Reason for Choosing the Actuarial Profession - Coursework Example

A Report on the Actuarial Profession Name: Course: Institution: Tutor: A Report on the Actuarial Profession Actuarial science is a field of study within the wider discipline of insurance that applies knowledge of mathematical, statistical and probability techniques to assess the level of risks in financial systems. Professionals who have qualified in this field are called actuaries and can be employed in insurance companies, pension and benefit schemes, banks, brokerage industries and in software development industries. Actuarial science incorporates concepts from various disciplines including mathematics, statistics, probability, economics and finance to develop complex models and techniques for determining risks. Knowledge from these areas is used to develop models for determining a company’s risk exposure and to develop techniques or averting risks (Szabo, 2004). Actuaries add value to the business world by enabling companies and individuals make better and informed decisions with a clear understanding of the likely range of financial outcomes from several future events. Actuaries are greatly valued in life insurance where they undertake the analysis of mortality trends to produce life tables. Life tables are used to predict the expected future lifetimes of certain age groups. Such predictions can be helpful in developing insurance products and policies such as endowments and annuities. Actuarial science knowledge can also be applied in life insurance to develop models for determining risk exposure for credit and mortgage insurance. This can be helpful in averting financial uncertainties in the mortgage industry. Knowledge of actuarial science is also applied in health insurance to determine and develop contingency trends such as the rate of morbidity, future trends in disability rates, and mortality and fertility rates. This can be used to determine life expectancy levels for a particular region’s population and population trends for a country. This can also be helpful in determining the impact of geographical distribution on the utilization of health services. Actuaries can also be helpful in the development of benefit schemes for workers, reimbursement structures and standards of health care (Szabo, 2004). Actuaries are greatly valued in the pension industry where they develop costs of alternative strategies for maintaining pension plans. Besides life insurance, the discipline is also valued in property, causality, general and liability insurance to develop models for policy coverage. Students pursuing a course in actuarial science can choose from a number of study options. One option is being sponsored by the employer or studying by correspondence through a set of professional exams. Proper understanding of mathematical concepts and their application in finance is necessary to pursue a successful career as an actuary. On a typical day, an actuary’s work may include: i. Analyzing sets of statistical and financial information to determine possibilities of certain risks occurring. ii. Designing company policies to minimize costs associated with risks. iii. Calculating insurance premium rates. iv. Helping financial firms manage risks and maximize returns. Actuaries have the duty to assess the financial impact of certain undesirable future events and develop mechanism for mitigating the financial impacts of such events. Hence actuaries model the future of a financial system by methodological analysis of past events. The likely occurrences of financial outcomes from different events are then quantified. This gives an idealized model of a company’s risk exposure. Primarily, the areas of pension, insurance and investment analysis are the main ones where the expert finance and risk management skills of actuaries are used. The management of gratuity, pension and other employee benefits fund schemes and company insurances are greatly involved in the job of actuaries. Additionally, actuaries have statutory roles to perform in a wide range of insurance schemes sponsored by the government. Analysis of mortality trends, production of life tables and application of compound interest in insurance schemes are the primary areas that are focused upon by actuaries more often of late. The various methods of funding for retirement and the proper measurement of liabilities that may not come due for many years are other important areas that are dealt with by actuaries in the pension industry. Occurrence of natural disasters, property destruction and automobile accidents may cause hefty losses to individuals and companies. Actuaries play essential role in forecasting losses to properties in the field of property insurance. Reason for Choosing the Actuarial Profession i. The actuarial profession is a globally recognized and world wide affiliated course. ii. The profession has low unemployment rate. In addition, the profession is high paying and actuaries have a high demand in the job market. iii. Knowledge of actuarial science has wide application in various fields including professional practices. iv. The cost of studying the profession is relatively low compared to other professions such as medicine or engineering. v. The insurance industry is largely privatized and the presence of several public pension schemes means that more and more actuaries will be required in the industry. vi. A career in actuarial science can offer one considerable rewards in terms of professional status, intellectual challenge, high earnings and job satisfaction. Skills Needed for Successful Career in the Actuarial Profession The undergraduate life in college sets a defining basis for a successful career in the actuarial profession. It, therefore, becomes necessary for students to decide early enough what professions they would like to enter when their studies are over. For those interested in becoming actuaries, they should focus on receiving relevant education, one that is based on a holistic approach to studying mathematics and business. As such, a degree in mathematics, business or actuarial science is definitely an excellent start although streams like economics, sociology and arts can be studied for an enhanced understanding of issues that drive the society. Aspirant actuaries must be able to solve a wide range of problems related to probability, calculus and statistics, which are the main pillars of the actuarial profession (Society of Actuaries, 1973). To be an actuary, an individual must possess specialized knowledge in mathematics, calculus, probability and statistics. These serve as basis for developing complex models for determining events and outcomes. Strong analytic skills as well as project management and problem solving skills are also required. One must also have a good business sense and understanding of such matters as finance, accounting and economics. Most important strong computer skills in word processing programs, statistical analysis programs, spreadsheet, database manipulation and programming languages are essential. Computers have become an integral part of life and mathematical calculations, especially those related to high level business researches are carried out on computers (Rogers, 2003). Actuaries should be good communicators capable of presenting information in appropriate manner. In addition, actuaries should be self-motivated, creative, ambitious and able to work with others. While having exam successes and quantitative skills is crucial, it is important for students pursuing the course to have a well rounded curriculum while in college. It is, therefore, important for the students to take liberal arts courses alongside business and math courses. To qualify as certified actuaries, aspirants must take and pass a minimum number of professional exams. These exams are offered by relevant professional bodies such as the Society of Actuaries or the Casualty Actuarial Society. Exams from these professional bodies consist of computer-based tests on various subjects related to mathematics, business and finance. Aspiring actuaries should be persons of judgment rather than persons who use techniques to arrive at situations. One is required to adopt a solid commercial approach to decision making. Personal integrity of the highest standards is required of actuaries since safeguarding of the financial interests of the public is the primary responsibility of actuaries. The privatization of insurance industry in many countries has created a huge demand for the services of actuaries. Additionally, the rolling off of public pension schemes has also increased the demand for actuaries. As Rogers (2003) has asserted, it takes a deep driving desire to consistently study the facets of this wonderful profession and a keep sense of curiosity and intelligence. In conclusion, the actuarial profession applies statistical and mathematical methods in finance and insurance to assess and manage risks. The profession borrows from a number of various interrelated disciplines such as finance, probability, statistics and economics to tackle a wide range of operational issues which a business may face such as financial uncertainties. Essentially, an actuary is a finance professional who analyses financial consequences of a risk. A career in the actuarial profession starts with economic and mathematical techniques which provide a basis for the career. In the last few years, actuaries have become chief architects of financial security programs throughout the world. Frequent occurrence of catastrophic disasters has made the work of actuaries more prominent. Low level actuaries who perform their duties well and demonstrate a commanding knowledge of insurance, investment benefits, pension schemes bad related, normally by passing professional actuarial exams can easily over to executive positions such as Chief Financial Officers or Chief Risk Officers. Not surprising, the actuary is rated among the most prominent jobs in the world. References Rogers, G 2003. The Actuarial Profession: Making a Difference. Berth: The Institute of Actuaries of Australia. Society of Actuaries, 2001. The Actuarial Profession: A Description of the Responsibilities, 3rd edn, Training and Opportunities of the Actuary in the United States and Canada. Society of Actuaries. Szabo, F. 2004. Actuaries' Survival Guide: How to Succeed in One of the Most Desirable Professions. New York: Academic Press. Read More