I mean to call an actuary a superhero is very conceited... Hey there aspiring
actuaries! If we haven't met before, my name is Michelle,
this is Actuary Elle and I have to admit something.. When I meet new people..
I don't always tell them that I'm an actuary. Every profession has a range of
duties and responsibilities associated with it, but some professions just boil
down to a more succinct, understandable, quick sentence of what I do. A doctor
helps sick people, I get that. A teacher teaches you new things, I get that
an actuary.. quantifies.. risk? What? The main reason why I have this channel is to try
to make the actuarial profession understandable and accessible to those
of you who are maybe interested in becoming an actuary I try to explain
what is an actuary in clear understandable English but I haven't
been able to succinctly do that in one sentence so today I thought I would go
to the source. I'm going to go to the websites of the various actuarial
societies and see what their "what is an actuary definition" looks like, see if I
understand it see if I agree with it. I want to look at
the Casualty Actuarial Society, the Society of Actuaries
and the Institute and faculty of actuaries. Starting off with the society
that I'm a part of, the Casualty Actuarial Society, I have been sorely
disappointed feel free to go search through their
website but I have not been able to find a page that says "what is an actuary?" They
do link to the "be an actuary" website so I will check that definition out next
but first we could start with a page that I found that is just about the
practice areas of being an actuary so I thought let's see what they think
actuaries do. The four practice areas that they list off are enterprise risk
management, predictive modeling, rate making and reserving so that's pretty
close to what I've said in previous videos the why actuaries work in
insurance company video that I had done previously I had mentioned reserving and
pricing. Personally I like to use the word pricing rather than rate making
and the ratemaking is the correct actuarial term just because I feel like
coming up with insurance prices is a more clear English definition to someone
who's not in the insurance industry so it seems like the CAS agrees with me
that the two things that I think are important are also important. I'm
absolutely not an ERM expert but let's see how they define it. ERM is the
process by which organizations in all industries assess control exploit
finance and monitor risks from all sources for the purpose of increasing
the organization's short and long term value to its stakeholders. I mean I think
that's a fair definition I just don't know if it's a clear English definition
to someone who doesn't know what that means I think the word risk can be
really confusing and there are lots of different types of risk anything from
reputational risk to operational risk to financial risk. The interesting thing to
note here is that when you hear risk as a non actuary person even as an actuary
risk bad bad risk we don't want risk but here they talk
about assessing risk which is just understanding what your risks are as an
actuary I'm not at risk for medical malpractice but as a doctor I would be
controlling risk is the "let's make sure this risk doesn't happen so much" kind of
part of it I would imagine but the interesting part is the exploiting risk
this is what insurance companies do very well and ERM is not an insurance company
specific thing enterprise risk management is for every industry but
insurance companies are particularly good at exploiting risk we say you don't
want to take on that risk pay us and we'll take on that risk predictive
modeling involves the use of data to forecast future events yes agreed
it relies on capturing relationships between explanatory variables and the
predicted variables from past occurrences yes agreed and exploiting
them to predict future outcomes yes agreed look at past data predict the
future there are 100% absolutely actuaries who
focus on predictive modeling but I would say that as an actuary a lot of the time
predictive modeling is used as a subset of the other categories we
use predictive modeling to predict prices of insurance we use predictive
modeling to predict our reserve level we don't model for the sake of modeling but
I have built non-traditional actuarial models one of the first predictive
models I actually ever at built the company that I work for was trying to predict
survey scores for people who had just had to claim with our company they fill
out a survey to say were you satisfied and I tried to build a model to predict
whether or not people would give us a good score and the reason why we did
that was to be able to separate out the things that we can't control like a
person's age and gender from things that we can control like how many times they
had to call us versus we have to call them about the claim so predictive
modeling can be used anywhere remaking is what I do so let's see what they
think rate making is the process of
establishing rates used in insurance or other risk transfer mechanisms this
process involves a number of considerations including marketing goals
competition and legal restrictions to the extent they affect the estimation of
future costs associated with the transfer of risk yo I did not understand
that and this is what I do let's try to break it down. The last bit is kind of
good but albeit not in English the estimation of future costs associated
with the transfer of risk, what does that mean? We take on the risk of you having a
car accident, of your house burning down, of your basement flooding in exchange for a
