Actuarial Consultant Definition

What Is an Actuarial Consultant?

The term actuarial consultant refers to a financial professional who advises clients on investment, insurance, and pension-related decisions using a variety of measurements. The consultant applies an extensive use of statistics, contingency plans, and large amounts of data to formulate a plan best suited to the client. They calculate and analyze the data, make forecasts, provide the most accurate information to clients, and help them realize what their best options are.

Understanding Actuarial Consultants

Actuaries are professionals who work in the financial sector. They complete risk and cost analysis and determine where financial uncertainties lie using the skills of a statistician, economist, and probabilities forecaster. Actuarial consultants use these skills to dispense financial advice to their clients, manage risk, and help clients choose the proper insurance, pension, and investment plans to meet their specific goals.

These professionals spend a great deal of time crunching numbers and running hypothetical scenarios concerning current trends and any changes that are likely in the future. They know their clients well enough to make sure, among other things, that employees make sufficient contributions to their retirement plans. They assess the probabilities of work-related injuries, accidents, and events that may be beyond a company's control, such as natural disasters.

Entry into the field of actuarial consulting requires an undergraduate degree in a related discipline such as finance, economics, statistics, math, or business. Those who wish to advance in their fields may consider getting a master's degree.

Becoming an actuarial consultant is rigorous and includes an extensive series of examinations. Required disciplines include statistics, economics, law, probability, finance, and risk assessment. Actuarial science applies the mathematics of probability and statistics to define, analyze, and solve the financial implications of uncertain future events. Traditional actuarial science largely revolves around the analysis of mortality, the production of life tables, and the application of compound interest.

According to the Bureau of Labor Statistics (BLS), the median annual salary for an actuary in 2021 was $105,900 or $50.91 per hour. The job outlook for the ten-year period between 2020 and 2030 was expected to be 24%—much faster than average. This means there will be a greater need for people in this field to assess risk and price insurance products.

Special Considerations

There are two main divisions of actuarial work. The most familiar space is in the life and health insurance industries working in such areas as retirement benefits, health and wellness benefits, life insurance, and short- and long-term disability benefits. Consultants use mortality tables, health yardsticks, and other tools to determine the likelihood and odds the insurance supplier will have to pay a claim. They then calculate the premium, or price, the insurer needs to charge the company to cover all calculated risks.

Another field is in casualty insurance, which includes automobile and homeowners insurance. Actuarial consultants calculate probabilities for claims based on safety features in cars, type, and location of housing, and more.

In the investment world, actuarial consultants work in a wide range of roles at many different types of companies. They are involved with investment consulting, investment management, investment banking, and financial advice for retail clients. Actuaries understand how assets and liabilities interact with each other. They also advise in the management of capital, financial reporting, and merger and acquisition (M&A) areas.

The Institute and Faculty of Actuaries (IFoA) is the professional group following industry and regulatory changes in the United Kingdom.

In the United States, actuarial services are regulated by federal and state oversight. The Securities and Exchange Commission (SEC) also provides oversight.