Actuarial science is the field of study that applies statistical and mathematical methods to analyze the risk in finance, insurance, and other professions and industries. Actuarial science topics utilize probability and statistics to define examine, and resolve financial outcomes of uncertain future events. An actuary merges skills of a mathematician, financial investment manager and business executive. Actuaries are experts in this field who are qualified through experience and exceptional education. In a lot of countries, actuaries must display their experience by excelling in a series of professional examinations.
The actuarial credentialing and exam process involves a series of rigorous exams. The aim of the exam process, is to determine the credibility of an individual before they can be confirmed as a credentialed actuary. The 2 most common paths taken in an actuarial career are: 1.) life and health insurance actuary or 2.) property and casualty insurance actuary. In the case of the life and health insurance actuary, the exams are administered by the Society of Actuaries. On the other hand, the aspiring property and casualty insurance actuary, takes exams offered by Casualty Actuarial Society (CAS). The exam can take place in a university setting, or through a series of examinations in a place of work. Most countries use the university-exam structure.
Actuarial Science Topics – Computer Science
Computer science is the experimentation, theory, and engineering that creates the basis for the design and control of computers. It is widely defined as the study of algorithms that communicate, store, and process digital information. It is regarded as an umbrella term to describe the study of computer and technology, and it involves core subjects that include basic programming, the theory of computation, and principles of computer hardware. Computer Science as well as other quantitative subjects, such as Math or Finance, tends to provide the academic background that produces well-qualified actuaries.
Computer science is often a catalyst for progress in our society. The innovation and knowledge gained through computer science has a wide effect ranging from improving our communication devices and even facilitating in the advancement of medical technology. Moreover, computer science has proven its ability to help forge new paths and accelerate advancement in numerous other fields. Artificial intelligence, actuarial science, data science and genomics sequencing are example of fields that have been positively affected by computer science. The substantially reduced costs from implementing machine- learning techniques and improved computing power have saved the health care industry tens of millions of dollars. This demonstrates the innovative and cost effective benefits industries can potentially gain from the use of computer science.
Economics in Relation to Actuarial Science
Economics, Finance, Math or Statistics are excellent undergraduate study options for those who hope to enter into the field of Actuarial Science. Because of their relevance as Actuarial Science Topics, we will explore their significance to the field in the paragraphs that follow. Although these subjects are interrelated, economics differs, because it is a social science that focuses on the production, consumption, and distribution of goods and services. Economics, examines the way in which businesses, individuals, nations, and governments disburse allocations. It also examines the extent to which these allocations satisfy the needs of the populace and how these entities should coordinate efforts to make the economies work.
Economics involves topics such as wealth and finance but is far broader in its use and scope. It helps us understand historical trends, current events and can help make predictions about the coming years. Economics can look at things from a smaller scale, for example microeconomics, or larger scale, such as, macroeconomics. Microeconomics is basically the study of individual decisions while macroeconomics looks at the economy as a whole. Microeconomics focuses in detail on individual consumers. It uses advanced mathematical techniques to describe and understand consumer motivation and decision making mechanisms. Macroeconomics studies the outlook, structure and decision making of an economy as a whole as opposed to individual markets.
Finance is the study and system of investments, money, and various financial instruments. There are three main categories that it can divided into: personal finance, corporate finance, and public finance. Recently, social science has emerged as an essential member of finance. Behavioral finance, on the other hand, aims to determine the social, emotional, and psychological reasons behind every financial decision.
Examples of subject matter that fall under the umbrella of Finance are: money management, budgeting, forecasting, investing and borrowing. Common topics encountered in the financial services industry are: profit, interest rates, financial services, investments and risk. Careers in Finance include: corporate finance, banking, wealth creation, mortgages, equity research and insurance
Actuarial Science Topics – Financial Statements and Reporting
Financial statements, also known as a financial reports, give details of formal records that reveal the position and financial activities of a person, business, or other entity. These statements typically include a normal financial statement followed by a management analysis and discussion. It also includes sales and expenditures during the stated period.
