What is the role of actuarial science in insurance?

Actuarial science plays a crucial role in the insurance industry primarily through the assessment of risk and the determination of premiums. Actuaries use mathematical and statistical methods to analyze data related to potential risks that an insurance company may face. This involves evaluating the likelihood of various events occurring, such as accidents, natural disasters, or illnesses, and quantifying the financial implications of those events.

By accurately assessing risk, actuaries help insurers to set premiums that are commensurate with the level of risk being covered. This ensures that the company remains financially solvent while also providing competitive pricing to customers. Their work involves creating models that predict future claims and losses, which directly influences how much policyholders will pay for their insurance coverage.

In contrast, enhancing marketing techniques, managing client relations, and handling customer service are important functions within an insurance company but are not the primary focus of actuarial science. These areas are more aligned with operational and customer-facing roles rather than the core analytical responsibilities that actuaries hold in determining the financial viability and pricing of insurance products.