Actuary

DEFINITION of 'Actuary'

An actuary is a professional dealing with the assessment and management of risk for financial investments, insurance policies, and any other ventures involving a measure of uncertainty. 

BREAKING DOWN 'Actuary'

Actuaries are professionals who assess the financial risk of a particular situation, primarily using probability, financial theory and computer science. The corresponding field for the profession is called actuarial science. Public and private institutions rely heavily on actuarial science to determine the relative risk of various decisions; as such, actuaries are trained and tested extensively before they are allowed to practice. Investment banks and insurance companies employ a number of full-time actuaries, but other actuaries, either self-employed or working as a part of an actuarial firm, act as consultants for a number of different businesses. While primarily used for insurance policies and investments, actuarial science is applicable in any situation where risk and uncertainty are present, and actuarial science is currently one of the fastest-growing and better-paying industries in the United States.

Most actuaries work at insurance companies, where their risk-management specialties are particularly applicable. Insurance companies want to take on policies that offer little risk, and the most traditional actuarial practices revolve around analyzing various factors related to life expectancy, constructing mortality tables that provide a measure of predictability and making recommendations to brokers in individual cases.  While actuarial science is most commonly applied to mortality analysis for life insurance, many of the same procedures are also used for property, liability and other kinds of insurance. The impact of actuary recommendations on life insurance premiums can encourage behaviors that would result in lower premiums, like quitting smoking.

Additionally, actuaries are commonly employed to examine the risk of an investment in the financial world. Actuaries combine their procedures for statistically measuring probability with predictive tools specific to the market. The fluctuations of a market are in many ways less predictable than an individual's lifespan, requiring intensive actuary knowledge of the investment or industry. Like insurance policies, futures investments carry substantial uncertainty and risk, and good actuarial practices can help mitigate the overall risk of a portfolio.  Most major investment banks employ a number of actuaries on retainer, but businesses making one-time decisions of consequence often hire consulting actuaries for assistance. 

The concept of insurance has existed since the late seventeenth century when the practice of risk assessment became increasingly scientific. By the end of the century, early actuarial scientists had released the first mortality tables, which divided the population into groups based on lifestyle choices and personal circumstances and made it easier for insurance brokers to quantify the risk of taking on a new insurance policy.

RELATED TERMS
  1. Actuarial Service

    Method by which corporations determine, assess and plan for the ...
  2. Actuarial Age

    An individual's life expectancy based on calculations and statistical ...
  3. Canadian Institute Of Actuaries ...

    The Canadian Institute of Actuaries, or CIA, is an organization ...
  4. Government Actuary

    An employee of the U.K. government who works for the Government's ...
  5. Actuarial Science

    A discipline that assesses financial risks in the insurance and ...
  6. Actuarial Analysis

    The examination of risk by a highly educated and certified professional ...
Related Articles
  1. Financial Advisor

    Career Advice: Financial Analyst Vs. Actuary

    Read an in-depth comparison between financial analysts and actuaries, what it's like to work as each and how to determine which is best for you.
  2. Managing Wealth

    Career Advice: Accounting Vs. Actuary

    Read about what life is like as an actuary or as an accountant, how the two careers are different and how to decide which is best for you.
  3. Personal Finance

    Explaining Insurance

    Insurance is a form of contract between an individual and an insurance company that spreads risk in exchange for premium payments.
  4. Personal Finance

    How Big Data Has Changed Insurance

    No longer confined to technology, big data has become integral to providing solutions to the insurance industry's long standing challenges.
  5. Personal Finance

    8 Profitable Majors For The College-Bound In 2015

    Choose your college major wisely to justify the rising cost of higher education. Here are 8 majors that lead to good jobs and high salaries.
  6. Personal Finance

    Insurance Coverage: A Business Necessity

    Don't go to work without this policy in place - especially if your work is in your home.
  7. Retirement

    How Long Will You Live? This Tool Will Tell You

    Longevity-calculating tools help advisors guide clients through their financial livelihood during their retirement years. Here's a look at some of them.
  8. Personal Finance

    5 Ways to Lower Life Insurance Premiums

    Learn several effective methods for lowering life insurance premiums. These include quitting smoking and considering term life insurance.
  9. Personal Finance

    Bundle Your Insurance For Big Savings

    Bundling your insurance can save you money and time. Read on to see how get the most out of multiline insurance discounts.
  10. Personal Finance

    The History Of Insurance In America

    Insurance was a latecomer to the American landscape, largely due to the country's unknown risks.
RELATED FAQS
  1. What's the average salary of an actuary?

    Get insight into the intriguing career of risk analysis and forecasting. How much do actuaries make, and how is this field ... Read Answer >>
  2. How is my insurance premium calculated?

    An insurance premium is the money charged by insurance companies for coverage. Insurance premiums for services differ from ... Read Answer >>
  3. What caused the European / Eurozone debt crisis?

    Understand how insurance companies price insurance premiums, and learn the importance of data and statistics in the insurance ... Read Answer >>
  4. What are the main factors that impact share prices in the insurance sector?

    Learn about some of the main factors that impact share prices in the insurance sector. Insurance companies make money by ... Read Answer >>
  5. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
  6. Can your insurance company cancel your policy without notice?

    Learn about your rights as an insured when it comes to your insurance policy being canceled, including how to access your ... Read Answer >>
Hot Definitions
  1. Put Option

    An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security ...
  2. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  5. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  6. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
Trading Center