UNIT I

BEGINNING OF THE ACTUARY PROFESSION

Warm-up activities

1. Do you easily take risks? Are you a risk-taker?

2. Can you share what risks you have taken.
3. Which ones carry the most and the least risk? Explain why and prioritize them.
a. Plane
b. Car
c. Train
d. Alcohol drinking
e. Smoking habits
f. Poor diet or malnutrition
g. Cash
h. Property
4. What types of risks can businesses face (e.g. financial risks, frauds, embezzlements etc.)?
Can you name other risks?

TASK A Match the terms used in risk taking with their definitions

1. To calculate a. to recognize a problem, need, fact, etc.

and to show that it exists
2. To encounter b. to imagine or expect that something will
happen
3. To evaluate c. to judge the number or amount of
something by using the information that
you already have, and adding, taking
away, multiplying, or dividing numbers
4. To identify d. to decide which of a group of things are
the most important so that you can deal
with them first
5. To minimize e. to judge or calculate the quality,
importance, amount, or value of
something
6. To spread f. to reduce something to the least possible
level or amount
7. To anticipate g. a meeting, especially one that happens
by chance
8. To prioritize h. to cover or reach a wider or increasing
area, or to make something do this
TASK B Match the verbs from TASK A with the nouns that match them

1. To encounter a. issues
2. To evaluate b. threats
3. To anticipate c. risks
4. To prioritize d. problems
5. To identify e. damages
6. To minimize f. Insurance risks
7. To calculate g. actions
8. To spread h. effects

READING ARTICLE

An actuary is a business professional who deals with the measurement and management of risk
and uncertainty. The name of the corresponding field is actuarial science. These risks can affect
both sides of the balance sheet and require asset management, liability management, and valuation
skills. Actuaries provide assessments of financial security systems, with a focus on their
complexity, their mathematics, and their mechanisms.

While the concept of insurance dates to antiquity, the concepts needed to scientifically measure
and mitigate risks have their origins in the 17th century studies of probability and annuities.
Actuaries of the 21st century require analytical skills, business knowledge, and an understanding of
human behavior and information systems to design and manage programs that control risk. The
actual steps needed to become an actuary are usually country-specific; however, almost all
processes share a rigorous schooling or examination structure and take many years to complete.

The profession has consistently been ranked as one of the most desirable. In various studies,
being an actuary was ranked number one or two multiple times since 2010 and in the top 20 for
most of the past decade.

Actuaries use skills primarily in mathematics, particularly calculus-based probability and

mathematical statistics, but also economics, computer science, finance, and business. For this
reason, actuaries are essential to the insurance and reinsurance industries, as staff employees or as
consultants; to other businesses, including sponsors of pension plans; and to government agencies
such as the Government Actuary's Department in the United Kingdom or the Social Security
Administration in the United States of America. Actuaries assemble and analyze data to estimate
the probability and likely cost of the occurrence of an event such as death, sickness, injury,
disability, or loss of property. Actuaries also address financial questions, including those involving
the level of pension contributions required to produce a certain retirement income and the way in
which a company should invest resources to maximize its return on investments in light of potential
risk. Using their broad knowledge, actuaries help design and price insurance policies, pension plans,
and other financial strategies in a manner that will help ensure that the plans are maintained on a
sound financial basis.

Most traditional actuarial disciplines fall into two main categories: life and non-life.
 Life actuaries, that include health and pension actuaries, primarily deal with mortality risk,
morbidity risk, and investment risk. Products prominent in their work include life insurance,
annuities, pensions, short and long term disability insurance, health insurance, health savings
accounts, and long-term care insurance. In addition to these risks, social insurance programs are
influenced by public opinion, politics, budget constraints, changing demographics, and other factors
such as medical technology, inflation, and cost of living considerations.

Non-life actuaries, also known as property and casualty or general insurance actuaries, deal
with both physical and legal risks that affect people or their property. Products prominent in their
work include auto insurance, homeowners insurance, commercial property insurance, workers'
compensation, malpractice insurance, product liability insurance, marine insurance, terrorism
insurance and other types of liability insurance.

Actuaries are also called upon for their expertise in enterprise risk management. This can
involve dynamic financial analysis, stress testing, the formulation of corporate risk policy, and the
setting up and running of corporate risk departments. Actuaries are also involved in other areas of
the financial services industry, such as analyzing securities offerings or market research.