Financial statements are useful for a wide variety of reasons. In particular, they help determine the ability of a business to generate cash and pay debts. Financial statements also help keep track of financial results and identify potential profitability issues. The statements lend way to financial ratios that reveal the health of the business. Additionally financial statements give details of certain business transactions.
Mathematics is the science of order, relation, and structures that evolve from the elemental practices of describing, counting, and measuring the shape of objects. Math utilizes patterns to formulate new conjectures, they resolve the falsity or truth of conjectures by mathematical proof. Mathematics also deals with quantitative calculations and logical reasoning. Its development has also lead to an increased degree of abstraction and idealization of its subject matter. Mathematics along with statistics is used in actuarial science to assess and minimize risk.
Life and Health Insurance
Actuarial science is of great importance to the insurance industry because it helps insurance companies evaluate risk. Insurance, whether it be life or health insurance, helps people in funding of their day to day operations. Life and Health insurance companies help ensure that customers don’t suffer crippling financial losses, as a result of a serious accident or illness. Life insurance is a very important step when planning one’s future because it helps to fulfill obligations and promises to the family of the dead. On the other hand health insurance helps with medical expenses such as hospital stays, surgeries, tests and procedures and doctor’s visits.
Life and health insurance offer different coverage and serve a different purpose. Life insurance pays out a death benefit to beneficiaries in the unfortunate event of premature death. The purpose of the death benefit is to help ensure that the family does not struggle financially after the death of the insured. The motive is to help minimize costs, as far as future income lost, therefore assisting with covering if not defraying some of the obligations and expenses such as medical and funeral expenses and debts. Additional options for these funds include college savings accounts or spousal retirement.
Actuarial Science Topics – Pension Industry
The state pays a fixed amount of money, referred to as a pension, to those of eligible retirement age. Widows and the disabled often qualify for a pension as well. Pensions are funded by money added as a clause during the employee’s years of work. Payment is drawn from pension to support the individual’s retirement, which is issued out in the form of periodic payments. Pensions are generally broken down to either a defined contribution plan or defined benefit plan. The defined benefit plan refers to a fixed sum that is paid to a person at regular intervals, while on the other hand, a defined contribution plan works based on a fixed amount that is invested and later becomes available at retirement age. When it comes to pensions actuarial science compares to costs of alternate strategies in relation to administration, funding, maintenance and redesign of pension plans.
Probability is the likeliness of something taking place, while probability theory is a branch of science that deals with the analysis of random phenomena. It treats concepts into a mathematical manner through sets of axioms. These axioms formalize probability in a manner of probability space and assign them with values between 0 and 1. The outcome of a random event can not be determined prior to occurrence, in other words there are several possible results. Actuarial science uses probability to estimate financial impact.
Property and Casualty Insurance
Property and Casualty Insurance is a form of insurance coverage that helps to protect the properties of its subscribers. The phrase refers to various types of insurance, which fall under the umbrella term of Property and Casualty Insurance. Some examples of Property and Casualty insurance are homeowners insurance, auto insurance, life insurance, power sports insurance, and renters insurance.
Workers’ compensation is an essential type of casualty insurance for business owners. This type of insurance serves as a form of protection from liabilities in the event of an injury on the job. In addition to workers compensation, another important type of casualty insurance, is liability insurance. Liability losses is a term for losses that occur as a result of the insured interactions with others on their property. Insurance decreases the impact of financial distress after loss. The company to which you pay a small fee today agrees to bear the financial burden of a large but uncertain loss in the future. The law requires us to carry insurance and often legal contracts, with mortgage lender, for example, require the same. Some US State laws require property insurance, but most require at least liability insurance for vehicles.
Actuarial Science Topics – Risk Modeling
Risk Modeling is defined as the use of econometric techniques to predict risk in a portfolio in addition to quantifying the potential loss. This field is within the scope of financial modeling. Those who practice in this field must be equipped with techniques that can be used to analyze financial risks in portfolios as well as individual securities.
