Actuarial science and insurance can work hand in hand to protect businesses and individuals in unforeseen circumstances. Historically, actuaries have been employed by insurance companies and have now branched out to be able to work in a variety of industries around the world, such as pensions and benefits, risk management, and finance and investment. Actuarial skills have been recognized for work in personal finance, casualty, and health care planning, as well as some more traditional areas such as pensions, insurance, and investments. So let’s first understand what exactly actuaries do to see how they use their skills in the insurance industry. Actuaries use their background in finance and statistics to assess risk in insurance, finance, and other industries. they then inform businesses and individuals of how much they would need to set aside to deal with risks and costly events that may occur in the future.
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Reading: What is actuary in insurance
history of actuarial science in insurance
As mentioned above, actuaries traditionally work in insurance and this all began in the day when the basic requirements for interests in communities increased the need to be protected against risks. therefore, if a community were at risk of losing their older family members to a virus, they would not be financially protected if they depended on the older person for money and food. after the appearance of barter, the type of risks became more complex and people possibly lost goods or even their lives when they embarked on commercial trips. Technically, the oldest form of insurance may be from the 3rd century, when the first forms of charity were provided to people in need. At that time there was a social stigma for receiving charity, which is why mutual aid and pension agreements emerged where associations were created in the Roman Empire to help with burial and cremation expenses. this was done by each member of the association paying a small monthly sum and then, if a member died, that money would cover the expenses. later many companies were created in a similar way, and eventually non-life insurance events emerged to protect those who lose their cargo on ocean voyages. Fast forward to the 17th century, a more scientific approach to risk management was developed where in 1662, John Graunt, the founder of demography, showed that longevity and death can be predicted in certain groups of people. this provided the foundation for the original life table that led to what life insurance is today.
in 1762, mathematician james dodson’s work on the level premium system (which is life insurance that will cover the life of the person who took it) helped form what is now known as equitable life, the first life insurance company. use raw. this was later passed on to edward rowe mores after dodson’s death, where he ensured that the chief officer was called an actuary.
Many companies that did not use mathematical methods failed or had to use the same methods pioneered by equitable life. this created a need for insurance actuaries and their skill set is now traditionally used in the insurance industry.
training for actuaries working in insurance
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Many insurance companies hire prospective actuaries directly from the school, either in an apprenticeship or school-leaving program. With this, candidates will go through training and work experience to acquire the right skills to be an actuary. You can also become an actuary starting with a degree in accounting, economics, mathematics, finance, etc. and then join a graduate program at an insurance company.
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what do actuaries do in…?
Actuaries have worked with companies that provide life insurance, pensions, etc… since the beginning and it is more the traditional area in which actuaries build a career. In this field, actuaries are involved in all stages of product development, pricing, risk assessment, and product marketing. They can also work on financial management by developing plans from their analysis to ensure clients perform well.
Actuaries are typically found working in insurance companies and consultancies and, in some cases, may also work in general insurance. General insurance includes the provision of coverage for personal insurance, such as home and auto insurance, as well as insurance for large business risks, such as natural disasters. Actuaries are employed by insurance companies to work on reinsurance and brokerage operations, as well as to help with their financial management. This is done by analyzing statistics on the severity and frequency of claims to help insurance companies invest wisely to ensure they maximize revenue and pay potential claims. actuaries also analyze different types of risk based on different groups of people and circumstances to help design and price policies correctly.
This is done when actuaries use statistical techniques to create a statistical model that will later be used extensively in the analysis of large amounts of data. This analysis is then used to understand the risks and to ensure that the amount paid for insurance is adequate to meet the final settlement of insurance claims. actuaries have been integrally involved in estimating the final costs of unforeseen circumstances, such as terrorist attacks, natural disasters, and industrial illnesses.
Risk management is an excellent career path for actuaries as it is a good fit for their skills and experience. Another key skill that actuaries need is to explain their findings to companies so that they understand them and can implement the actuary’s findings in their future decisions. in addition to analyzing specific risks from this, they develop models for companies to help minimize their own future risks.
If you are interested in becoming an actuary, please read here to learn more about why you should become an actuary.