Before understanding the concept of actuary in insurance, the importance of risk in the insurance sector should be interpreted. When the word insurance is uttered, the concept that comes to mind is risk. Almost everything in insurance depends on the concept of risk. For example, insurance premium is calculated based on the risk of the insured person or the insured object. If the insurance company gives an insurance premium, as an example, which is below the risk level, the company will eventually take a financial bath and lose money. Thus, insurance companies take risk into consideration for every single step that they take, so that the company can make profits.
Actuary – Easy Definition
Actuary is one of the most important areas of profession in the insurance sector. Actuary mainly deals with insurance risks. By using insurance risk analysis, Actuary department of an insurance company calculates insurance premium factors, risk reserves of the company and decide on the adequateness of insurance companies in terms of meeting their insurance liabilities or obligations. An actuary gets educated about insurance mathematics. Insurance mathematics is mostly about derivatives, limit and statistics. Regression analysis is widely used by actuaries in order to come up with a foresight of risks of the insurance companies.
After getting to know the concept of actuary, we shall better look it up from Cambridge dictionary in order to have a precise and concise definition. Cambridge dictionary defines actuary as
a person who calculates how likely accidents, such as fire, flood, or loss of property, are to happen, and tells insurance companies how much they should charge their customersCambridge Dictionary