Define Insurance Actuarial

Property actuaries ensure insurers have sufficient reserves for catastrophes.

"Insurance actuarial" is a colloquial term for "insurance actuary" sometimes used by laymen outside of the field of insurance. "Actuarial" is correctly used as an adjective, yet the public sometimes misuses it as a noun. Put simply, an insurance actuary is a professional--usually trained in mathematics--who calculates the premiums and reserves for an insurance company.

Types

Just as there are several types of insurance, there are several types of actuary. The two main groups are property/casualty actuaries and life/health/pension actuaries. Two professional societies serve these two groups: the Casualty Actuarial Society (CAS) and the Society of Actuaries (SOA) respectively. Because of the nature of the different types of loss, actuaries use different calculations in different fields. Casualty, or liability, actuaries must predict the total losses of lawsuits that can take years to settle. Property actuaries predict claim losses that are more quickly resolved, but have the uncertainty of catastrophes such as hurricanes. Life and pension actuaries use life tables to predict losses upon death or payout after retirement, while health actuaries use other tables.

Background

Because of the probabilistic nature of the calculations, mathematics and statistics majors are common recruiting pools for the actuarial profession. A much smaller portion of actuaries majored in economics.

Designations

Actuaries take professional exams for several years. With a pass rate for any sitting set at around 40 percent of registrants, many actuaries eventually give up before achieving either professional society's designation. The Associateship and Fellowship offered by the CAS are titled ACAS and FCAS respectively. For the SOA, the titles are ASA and FSA.

Need

Part of the reasons insurance companies need numerous actuaries is because of the wide range of risks and the limited data for each, especially for commercial risks where businesses vary widely in their risk exposure. The need for health/life/pension actuaries is about 10 times that of property/casualty actuaries. This difference is evident in the comparative size of the two professional societies.

Average Workday

There is no average workday for actuaries in general, though a given actuary may find himself repeating the same tasks each quarter. An actuary may audit data to avoid erroneous calculations, respond to regulator inquiries, edit computer programs, create models of catastrophes, explore possible improvements in pricing methodology and ensure that any changes from prior indications of the data from prior quarters can be explained. An actuary may calculate rate for determining premiums, or calculate the reserves for the resulting policies. The first concerns the policy's revenue before the policy goes into effect. The latter concerns the company's having enough reserves to pay out subsequent claims after the policy goes into effect.

References

• University of Illinois at Urbana-Champaign: Actuary
• Be An Actuary: FAQ
• Careers.org: Occupation profile for actuaries
• SOA: November 2009 Pass rates
• CAS: Spring 2003 Pass rates