What is an actuary? Trust me, it’s a valid question. When I tell someone I’m an actuary or that I studied actuarial science in college, I often receive an interesting response. Besides the usual spectrum of confused facial expressions, questions like “Is that related to biology?” are not uncommon. Even though Along Came Polly, starring Ben Stiller as an actuary working in the life insurance industry, made some strides in dispelling the mystery of the actuarial profession, we still have a long way to go.
So what is an actuary? The Society of Actuaries (yes, there is such a thing) attempts to clarify by telling us, “An actuary is a business professional who analyzes the financial consequences of risk. Actuaries use mathematics, statistics and financial theory to study uncertain future events.”
Now that sounds riveting, doesn’t it? Often when I explain what I do, people respond with “I’m glad I don’t have to do that, I’m terrible at math!” But even though the words “mathematics” and “statistics” make it sound kind of boring, that’s far from the case. Actuaries are an integral part of many organizations, especially in the insurance industry.
Actuaries try to bridge the gap between the outside world and what happens inside the walls of the companies we work for. In the insurance industry, information is constantly flowing into the company such as information about its products, the users of those products, and everything that happens when the two interact. An actuary is somewhat of an interpreter of that information. We take the oceans of data, analyze and examine each and every ripple, and try to separate the noise from what matters.
We do it all in order to get a better understanding of the big picture. It’s kind of like trying to find the needle in the haystack, and the bigger the pile of hay, the more rewarding it is to find that needle. Our goal is to figure out what that proverbial ocean of information tells us not only about the past, but also about what we can expect in the future so the people in charge can prepare properly and keep the ship sailing along smoothly.
There is one little caveat that comes into play with predicting the future – we’re not always right. Sure, we do everything we can to get as close as possible, but ultimately, even an educated guess can be incorrect.
Simply put, actuaries are much like your local weatherman. They look back at the weather we’ve experienced in the past and based on that, they take a stab at what’s going to happen tomorrow, the day after, and maybe a week out if they’re feeling ambitious. As actuaries, we get to do the same thing, except we’re expected to project what will happen a year or two, or even ten from now, rather than just a few days down the road. That’s pretty cool if you ask me! And even though we’re not always spot-on, we still get paid to do it. Are you in a career that’s difficult to explain? I’d love to hear about it in the comments below!