Definition of Actuarial Science
Actuarial science is based on prediction or forecast of the reasonableness of occurrence of an event & quantification of the risk of financial impact (i.e. outflow of cash resources) of such prediction by using the probability theory of risk quantification so that a certain/scientific amount can be computed & which helps the company to take decisions for acceptance of the risk of the event.
- Actuarial science is nothing but a science of probability theory. Probability means the chance of occurrence for the event in the future (near or far future).
- Actuarial science makes predictions of the event occurring in the future. On the basis of such prediction, the premium amounts of insurance are computed. Such prediction helps insurance companies, to stay prepared for the likelihood of paying the claim amount in the future.
- The basic job of actuarial science is to quantify the risk in a probable event. Actuarial science is able to do the said job due to its connection with probability theory, economics, financial word, mathematical background& computer science.
- In recent decades, the world has observed various natural calamities & the risk of occurrence of such calamities. Thus, there is an increase in insurance coverage policies.
- With the up-gradation of the speed of computers & the use of modern financial theory, we have observed various scientific changes around the globe.
What’s an Actuary Doing?
- Every professional has some responsibilities towards his work & knowledge. Let us discuss on the responsibilities bestowed upon the actuary through actuarial science.
- An actuary is dependent on the historic information available as on date. Using the historic information, he applies concepts of probability theory in a scientific manner to predict the financial impact on the company.
- Using the prediction, he identifies the trend of data & then provides the estimated percentage to be used for computing the final amount. Such reports are used by the clients to set aside sufficient resources in case of probable events.
- What if there is no historic data or information available for an event? What if the historic information available is not relevant for the circumstance of the case? Here, the actuary uses the risk involved in the future in respect of said circumstance. Then the quantifies the impact based on the best estimation judgment.
- Actuarial science is used in all sorts of estimation, whether it is estimation of economic trends, or policy risk or death rate, or growth prospects of any event or risk of an increase in global warming.
Example of Acturial Science
Suppose you are an employee of a multi-chained grocery mart. During the performance of duties, you got injured with severe back pain. Thanks to the employee accident policy of the Grocery Mart, according to which you will be compensated for 1-month gross pay plus medical expenses, after confirmation from the doctor. This is where actuarial science is involved. How is the company able to easily pay you for the unfortunate event happened? Well, the company has already predicted the occurrence of such a situation way before the act. The company has already set aside sufficient resources to manage such events. In the short, the company was already prepared for such an event even if it would be a big cost. This was possible only with the prediction expertise of actuarial science. If this scenario makes feel wanted to know how the actuary did it, you’re your aspirations are correct to go for actuarial science.
Requirements for Acturial Studies
So as to study actuarial science, there are few requirements that one should possess. It depends on the university to university.
- So as to attain a bachelor’s degree in actuarial science, the following are the requirements:
- Financial certification from a recognized institution
- Letter of recommendation from the relevant authority or school
- The individual should have minimum test scores of English languages as “International English Language Testing (IELTS)” of 6.0 or “Test of English as a Foreign Language (TOEFL)” of 80
- Records evidencing high-school transcripts
- So as to attain a master’s degree in actuarial science, the following are the requirements:
- The GPA should be a minimum of 3.0
- The individual should have minimum test scores of English languages as “International English Language Testing (IELTS)” of 6.5 or “Test of English as a Foreign Language (TOEFL)” of 80.
- GRE test scores should be appropriate
- Bachelor’s degree is essential in the field of statistics or mathematics or such a type of related field.
Is It Worth an Actuarial Science Degree?
- The study of actuarial science will help a person to achieve the degree of “actuary”. This study will help a person to boast his dream to become an actuary. However, one can still pass the actuarial exams by studying related fields such as Mathematics or Statistics, or finance-related.
- Actuarial science is a global standard when it comes to prediction or probabilities. The study mechanics are built in such a way that the person becomes comfortable with predictions in routine life. The reason is that the individual goes through intension training during the entire process.
- Only due to such devotion in training & rigorous study, the actuaries around handsome bucks or even higher bucks in the globe. The market is always demanding such people.
- Actuarial science is mostly used in the insurance sector. However, there are many other avenues of prediction open in the world, which no one is exposed to yet.
- In case you want international recognition, it is suggested to complete the course from “Society of Actuaries (SOA)” or “Casualty Actuarial Society (CAS)”.
Benefits of Acturial Science
- The 6-figure salary makes the actuary career very demanding for people who love advanced math things. The starting package is around $ 50000. The median wage is estimated at around $ 101000.
- Another benefit is that this career is rapidly growing & there is always a demand for the job. The major reason is the insurance sector. The backend for the insurance sector is a growing population & complications in the world human health.
- The work-life is balanced along with the best pay on the globe.
- The start of salary is itself high & thus there is a direct jump from no earning to high earning.
- Actuarial science is helpful in dealing with real-life issues of any type of industry.
- Also, actuaries are involved in high-end business decision-making.
- With the help of actuaries, the Company can decide upon identifying future risks in the exposed areas.
- Actuarial science is also helpful in determining the provision for retirement benefits payable to employees. Thus, they are also involved in the preparation of the financial statements of the company.
- Risk analysis is the main bread & butter for the actuaries. Today many companies need assistance in identifying various risks that are directly or indirectly related to businesses.
- Actuaries are able to provide customized solutions on the basis of each situation for any company.
By this time, you may have understood the main study area of actuarial science. The main job of actuaries is to analyze the risks involved in an event & to suggest the likelihood or occurrence of the risk in the future. The client will be prepared beforehand to handle the actual situation. Due to higher demand over the globe, many universities are now offering various courses for actuarial science. Due to such high-end studies, actuaries have hold over finance, economics & mathematics (this combination is not that easy to achieve). Even if there are many benefits for actuarial sciences, one needs to accept the fact that the curriculum requires utter devotion & honesty.
This is a guide to Actuarial Science. Here we also discuss the definition and requirements for acturial studies along with benefits and example. You may also have a look at the following articles to learn more –