I work in IT (databasers and visualisation), but recently started a new job at a company that deals with actuaries, underwriting etc. Can someone explain what actuaries do in a way i can understand? Their are so many acronyms that get thrown about that when i ask about they literally just say what the letters mean and nothing further. Colleagues have tried, but tend to be quite short with their explanations and i don’t want to annoy them by asking more and more questions.
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Actuaries attempt to determine risk exposure to individuals in order to price insurance.
Using life insurance as an example, things like family history of cancer or other diseases, as well as things like “do you enjoy skydiving or other dangerous activities” in order to (as accurately as possible) try to estimate how old you will be when you die (more specifically, how many years from now, based on age and risk factors).
Then depending on the payout of the life insurance, determine what an appropriate monthly/annual premium should cost in order to fund the payout. The longer the time horizon, and/or the lower the payout, the smaller the premium amount would be.
Since insurance companies are collecting premiums from millions of individuals, being wrong on any given policy is “covered” by premiums paid in the aggregate, so long as on average they’re correct. Some people will will live far longer than expected, and pay more than the amount needed by the insurance company to pay out the policy upon their death, and others may die after 2 premiums have been paid.
This applies to all types of insurance, and actuarial “science” is why car insurance is on average, most expensive for teenage boys and “repeat offenders” (riskiest demographics). Then the cost scales with the type of coverage, and how expensive the car is.
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