What is Actuarial Science?
What is actuarial science? Actuarial Science is the discipline that applies mathematical and statistical methods to the systematic observation of natural events to assess the risk of events occurring and help formulate policies that minimize this risk and its financial impact on companies and clients.
Most actuaries apply their science to real life world problems. What impact will the government's choice to bail out large banks have on the economy? What impact will a tax increase have on the price of gasoline at the pump? What is the likelihood of New Orleans being devastated by another hurricane and would the estimated losses be the same, less or more? What is the likeliness of illness or death if certain cancer-causing compounds are present in certain foods and the financial ramifications to the company and the nation? What are the risks and security issues a local company faces in the decision to fully automate all processes and systems? Will it be possible to sustain the Social Security program as the population of the United States ages? Finding questions to these problems depends on mathematical models with various financial and economic applications and problem-solving methodologies which make up the Actuarial Science discipline. This discipline incorporates mathematics and financial theory to determine the financial effect of uncertain future events. It includes a set of mathematical tools that aid in decision-making in the presence of uncertainties.
Actuarial science is truly an interdisciplinary field. It uniquely incorporates the disciplines of Mathematics, Finance, Accounting and Economics to help individuals understand not only mathematical techniques, distributions, probabilities and other quantitative tools, but also the underlying business concepts and applications to the real world. This enables actuaries to successfully identify, measure and mitigate risk.