How Does Actuarial Science Work in Insurance

Everyone is familiar with the commercials where insurance companies compare their rates against those of their top competitors. Insurance companies charge their customers to cover various things like their automobiles, their homes, and their health. The consumer is usually required to pay a set fee for these services. This fee, which is also sometimes called a premium, can vary based on the type of insurance, the number of things covered under that insurance, and the consumer themselves.

But how are all these rates and premiums calculated? How do insurance companies know what to charge the consumer? How does the consumer know that they are not overpaying for coverage? The answer to all those questions is actuarial science. Actuarial science is sometimes also known as the mathematics of insurance. Insurance companies use it every day to come up with those rates.

A person who uses actuarial science in the insurance field is called an actuary. You could also call that person a risk assessor. That is the simple description of what they do. But how they do it is certainly not simple at all. An actuary would be the person who decides what the chances are that you will get into an automobile accident. To decide this, they look at things like your past driving record, the current condition of your car, and traffic flow where you live and work. These are just some of the factors that actuaries use to help calculate your insurance rates.

The work of an actuary isn’t just restricted to crunching numbers. An actuary should also have a working knowledge of statistical mathematics, probability theory, and an extensive knowledge of economics. An actuary also has the choice to work in other fields besides insurance. Actuaries work with the legal departments of many cities and towns.

A job in actuarial science is ranked as one of the most promising job fields out there in the upcoming year. Not only is there a serious need for more people skilled in actuarial science, the companies that do employ actuaries already are paying top dollar to hold on to the people they have. A person with an entry level position as an actuary can be expected to earn between one hundred and two hundred and fifty thousand dollars a year.

If you want to work in the field of actuarial science, most companies prefer candidates with at least a bachelors degree. You can now take actuarial science as a major in most colleges and it is also being offered as an elective course in many high schools. If you don’t have a degree in actuarial science, sometimes a degree in a related economic field is acceptable.

The final step to becoming an actuary is to pass an examination that certifies you in that field. A lot of companies prefer applicants that have at least two certifications, but exceptions to that rule have been made in the past with internships. A lot of people don’t give much thought to the work that goes into calculating their insurance rates. If you are an actuary, you know that it is a lot of work indeed.

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