4 Responsibilities of an Actuary

An actuary is a statistician who is in charge of evaluating various types of risks. Most actuaries are employed by insurance companies, which use their expertise to set the terms, conditions and premium rates for their insurance policies. They are also hired by pension funds and various private companies to detect risks and help design procedures that can help mitigate risk. And while the actuaries' responsibilities vary depending on who hired them, and what kind of data they are working with, the basics tend to remain the same.

Actuaries and the Importance of Risk Evaluation

When an insurance company sells off an insurance policy, it operates under the assumption that the person who bought bought will not require the coverage. There are only so many times insurance companies can pay claims before those payments start costing them more money. In order to avoid pay-outs, insurance companies need someone to analyse what kind of risks their potential beneficiaries will be facing and calculate whether or not selling insurance to them is worth the risk. This is where the actuaries come in.

The actuary will use their extensive knowledge of statistics, finance and economics to analyse the data. They serve similar purpose when they work for pension funds. Private companies used them to evaluate risks involved in implementing their business strategies in hopes that they will be to avoid putting their money in something that will ultimately backfire and cost them far more than it's worth. The responsibilities include the compiling and reviewing statistical data, using that data to suggest policy guidelines for their employers, providing expert testimony at trials and legislative hearings and coming up with new and improved ways to consider risk.

1. Compiling and Reviewing Statistical Data

This is the first and the most important responsibility of the actuary. Actuaries gather data on mortality, sickness, accidents, disability and retirement within their community, as well as any other data that may be relevant to their employer. They plug those variables into advanced statistical models to calculate how those variables would affect the insurance beneficiaries in the future. The data that is produced is fairly reliable.

2. Advising on Company Policies

Another responsibility is contract review. An actuary will review contracts, insurance plans, annuity plans, pension plans and policies. They look to see if those policies take the risks they calculated into account and craft guidelines that would allow their employers to better adapt to those risks.

3. Providing Expert Testimony

The actuaries are sometimes asked to provide testimony in lawsuits that revolve around insurance or risk in general. Sometimes, they are asked to testify on the behalf of their employees, but they are also asked to act as expert witnesses. They may also be asked to testify in similar capacity when state and federal legislatures are trying to create laws that have anything to do with insurance companies.

4. Devising New Methods of Risk Analysis

While actuaries often rely on statistical models devised by other actuaries or mathematicians in general, they are sometimes asked to come up with new statistical models in order to evaluate risks for new insurance policies, or modify existing models to account for circumstances that did not previously exist. They may also be asked to make existing models more exact and more efficient.

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