INSURING OUR FINANCIAL SECURITY

People sometimes remark that death and taxes are the only sure things in life, but even these involve uncertainty. Many of us prefer to live our lives with some level of protection, for our loved ones as well as ourselves, against the consequences of such unexpected events as the loss of life, limb, or property. Insurance companies provide this protection by collecting enough money from their customers to pay the claims of those who suffer losses. The people who do the calculations needed in designing insurance products are called actuaries.

Consider the simplified example of someone who wants to buy collision insurance for a $10,000 car. Suppose that, within one year, the person has a 2 percent chance of having an accident causing a total loss of the vehicle. Then, to break even, the insurance company should charge an annual premium of $200 to insure this person. In practice, the premium will be somewhat larger to cover operating expenses and to provide a safety margin. Also, a customer involved in a collision may not suffer a total loss but may instead file a smaller claim for damages. Such details would have to be addressed in making a comprehensive assessment.

Actuaries combine their skills in mathematics and statistics with a well-rounded knowledge of business to solve a variety of financial and social problems. Most actuaries work for insurance companies, but banks and investment firms, large corporations, public accounting firms, and other organizations also employ actuaries to assess and manage financial risks. Some actuaries work in government and help to manage such programs as Medicare and the Social Security system.

Statistics majors develop the core quantitative skills that are necessary for success in an actuarial career. Those students who pursue an Emphasis in Actuarial Science also take courses in economics, finance, and accounting to complement their training in mathematics and statistics and to prepare them for entry-level industry positions.