Importance of Actuarial Science

Running the numbers can be important

Without the field of actuarial science there would be no insurance companies. Insurance companies, despite the bad press that they sometimes receive, can do good things. They allow people to pool resources and plan for the unknowable. They allow for eventualities that could not be dealt with by the average person.

Risk

The first thing that an actuary does is figure out how much risk is involved in a particular customer. If a person is deemed too risky then the actuary recommends that they not be insured. If this system didn't work then the insurance company would be unable to make money.

Necessity

Without insurance companies it would be very difficult for the average person to deal with catastrophic or random events. Car crashes are a part of our culture, as are plane crashes and natural phenomenon. Insurance companies factor the likelihood of these events into the rates they charge. In the event that something happens the adjusted rates allow them to cover their customers.

Pensions

Actuaries are also in charge of determining payouts for pensions. If a person were to live too long or the pension payment were too high then the company would go bankrupt. So in order that pensions are viable, something that many people depend on, the actuary profession is vital.

Other Types of Insurance

Actuaries not only allow for the viability of life insurance, they are also responsible for certain types of short-term insurance. Short-term insurances are affected by many variables dealing with people as well as external events.

Criminal Sentencing

Some states use actuaries to determine the sentences of criminals. This is in line with the variables and practices of an actuary. They use human-centric variables such as pain, suffering, damage and decreases in quality of life to determine length of sentence and severity of fines.

References

• H. Warren: Introduction to Actuarial Science