Actuary is a person who determines the future value of risk and makes all predictions based on his calculations and assumptions. An actuary is a highly trained statistician who is an authority in evaluating the various types of risks.
In insurance companies, all financial calculations are done by an actuary. They are the ones who calculate how much insurance premium would be paid by whom and why. They are ones who tabulate the premium table and rate-up chart and do all the other predictions, calculations and assumptions that are required. Hence they play a key role in the insurance companies and are hence very highly paid individuals.
The role of actuary involves detailed analysis of data to accurately determine and measure future risks. It also requires expertise to forecast future probabilities of various outcomes, such as losses or claims and their expected magnitudes so that the insurance companies can estimate the amount of claim that would happen in a particular year and plan accordingly.
An actuary is different from an insurance underwriter. An underwriter estimates the amount of risk that the company can undertake on a particular person’s life, whereas, as actuary estimates the amount of risk that the company can undertake for all the policyholders combined together.
Basically, an underwriter evaluates applications for insurance and makes decisions on whether to accept or reject them. An actuary works at a more macro level, setting the high-level parameters that guide insurance underwriters.