Risk Modeling is of great value in industries, particularly where calculated risk is integral to the business. Actuarial science uses various types of prediction models to estimate levels of risk. A better understanding of risks helps organizations achieve broad strategic objectives. With this in mind, it is important for key decision makers in any organization to understand the risks associated within their industry. In effort to address risk, public and private organizations have begun to embrace a wide variety of risk models and simulations. Conducting business means exposure to some risk, regardless of the industry. The types of risks are numerous, and may be operational, strategic, compliance related or geopolitical in nature. The wider availability of data as well as the increasingly sophisticated methods for analysis have made modeling more practical.
The emergence of Big Data in addition to the ushering in of dynamic data visualization tools has stimulated the demand for use of data analytics to address risk. One limits of data analytics is the use of historical data, which reveals the past behavior of a system. This is sufficient as far as correlations and obtaining some indications of causation. However, if the goal is to be predictive, it would be inaccurate to assume that the systems future behavior can be predicted solely based on the past. That is to say that circumstances and variables are always changing, so the fusion of modeling, analytics and other statistical techniques results in improved decision making tools.
Actuarial Science Topics – Statistics
Statistics is a science that deals with analysis, classification, interpretation, and collection of numerical facts or data. Furthermore, it is a branch of mathematics that deals with the organization, analysis, data collection, presentation, and interpretation of data. Statistical data is used in mathematical theories of probability, as well as in regularity of aggregates, and imposes or less disparate elements. Statistical analysis itself is the collection, evaluation and summation of data. Summarized data is especially important in helping depict a story by using tools like graphs, bar charts and histograms. As shown above, statistics is used to help make informed and data based business decisions.
Probability and statistics are two important branches of science that are essential cross a number of data specific fields, including actuarial science. Our world is increasingly information and data driven. Statisticians help provide guidance in narrowing down this information, as well as, making it more applicable. Statistics is a major component of actuarial science. In fact, it’s use is becoming more widely recognize as an integral component in other fields, such as psychology, business, social sciences and government.
Actuarial Science Topics are vast and span a wide area of subject matter. The nature of the occupation requires those in the field of actuarial science to evolve and adapt. This is due to continual innovation and development in our fast paced ever changing world.
Trends in Actuarial Science Topics
A few key areas in actuarial science grow each year. Firstly, data integrates itself into our daily lives like never before. The technology used daily helps companies to find better ways to reach new consumers. Secondly, risk modeling is adapting to new and innovative forms of global threat. Risk must now consider the growingly global economy, and interwoven threads of organizational and structural formations. Lastly, actuarial science topics continue to grow in ways unseen in the early days of the field. Let’s briefly discuss all three of these trends. Doing so helps understand how topics are adopting and adapting to new trends.
Data Integration into Technological Consumerism
For years, social media and the digital world collect our information. Online shopping is convenient, and often means better prices for the consumer. A process is underway leading to the spread of personal information for companies. Big data is now able to understand more about consumers than ever before. Actuaries in the field of marketing and product development understand buyers better than ever before. We continue to see risk management in product development increase thanks to this better perspective. To sum up, actuaries and big data work hand in hand to better tail products to the people most likely to buy them.
Risk and the Global World
Corporations rarely deal with a single country nowadays. Large businesses work overseas, in numerous offices, with a number of different staffs and teams of workers. A global economy means better resources and communication between international branches of work. Because of this, actuarial science topics must also contend with the risk of global decline. Just like the economy of the United States can benefit from success in the European Union, downturns are felt globally as well. Risk management must consider the implications of a global economy in their models. Doing so helps prevent crises like the housing fall of 2008. Although spurred by the United States, the entire world feels the implications of economic recessions.
Unseen Growth in the Various Topics
Nobody knew actuarial science would be as big as it is today. For a long time, management techniques led the way to better organizational structuring. Now, CEOs understand the benefit of risk management and crisis communication. No matter the industry or field, disaster awaits around every corner. Preventing the next global economic downfall is hard to do. Increasing success by investing money in understanding a single business’ threats is not. Therefore, more actuaries work today in the business world than ever before. Luckily, the field continues to grow, making it a great field of study for students. Young people interested in math and data can find new ways to use their interest.
Exploring actuarial science topics helps to better break down the field of study. Dave4Math covers numerous topics to help increase your understanding of today’s top fields. Make sure to look at more areas of interest on the site. Don’t have an account? Join the Dave4Math community today!