How does an actuary use math

how does an actuary use math

I provide information that people can't get any other way.

There aren't many actuaries in the U.S. but Brian Forman is one. "Actuary" usually ranks at the top of the list of "most desirable jobs" and it's not because it starts with the letter "A." Being an actuary pays well, is low-stress and offers growth opportunities, job security and a positive work environment. It is challenging, however. Actuaries use math to predict how future events might affect the finances of their company--usually an insurance firm--so that the company can make financial decisions today.

To understand what actuaries do, you need to understand how insurance works. If you have life insurance, for example, every year you pay a certain amount of money (the "premium") to your insurance company. The company puts the money in a reserve. When you die, your family files a "claim" and the insurance company pays them money--often more than you paid in premiums (their "benefits").

For a more information about how insurance and actuaries work, click here.

What exactly do you do?

As an actuary, I make calculations about insurance policies--in my case, life insurance. I decide how much the company needs to keep in reserve in order to pay future benefits. I need to consider a wide range of factors and make some projections. We don't want to use the reserves to buy office supplies, for example. I also have to be certain to follow all the laws that apply when I make those calculations. In fact, I must sign and file statements with the state verifying that we have adequate reserves.

As a manager, I oversee other employees and do product pricing. I help decide, for instance, how much to charge for a new type of insurance.

What's the coolest part of your job?

I get to see the impact of my decisions on the whole company.

What's your favorite part?

I like not having a day-to-day routine. I get to set my own schedule and priorities. I also like that I can provide information that people can't get any other way.

Tell a story about problem solving in your job.

Problem solving is really important. When I hire people, that's one of the major skills I look for. Problems arise all the time. For instance, we run computer-generated reports at the end of each month but we can't assume that they're right. We always review them. If one doesn't look right, then that's a problem and we have to figure out what happened. Maybe the numbers for a day were accidentally dropped, for instance, and not included in the month's total. We have to look at everything for quality.

How did you become an actuary?

My mom's friend's son was an actuary and it seemed like a good job. I was always good in math and science, so I decided in high school that I was going to be an actuary, too. I took as much math as I could and I went to one of the few colleges at that time that had an actuary program. I also took some of the necessary qualification exams while I was still in college (e.g. calculus, probability, statistics) so that I could work as soon as I graduated.

What advice do you have for students entering high school?

Learn math and computers! They're important tools, necessary for any job--professional or not. I think that people should know what an error message on their computer screen means no matter what work they do.

You usually don't see the effects of your decisions on many customers because they live long lives. How do you deal with that?

I like to see results. Since the fruits of my labor may not appear within my lifetime, I focus on different sources of gratification, such as getting statements completed.

What's the part you like least about your job?

Now you make me struggle! [Long pause.] I guess that there are so many things to do and not as much time as I'd like. And personnel issues. When one employee doesn't like another, for example, that's hard. But you just have to deal with it.

What surprised you about your

job when you first started?

When I first began work after leaving college, I found that what you learn in school really isn't an indication of what you'll actually do. School just lays the foundation tools.

How has your job changed over time?

When I started, I focused strictly on computer-oriented actuarial work. Now half of my job is managerial.

Where do you think the job of actuary will be ten years from now?

I see the field broadening. In addition, I think there'll be more consolidations in the insurance industry [companies combining to form bigger companies]. People base trust ratings on an insurance company's financial stability, which increases with the size of the firm. Bigger firms have an advantage over smaller, local firms so there'll continue to be fewer firms in Texas.

What's the next step on your career path?

I will focus on using computers for actuarial purposes. I'll be a consultant, maybe--analyzing and designing actuary software programs. I got into computer programming when I was in high school; I was one of the first actuaries to use computers when I started in the late 70's. In fact, I worked as an actuary in the computer department for my first couple of years at work. I've kept up with my computer skills and can easily learn new languages.

How do people react when they learn what you do?

Many people don't know what an actuary is. Those who do know are impressed--it's a top job, a small profession and well-paid.

If "10" is really tense, what's your average stress level at work?

I guess it's about a 7.

Is your workload steady or does it fluctuate?

It's steadily busy, although the year's end is tougher.

What disappointed you?

My job hasn't disappointed me but the industry has. More and more companies are consolidating--being bought by bigger companies, as ours recently has. As a result, many Texas firms are now gone.

What information do you need to keep up in your field and where do you get it?

I need to know about changes in demographics data. For example, people are living longer and that affects my calculations. I also need to know about changes in the laws and regulations for life insurance. I get this information by going to seminars and professional meetings. I also read journals and listen to tapes of meetings I can't attend.

What type of space do you work in?


What's the dress code?

Business casual.

Do you usually work alone or with people?

I work with a combination of both.

What kinds of equipment do you work with?

The only equipment I use is a computer.

What role does writing play in your work?

I write all the time. I describe new products and do regular business writing--letters, memo's, reports.

What role does public speaking play in your work?

Not normally, although sometimes I speak at professional meetings.

How do interpersonal skills come into play in your work?

As a manger, I need to communicate with the people I supervise. In addition, I need to translate my information so that people in other departments can understand it.

How do insurance companies make money if they just hold funds in reserve?

Well, often they don't have to pay full benefits if people stop making payments or die in a way that the policy doesn't cover (such as suicide). They can also profit if people keep paying premiums and live longer than the average person before the death benefit is paid. Mostly, though, companies profit by investing money and earning interest on the reserves.

More about how actuaries help insurance companies.

Actuaries like Brian help their companies decide how much to keep in reserves, spend as profits and charge for premiums. If they charge too little, for example, insurance companies can't afford to pay the claims. If they charge too much, they lose customers. To make these decisions, Brian considers how long people will likely live, whether the economy will be good or bad twenty years from now, and other questions like that.

What You Need to Know


Category: Insurance

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