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Actuary
by: Sahil | last updated: November 30, 2009
Category: Homeowners Insurance | Tags: Actuary, risk assesment, home risk assessment, risk
Category: Homeowners Insurance | Tags: Actuary, risk assesment, home risk assessment, risk
An actuary is a professional who specializes in dealing and calculating risks and their financial impact. An actuary is a very broad term for a professional who usually takes up one of the many branches in the field of actuarial science and profession. An actuary needs to have excellent knowledge in multiple fields such as mathematics, statistics, and social sciences. This means that very few people in the world are capable of performing this job which in turn means that actuaries are very well paid for their adroitness in calculating risks and damage control.
Actuaries play a very important role in the insurance industry and advise insurance providers about the risks and other financial aspects of a particular policy. For instance the increased probability of an earthquake in an area may make a policy holder more vulnerable. This can lead to increased premiums for policyholders since actuaries have reached a decision based on mathematical probability that the risk is higher in that particular area.
The job of an actuary also involves calculating the reserves along with the premiums in an insurance policy. Reserves in an insurance company are the provisions that are kept aside for future pay-outs. The liability side of the insurance company’s balance sheet will usually show reserves and the asset side will show the premiums and other income or collateral.
In the United States, the exams for becoming an actuary in the field of property and casualty are conducted by the Casualty Actuarial Society. The preliminary examinations that are conducted, test the candidates in fields such as economics, corporate finance and applied statistics - called Validation by Educational Experience (VEE).
In addition to this, the Casualty Actuary Society necessitates the successful completion of seven examinations and VEE for Associateship and two supplementary exams for Fellowship. In addition to these requirements, casualty actuarial candidates must also complete professionalism education and be recommended for membership by existing members.
Since an actuary focuses in risk, the occupation is intrinsically risky. Natural catastrophes can appear whether or not an actuary has foreseen them, and will occasionally result in a severe financial blow to an insurance company. This is why the profession necessitates wide-ranging education and a certain amount of natural insight, since an actuary must be able to forecast the unpredictable. In the financial industry, actuaries are extremely important, as they assist to shelter major investments by keeping a close eye on the market and at the same time making long-standing projections.
Actuaries need not be only those professionals who have passed the above mentioned examinations. A business professional who can predict and assess the amount of risk involved in a business venture can also be called an actuary. This means that a manager or officer of a company can act as an actuary by calculating the risk involved in new and existing business ventures. Even people themselves can calculate the amount of risk involved as far as their property and personal possessions are concerned. For instance, having no home insurance in Florida will usually lead to catastrophic losses. This prediction can also be made by a person who buys the insurance and such predictions do not need a professional. Thus actuaries can be found in many other fields of finance such as futures, commodities and speculative markets.
A person who is shopping around for home insurance can be called an amateur actuary who usually calculates the risk posed by various factors to his or her house and decides to do damage control in the event of an unexpected catastrophic contingency.
If you plan on buying home insurance then some of the factors that will play an important role in efficiency of that insurance are the location of the house, history of weather conditions, local and world economy, and some seemingly unrelated factors such as price of oil, cost of living index, your nest egg and the amount of liquid funds that are available at your disposal at any given time.
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