premium that's the transfer of risk that's happening in an insurance company
you pay me money and I take on your risk the estimation of future costs is super
fundamental to rate making we are not pricing for past accidents we are
pricing for future accidents if you had a claim last year I'm not going to
charge you more next year to make up the money that I already paid out to you
that's not what we do we're not trying to recoup old money the reason why your
insurance goes up when you have a claim is actually because someone who's
already had a claim is more likely to have another claim we are trying to
predict the future cost of risk but we do have to consider all the things that
they're talking about like marketing goals maybe we want to grow in a certain
area of the country and so we will give a little bit
of a discount to those people competition if everyone else is charging
$300 and we're charging $500 we just won't be able to sell it legal
restrictions a big one that depends on the state or province that you live in
is credit score some places they let you use credit score to price insurance some
places they don't let you use credit score to price insurance here in Ontario
where I work we can use your credit score to price property insurance but we
cannot use credit score as of the time of filming to price your car insurance
reserving is the process of evaluating reviewing and estimating property and
casualty related unpaid claims within insurance reinsurance self insurance and
other risk transfer or funding mechanisms I mean there are a lot of
words in there the part that I would stick with was estimating unpaid claims
with insurance as an insurance company if you give us the risk of you having a
claim and then you have a claim we have to pay out and so all the money that we
have not yet paid out we've got to know how much it is I talked a lot about this
in my how actuaries use triangle videos you should check that one out it's
really good I spent a lot of time on it thumbs it up please like I mentioned the
CAS did not have a "what is an actuary" section on their website but they do
have a joint website between the CAS and the SOA so I thought I'd go to the
be an actuary website and read their what is an actuary definition part
superhero part fortune-teller part trusted advisor I mean to call it
actually a superhero is very conceited becoming an actuary is not a feel-good
job you're not saving orphans you're not feeding the hungry but what you are
doing is fundamental to the economy I do believe that actuaries are fundamental
to insurance and insurance is fundamental to a functioning economy so
do we do good work do we do important work yes
are we superheroes no no no are we fortune tellers absolutely our
job is to predict the future. Predict how much of a claim you're gonna have in the
future before you've had it. It involves a lot of feeling which direction the
wind is blowing it involves a lot of darts thrown at a dartboard I don't
personally have a crystal ball but I wouldn't
be surprised that there's some actuaries that look into it to try to predict the
future I would absolutely agree that we are trusted advisors there's a real
sense at my insurance company that what an actuary says holds a lot of weight I
don't know if we deserve the pedestal that they put us on but it's nice to
feel needed we manage risk it's what we do with unbeatable analytical skills
okay we help organizations plan for the future and protect themselves from loss
to say that our skills are unbeatable is a little.. yes an actuary would have strong
analytical skills but there are other professions that also require strong
analytical skills by understanding the very nature of risk we play a key role
in the psychological physical and financial stability of society
absolutely this goes back to the ERM definition I was talking about before
you have to be able to understand assess control figure out what needs to be
contained what we can exploit what we need to monitor we need to be aware of
what risk is and this is fundamental to society for sure
with our help businesses can grow sure retirees can invest with confidence this
is for actuaries that work in pension and people can enjoy peace of mind we
love what we do I love my job most days some days I just want to like quit and
burrito in a blanket and scroll through tiktok I downloaded tiktok like
two days ago and now it's taking up my time it only makes sense that ours is a
top-ranked job after all we are in high-income and low stress environments
we enjoy a harmonious work-life balance our work is intellectually stimulating
and we work in a variety of settings but no matter where we work the career comes
with one great perk the satisfaction of solving problems and having an impact do
I earn a high income I think I do is it a low stress environment I would
say most days is low stress obviously it ebbs and flows but I would say most of the
time it's pretty chill work/life balance wise we have an expression on my team
that is there's no such thing as an actuarial emergency I work a regular
nine-to-five I take a full hour for lunch I stop and chat at the water
cooler with my coworkers it's a good time the work is definitely
intellectually stimulating a lot of the time
in a variety of settings usually I work in a cubicle so that's not so variety
nowadays I'm actually working from home not surprising we all know what's going
on in the world so welcome to my home office we are the backbone of financial
security.. oookay. we are the backbone of financial security insurance companies
financial planners and many multinational corporations are hesitant