TASK C Answer the following questions choosing the right option based on the
reading article

1. Who deals with risks and uncertainties?

a. An insurance broker
b. An actuary
c. A finance analyst
2. Nobody wants to work as an actuary in modern companies.
a. True
b. False
3. Name the skills necessary for actuaries of the 21st century,
a. Analytical skills, business knowledge, understanding of human conduct and information
systems
b. Analytical skills, business knowledge and understanding of human conduct
c. Communication skills, business knowledge and analytical skills
4. What are the main areas of interest of life actuaries?
a. Health and pension insurance
b. Social insurance and investment risks
c. Mortality risks, morbidity risks and investment risk
5. Actuary profession originates in the 17th century.
a. True
b. False
6. What are the main areas of interest of non-life actuaries?
a. Only homeowners insurance
b. Physical and legal risks
c. None of the above
TASK D Find words and expressions in the text that mean the following

1. It is the practice of increasing total wealth over time by acquiring, maintaining, and trading
investments that have the potential to grow in value.
2. It is a strategy to prepare for and lessen the effects of threats faced by a business.
3. It is a performance measure used to evaluate the efficiency or profitability of an investment
or compare the efficiency of a number of different investments.
4. It refers to the rate at which a disease occurs in a population. These illnesses can range from
acute to chronic, long-lasting conditions.
5. It can be defined as the probability or likelihood of occurrence of losses relative to the
expected return on any particular investment.
6. It is a type of insurance that will provide income in the event a worker is unable to perform
their work due to disability.
7. It is a type of insurance designed to provide coverage for the transportation of goods either
on the ocean or by land as well as damage to the waterborne instrument of conveyance and
to the liability for third parties arising out of the process.
8. It refers to all the combination of goods and services that can be purchased by a consumer
with his or her income at their given prices.

TASK E Complete the text with the words from the box

(risks) (life) (amount) (prevent) (death) (sample) (estimate) (person) (money)

(values)

In the scientific literature, these estimates of willingness to pay for small reductions in mortality 1.
___ are often referred to as the "value of a statistical life.” This is because these 2. ___ are typically
reported in units that match the aggregate dollar 3. ___ that a large group of people would be
willing to pay for a reduction in their individual risks of dying in a year, such that we would expect
one fewer 4. ___ among the group during that year on average. This is best explained by way of an
example. Suppose each 5. ___ in a sample of 100,000 people were asked how much he or she
would be willing to pay for a reduction in their individual risk of dying of 1 in 100,000, or 0.001%,
over the next year. Since this reduction in risk would mean that we would expect one fewer death
among the 6. ___ of 100,000 people over the next year on average, this is sometimes described as
"one statistical 7.___ saved.” Now suppose that the average response to this hypothetical question
was $100. Then the total dollar amount that the group would be willing to pay to save one statistical
life in a year would be $100 per person × 100,000 people, or $10 million. This is what is meant by
the "value of a statistical life.” Importantly, this is not an 8. ___ of how much 9.____ any single
individual or group would be willing to pay to 10. ___ the certain death of any particular person.

TASK F Complete each sentence with a word formed from the verb in brackets

1. The greatest benefits of life insurance include the ____ (able) to cover your funeral expenses
and provide for those you leave behind.
2. This is especially important if you have a family that is (to depend) on your salary to pay the
bills.
3. Industry experts suggest a life insurance policy that covers 10 times your (year) income.
 4. If you drive without auto insurance and have an accident, fines will probably be the least of
your (to finance) burden.
5. If you, a passenger, or the other driver is injured in the accident, auto insurance will cover
the expenses and help guard you against any (to litigate) that might result from the accident.
6. Auto insurance also protects your vehicle against theft, (vandal) or a natural disaster, such as
a hurricane or other weather-related incidents.
7. Most experts agree that life, health, long-term (ability), and auto insurance are the four types
of insurance you must have.
8. Always check with your employer first for available (to cover).
9. If your employer doesn't offer the type of insurance you want, obtain quotes from several
insurance (to provide).
10. While (to insure) is expensive, not having it could be far more costly.

TASK G – Find the odd word out in each group of words

1. Incompetent Professional Qualified competent

2. Management Governance Administration Leader
3. Room Area Field Sphere
4. Threat Thief Risk Danger
5. Affect Influence Effective Impact
6. Conductor Behavior Conduct Manners
7. Staff Employees Personnel People
8. Property Tax Assets Possessions
9. Insurance Security Safe assurance