What Is an Actuarial Consultant?

An actuarial consultant is a professional who advises clients on investment, insurance, and pension-related decisions. The actuarial consultant will apply the 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.

Actuarial Consultant Explained

An actuarial consultant combines the skills of a statistician, economist, and probabilities forecaster into one process dedicated to dispensing the proper financial advice. They advise insurance companies on setting adequate healthcare premiums. For businesses, they recommend strategies to manage their healthcare costs.

These professionals spend extensive time crunching numbers and running "what if" scenarios concerning current trends and likely future changes. 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 not in the company's control, such as natural disasters.

The process for 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.

The bottom line is that actuarial consultants are paid to manage risk and help clients choose the proper insurance, pension, and investment plans to meet their specific goals.

Where do Actuarial Consultants Work?

There are two main divisions of actuarial work. The likely 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 homeowner's 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 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.