Graphs, charts, lines, and dots. In High School, you likely learned the basics of statistics. It’s easy to take for granted the role of statistics in our life, but without statistics everything from healthcare to law would fall apart.
Statistics plays an essential part in mathematics, politics, chemistry, physics, and more. It is the study of data and its relationships with other things. Almost anything can be data, as data is a numerical representation of everyday things. If something can be observed, counted, measured, or categorized, it can be translated into data.
We naturally convert the world around us into data, often without realizing it. For example: emotion. A feeling of happiness isn't inherently numerical, but businesses can record it by asking a customer to rate their experience on a scale of 1 to 10.
Statistics deal with two types of data: quantitative and qualitative.
- Quantitative data is numerical measurements, counts, or calculations. You ask: How much? How many? How often?
- Qualitative data is categories, attributes, or labels. You ask: What type? What characteristics?
The point of statistics is to collect all this data and filter it so we can make better decisions and create strong representations of reality. Statistics is a bridge that takes the subjective experiences of life, translates it into data, organizes it, and then draws conclusions.
Actuarial science is a discipline that uses statistics and financial theory to measure data to predict financial risk. Actuaries are professionals who manage financial risk, ensuring that insurance companies, banks, and corporations can honor their promises when unexpected events happen.
Risk, Probability, and Uncertainty
At the heart of actuarial science is the study of risk and probability. While it is impossible to predict exactly when an individual will get into a car accident or when a natural disaster will strike, statistics allow actuaries to predict how many events will occur across a massive population over time.
By analyzing thousands of historical data points, actuaries calculate the mathematical probability of a specific financial loss. As the number of observed policyholders increases, the actual data matches the expected probability more closely. This predictable consistency is what allows an insurance company to remain financially solvent.
How Actuaries Apply Data Types
Actuaries take both quantitative and qualitative data from everyday life and plug them into advanced financial equations.
- Quantitative Applications: An actuary looks at numerical counts, such as a driver's age, the value of a home, or local weather measurements. A higher number of recorded historic storms in a specific coastal zip code translates directly to higher property insurance calculations.
- Qualitative Applications: Actuaries also evaluate descriptive categories. For example, a life insurance actuary looks at qualitative health attributes like whether an applicant is a smoker or non-smoker, or if they have a history of heart disease. These labels are converted into distinct statistical risk groups.
The Goal: Solvency and Strategy
The financial world is full of unpredictable factors. As an actuary, you filter out these minor variations to find reliable long-term trends.
With those trends, they can design stable insurance policies, establish accurate pension plans, and protect companies from financial ruin. Actuaries act as financial strategists, using the math of the past to build a secure architecture for the future.
Sources
BYU-Idaho: Advanced Writing for Math Students
BYU-Idaho: Department of Mathematics
US News: "What You Need to Know About Becoming a Mathematics Major”
Research.com: “Different Types of Mathematics Bachelor’s Degrees: Specializations, Careers, and Salaries"
BYU-Idaho: Math Boot Camp
Indeed.com: "Math Degrees: Types, FAQs and 7 Career Paths You Can Pursue"
Research.com: Mathematica
BYU-Idaho Academic Catalog: Mathematics (B.S.)
Wikipedia: “Mathematics"
BYU-Idaho: Math Internships
BYU-Idaho: Mathematics Student Resources
BYU-Idaho: Mathematics Societies
BYU-Idaho: Math Secondary Teaching Internship Requirements
BYU-Idaho: Quantitative Reasoning Requirements
BYU-Idaho: Mathematics Senior Projects
The Best Schools: What Is A Math Degree?