The actuarial profession had its start in Europe during the mid-17th century. The profession has grown substantially since that time. In this Asia Insurance Review article, Milliman consultants Sam Morgan and Neil Cantle provide a narrative on the evolution of the profession. They also discuss what actuaries can do moving forward to enhance their services.
Here is an excerpt from the article:
A key feature of those early [mathematical] applications of the emerging “actuarial science” was to help insurance companies to plan for the amounts they should charge and the capital that they should hold to cover potential claims. Before such methods became more common during the 18th century, companies who had not adopted this scientific approach found themselves embarrassingly short of money when they needed it.
So a key driver for actuarial input was the need to understand uncertainty. This is not unique to insurance though.
Society has evolved to become highly complex – it is incredibly interconnected and the businesses operating within it reflect that complexity too. Modern businesses are struggling to find robust ways of understanding the drivers of uncertainties in their key goals and knowing how they should constrain (or optimise) them in order to stand a really good chance of delivering the intended outcome, even under stressed conditions. There is a need for rigorous methods to be applied to uncertainty in general, beyond insurance risks….
Making sense of uncertainty the key
Methods which can help everyone to make sense of that uncertainty are hugely important in this. It is also the case that not every eventuality can be foreseen and so pretending that you can truly “manage” the risk is naïve. It is therefore essential to consider how “worst case” scenarios might play out so that consideration can be given to possible actions that would help the [organization] to survive in some form.
It therefore seems that there is a key role for highly analytical professionals who are not only adept at using technical methods to reveal the nature of uncertainties and then developing useful models but who can also help a wide audience to understand them. Actuaries arguably brought some of the early rigour to risk management and that is arguably what they can do next too.