What is an Actuary?
In the insurance field, an actuary is a professional tasked with evaluating the financial risk level associated with people and products. They aim to protect insurance companies from unexpected financial burdens by giving them projections of future scenarios as accurately as possible.
These projections are done using mortality tables, actuarial tools that help them determine which rate class to place an insurance applicant in.
Why life insurance companies hire actuaries
In order for life insurance companies to stay profitable, they need to bring more money in than they have to pay out in death benefits in any given stretch of time. That means they have to get pretty good at guessing how long people will live based on data they can collect and measure, like their age, gender, health metrics, and occupation.
Actuaries are the people who leverage that data — alongside statistical models and financial theories — to ensure the life insurance policies an insurer offers make fiscal sense. The actuary helps them design life insurance products and appropriately price them in a way that keeps the life insurance company solvent.
Actuaries and life insurance buyers
If you’re buying a life insurance policy, you probably won’t interface directly with an actuary. But you’ll have them to thank for the premiums the life insurance provider quotes you. The actuary has predetermined how much specific groups should pay for coverage based on the risk factors relevant to that group.