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Actuarial science is the discipline that applies mathematical

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Actuarial science is the discipline that applies mathematical and statistical methods to assess risk in
the insurance and finance industries.Actuaries are professionals who are qualified in this field through education and experience. In
many countries, actuaries must demonstrate their competence by passing a series of rigorous professional examinations.
Actuarial science includes a number of interrelating subjects,
including probability, mathematics, statistics, finance, economics, financial economics and computer programming. Historically,
actuarial science used deterministic models in the construction of tables and premiums. The science has gone through revolutionary
changes during the last 30 years due to the proliferation of high speed computers and the union ofstochastic actuarial models with
modern financial theory (Frees 1990).
Many universities have undergraduate and graduate degree programs in actuarial science. In 2010, a study published by job search
website CareerCast ranked actuary as the #1 job in the United States (Needleman 2010). The study used five key criteria to rank
jobs: environment, income, employment outlook, physical demands and stress. A similar study by U.S. News & World Report in 2006
included actuaries among the 25 Best Professions that it expects will be in great demand in the future (Nemko 2006).
Contents
[hide]
1 Life insurance, pensions and healthcare
2 Actuarial science applied to other forms of insurance
3 Development
o 3.1 Pre-formalization
o 3.2 Initial development
o 3.3 Early actuaries
o 3.4 Effects of technology
o 3.5 Actuarial science and modern financial economics
o 3.6 Actuaries outside insurance
4 Standards
5 See also
6 References
o 6.1 Works cited
o 6.2 Bibliography
7 External links
[edit]Life insurance, pensions and healthcare
Actuarial science became a formal mathematical discipline in the late 17th century with the increased demand for long-term
insurance coverages such as Burial, Life insurance, and Annuities. These long term coverages required that money be set aside to
pay future benefits, such as annuity and death benefits many years into the future. This requires estimating future contingent events,
such as the rates of mortality by age, as well as the development of mathematical techniques for discounting the value of funds set
aside and invested. This led to the development of an important actuarial concept, referred to as the Present value of a future sum.

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Pensions and healthcare emerged in the early 20th century as a result of collective bargaining. Certain aspects of the actuarial
methods for discounting pension funds have come under criticism from modern financial economics.
In traditional life insurance, actuarial science focuses on the analysis of mortality, the production of life tables, and the
application of compound interest to produce life insurance, annuities and endowment policies. Contemporary life insurance
programs have been extended to include credit and mortgage insurance, key man insurance for small businesses,long term
care insurance and health savings accounts (Hsiao 2001).
In health insurance, including insurance provided directly by employers, and social insurance, actuarial science focuses on
the analysis of rates of disability, morbidity, mortality, fertility and other contingencies. The effects of consumer choice and the
geographical distribution of the utilization of medical services and procedures, and the utilization of drugs and therapies, is also
of great importance. These factors underlay the development of the Resource-Base Relative Value Scale (RBRVS) at Harvard
in a multi-disciplined study. (Hsiao 2004) Actuarial science also aids in the design of benefit structures, reimbursement
standards, and the effects of proposed government standards on the cost of healthcare (CHBRP 2004).
In the pension industry, actuarial methods are used to measure the costs of alternative strategies with regard to the design,
maintenance or redesign of pension plans. The strategies are greatly influenced by collective bargaining; the employer's old,
new and foreign competitors; the changing demographics of the workforce; changes in the internal revenue code; changes in
the attitude of the internal revenue service regarding the calculation of surpluses; and equally importantly, both the short and
long term financial and economic trends. It is common with mergers and acquisitions that several pension plans have to be
combined or at least administered on an equitable basis. When benefit changes occur, old and new benefit plans have to be
blended, satisfying new social demands and various government discrimination test calculations, and providing employees and
retirees with understandable choices and transition paths. Benefit plans liabilities have to be properly valued, reflecting both
earned benefits for past service, and the benefits for future service. Finally, funding schemes have to be developed that are
manageable and satisfy the Financial Accounting Standards Board (FASB).
In social welfare programs, the Office of the Chief Actuary (OCACT), Social Security Administration plans and directs a
program of actuarial estimates and analyses relating to SSA-administered retirement, survivors and disability insurance
programs and to proposed changes in those programs. It evaluates operations of the Federal Old-Age and Survivors Insurance
Trust Fund and the Federal Disability Insurance Trust Fund, conducts studies of program financing, performs actuarial and
demographic research on social insurance and related program issues involving mortality, morbidity, utilization, retirement,
disability, survivorship, marriage, unemployment, poverty, old age, families with children, etc., and projects future workloads. In
addition, the Office is charged with conducting cost analyses relating to the Supplemental Security Income (SSI) program, a
general-revenue financed, means-tested program for low-income aged, blind and disabled people. The Office provides technical
and consultative services to the Commissioner, to the Board of Trustees of the Social Security Trust Funds, and its staff
appears before Congressional Committees to provide expert testimony on the actuarial aspects of Social Security issues.
The examples and perspective in this article deal primarily with the United States and do not represent a worldwide view of the subject.
Please improve this article and discuss the issue on the talk page. (December 2010)
[edit]Actuarial science applied to other forms of insurance

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Actuarial science is the discipline that applies mathematical and statistical methods to assess risk in the insurance and finance industries.Actuaries are professionals who are qualified in this field through education and experience. In many countries, actuaries must demonstrate their competence by passing a series of rigorous professional examinations. Actuarial science includes a number of interrelating subjects, including probability, mathematics, statistics, finance, economics, financial economics and computer programming. Historically, actuarial science used deterministic models in the construction of tables and premiums. The science has gone through revolutionary changes during the last 30 years due to the proliferation of high speed computers and the union ofstochastic actuarial models with modern financial theory (Frees 1990). Many universities have undergraduate and graduate degree programs in actuarial science. In 2010, a study published by job search website CareerCast ranked actuary as the #1 job in the United States (Needleman 2010). The study used five key criteria to rank jobs: environment, income, employment outlook, physical demands and stress. A similar study by U.S. News & World Report in 2006 included actuaries among the 25 Best Professions that it expects will be in great demand in the future (Nemko 2006). Contents  [hide] 1 Life insurance, pensions and healthcare 2 Actuarial science applied to other forms of insurance 3 Devel ...
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