If we were to ask 100 people to define what ‘actuarial services’ are, we are sure that many of them would not be able to. Possible answers likely to be given are, “They have something to do with accounting”, or “They help sort wills when someone dies”, and we even have those who mishear the question and think the term is related to archery.
Bows and arrows are most certainly not what actuaries use. Instead, actuaries from places such as Barton Consultancy provide a vital service backed up by their skills, knowledge, and experience. It is true to say that many people may not ever directly employ an actuary; however, actuarial services do influence many aspects of both a business’s and an individual’s finances. So, for anyone reading that wants to know more about what an actuary is and what they do, please read on.
What Is An Actuary, And What Do They Do?
Let us start by explaining what an actuary is and what the work is that they do. Actuaries are qualified professionals whose main role is to use statistical and mathematical models to assess and evaluate uncertainty and financial risks. By doing so, actuaries assist individuals and businesses in managing risks that are associated with and can impact financial decisions related to investments, pensions, and insurance policies, for example.
More specifically, what an actuarial service will do for its clients is use large amounts of data, input that data into models they have developed, and then from that, predict how likely or unlikely a given future event is to happen. Examples of these future events include health issues, natural disasters, and accidents.
In addition, an actuary will help companies that provide investments, pensions, or insurance, to develop products and services based on the risks associated with them. Simple examples are assessing and predicting the likelihood of claims being made on a specific insurance policy and the life expectancy of someone taking out a private pension.
Specific Examples Of How An Actuary Helps Their Commercial Clients Make Decisions
An actuary will assist pension providers, including employers, to create and manage pensions. Their role in this will be to assess the risks of providing specific pension benefits for both private and occupational pensions. This risk assessment will take account of factors that include life expectancy and the rate of inflation. Actuaries will also help employers set their contribution rates and advise on investments that help to grow the pension fund.
Given that risk influences just about everything within the insurance industry, it should be no surprise that actuarial services are much sought after within it. Actuaries will provide assessments of the risk of providing insurance policies across a huge range of both individual and business scenarios based on past data and present circumstances. They also advise on premium levels so that they reflect the risk of claims being made on each insurance policy.
As many a company has gone under due to it making wrong investment choices, an actuary is someone who should be consulted whenever a business is seeking to invest. That consultation will involve the actuary making predictions about how they see any specific market trending and also on the volatility of any given market. This allows large-scale investors to make far more informed choices on what to invest in and how much to invest in it.
Specific Examples Of How An Actuary Helps Their Private Clients Make Decisions
In all three of the areas mentioned (pensions, insurance, investments) an actuary can help individuals too. Examples include:
- Helping to understand the risks of specific private and occupational pension schemes
- Finding the right insurance policies based on individual circumstances
- Help with managing an investment portfolio to avoid extreme risks