to make certain moves without consulting us first
who wrote this I mean I thought I had a big ego but whoever wrote this thinks
very highly of themselves that's because the problems we solve provide a
safeguard against catastrophe and this gives them the confidence to grow and
that benefits everyone I really have no more to say about that definition that's
just a lot of ego and a lot of padding patting itself on the back. Society of
Actuaries okay they seem to have a one-sentence definition at the top let's
see if I like it actuaries are highly sought after professionals who develop
and communicate solutions for complex financial issues agreed but too vague
let's keep going actuaries measure and manage risk yes but again risk is a hard
concept to like understand actuaries have a deep understanding of mathematics
statistics and business management with this they help businesses grow and
provide value to their customers actuaries help leaders make strategic
decisions and consumers prepare for their work fair but I still don't know
what an actuary does actuaries are in demand I mean we're
hiring at my company I get contacted by recruiters all the time so yeah they
work for and with businesses with a financial focus yes
businesses including insurance life health property casualty ayyyyy even pet
insurance when I was interviewing for internships back in like 2012 I once got
an interview question where they asked me how I would price tombstone insurance
which is not something that they sell but hypothetically what factors would I
consider if I wanted to design an insurance product and price it for
tombstone insurance so sometimes you're asked to price strange things also
banking investments government energy ecommerce marketing employee benefits
product development enterprise management predictive analytics
consulting and more alright so they're just telling us like we're actuaries
work but this doesn't really tell you what an actuary does at all. I can see
why people would be confused if they read this they like cool a lot of
buzzwords a lot of different industries but like what does and actually do let's
check out the IFOA website: actuaries are problem solvers and strategic
thinkers with a deep understanding of financial systems I definitely have to
solve problems all day every day identifying problems coming up with
solutions coming up with creative solutions is a lot of what I do
strategic thinkers absolutely deep understanding of financial systems I
don't know if I would call my understanding of Finance deep I mean
insurance is a financial product I wouldn't call myself an expert in
financial systems I understand this one financial product and I do have a broad
understanding of how things like investment and option pricing works but
I wouldn't call myself an expert at all in like pure financial markets
I think MJ the fellow actuary another actuary youtuber I believe he
specializes in more finance actuary-ing stuff and he posts a lot of really
good videos I yeah I enjoyed watching him actuaries and analysts are experts
in risk management they use their mathematical skills to
measure the probability and risk of future events and to predict their
financial impact on businesses and their clients 100% as a pricing actuary I'm
predicting the future I need to see how much it's going to cost and then I need
to figure out how much what's gonna cost us and then that's what I do being an
actuary means having highly valued mathematical skills and expertise yes I
feel valued in my job actuaries come from different academic backgrounds but
share a love of math even if they haven't done a math degree I think this
is true in a lot of places people will come from an economics background people
will come from a generic math background but here in Canada I would say the
majority of people who are actuaries did study actuarial math or actuarial
science in university when you train as an actuary you'll learn how to analyze
data evaluate financial risks and communicate the status to
non-specialists this is something I've heard about the IFOA, I've never done
their exam process but I think there is an element of how to communicate data
that I think is really missing in the North American system and this is
something that I really try to drive when I'm coaching other people in my
team or when I'm coaching interns you can do this whole analysis but if you
can't explain it to anyone then what are you doing it doesn't serve a purpose so
having this communication skill is really important an actuarial career can be
one of the most diverse exciting and rewarding in the world. Most exciting in
the world? I mean.. I think we have to try to define excitement I mean I
work with data and like I have a lot of fun and it's intellectually stimulating
but exciting?? Actuaries use their skills to help measure the probability and risk
of future events yes every area of business is subject to risks yes so an
actuarial career offers many employment options yes including banking insurance
ooh healthcare pensions investments but also non-financial areas a career is an
actuary or actuarial analyst gives you the chance to apply your skills in maths and
statistics to the most exciting and significant real world challenges there
they go calling it exciting again maybe I'm missing some of the excitement
I still don't know what an actuary is maybe I'll just start telling people I'm
a youtuber if you like this video please give it a thumbs up subscribe to see
more of my face let me know in the comments if there are any actuary videos
you would like to see and thank you for calling bye