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Job Descriptions, Definitions Roles, Responsibility: Actuaries




One of the main functions of actuaries is to help businesses assess the risk of certain events occurring and formulate policies that minimize the cost of that risk. For this reason, actuaries are essential to the insurance industry. Actuaries assemble and analyze data to estimate the probability and likely cost of the occurrence of an event such as death, sickness, injury, disability, or loss of property. Actuaries also address financial questions, including those involving the level of pension contributions required to produce a certain retirement income level and the way in which a company should invest resources to maximize return on investments in light of potential risk. Using their broad knowledge of statistics, finance, and business, actuaries help design insurance policies, pension plans, and other financial strategies in a manner which will help ensure that the plans are maintained on a sound financial basis.

Most actuaries are employed in the insurance industry, specializing in life and health insurance or property and casualty insurance. They produce probability tables which determine the likelihood that a potential future event will generate a claim. From these tables, they estimate the amount a company can expect to pay in claims. For example, property and casualty actuaries calculate the expected amount of claims resulting from automobile accidents, which varies depending on the insured personís age, sex, driving history, type of car, and other factors. Actuaries ensure that the price, or premium, charged for such insurance will enable the company to cover claims and other expenses. This premium must be profitable, yet competitive with other insurance companies. Within the life and health insurance fields, actuaries are helping to develop long-term-care insurance and annuity policies, the latter a growing investment tool for many individuals.

Actuaries in other financial services industries manage credit and help price corporate security offerings. They also devise new investment tools to help their firms compete with other financial services companies. Pension actuaries working under the provisions of the Employee Retirement Income Security Act (ERISA) of 1974 evaluate pension plans covered by that Act and report on the plansí financial soundness to participants, sponsors, and Federal regulators. Actuaries working in government help manage social programs such as Social Security and Medicare.

Actuaries may help determine company policy and may need to explain complex technical matters to company executives, government officials, shareholders, policyholders, or the public in general. They may testify before public agencies on proposed legislation affecting their businesses or explain changes in contract provisions to customers. They also may help companies develop plans to enter new lines of business or new geographic markets with existing lines of business by forecasting demand in competitive settings.

Both staff actuaries employed by businesses and consulting actuaries provide advice to clients on a contract basis. The duties of most consulting actuaries are similar to those of other actuaries. For example, some may evaluate company pension plans by calculating the future value of employee and employer contributions and determining whether the amounts are sufficient to meet the future needs of retirees. Others help companies reduce their insurance costs by lowering the level of risk the companies take on. For instance, they may provide advice on how to lessen the risk of injury on the job, which will lower workerís compensation costs. Consulting actuaries sometimes testify in court regarding the value of the potential lifetime earnings of a person who is disabled or killed in an accident, the current value of future pension benefits (in divorce cases), or other values arrived at by complex calculations. Many consulting actuaries work in reinsurance, a field in which one insurance company arranges to share a large prospective liability policy with another insurance company in exchange for a percentage of the premium.