What is an actuary?
An actuary analyzes financial risk using mathematics, statistics, and data. Actuaries are employed by insurance companies and various other entities, including the state insurance departments that regulate and oversee insurance companies.
Actuaries who work for government regulatory agencies are responsible for analyzing the rate filings that insurers submit and determining whether the proposed rates are adequate but not excessive.
Actuaries who work for insurance companies are responsible for analyzing the company’s financial risk and setting adequate premiums. Actuaries must ensure that coverage is priced to be profitable, but that the rates are also justified by claims costs. If the rates are too high, they could be rejected by state regulators, or the insurer will have to rebate excess premiums to members in the form of medical loss ratio rebates. On the other hand, if the rates are too low and not adequate to cover costs, it could cause a carrier to become insolvent.
