuary science: the Society of Actuaries (SOA) and the Casualty Actuarial Society (CAS). These organizations certify actuaries for different purposes, but administer many of the same examinations. It is not necessary for a potential actuary to choose a specialty until very late in the certification process.