May 31, 2023

Brad Marolf

Business & Finance Wonders

The Role of an Insurance Actuary

Actuaries assess the potential financial impacts of complex risks using math and statistics. This enables clients to minimize risk in their operations. In the insurance industry, they use the data from statistical analysis to determine pricing, taking into consideration a range of factors. 

Actuaries are involved in the whole lifecycle of product development, working through the stages of risk assessment, pricing and marketing. They are responsible for ensuring that premium rates are set at the right level and that the organization has sufficient funds to meet claims. They are responsible for reviewing loss and premium trends, estimating future expenses and losses, and using the data to calculate an adequate price to charge for insurance. Actuaries also need to estimate exposure to catastrophes and assess rates for different populations at risk. 

Actuaries usually work in a specific area within an insurance company, such as business insurance; personal insurance, which covers homeowners and auto; and specialty insurance, which covers motorcycles and boats. There is also a demand for actuaries in life insurance and pensions. 

For the life insurance sector, actuaries analyze factors relating to a customer’s life expectancy. They use assumptions for mortality rates inflation, the rate of return on investment and the quantity of policies that are expected to be sold. Pricing must be positioned such that customers don’t feel they are being over-charged for the insurance product. Actuaries also need to ensure that products are compliant with any local regulations. Once the product has been developed, the actuary will prepare premium charts for underwriters to use when engaging with clients. 

Other career options for actuaries in insurance include moving into broking operations or reinsurance. Reinsurance is the transfer of parts of an insurer’s risk portfolio to a third party, the reinsurer, thereby reducing the risk of insolvency of the insurer. An actuary working in reinsurance will spend time preparing spreadsheets and building complex models for data analysis as well as liaising closely with clients, often acting as a consultant for the client. 

As actuaries advance their careers, they will have opportunities to specialize, have more direct client responsibility or become a partner.

Essential skills in the role of an actuary:

  • High level of numeracy
  • Research skills
  • Analytical skills
  • In-depth understanding of economics
  • Knowledge of legislation relating to financial services
  • Problem solving
  • Attention to detail
  • Written and spoken communication skills

Qualifications required for an actuary

The best route to progress your career as an actuary is to study for a Masters in Applied Statistics. The Master of Science in Applied Statistics degree from Michigan Technological University is 100% online, allowing you to continue with your career while you study. This program will give you the skills and knowledge you need to analyze and interpret data, using industry-standard data analysis and statistical software. You will learn how to solve actual problems through analysis of real datasets. 

Actuary compensation

The role of an actuary is complex and challenging and requires a range of skills. Remuneration for actuaries reflects this. According to Glassdoor, the national average salary for an actuary in the US is $131,000 in 2022.