It’s The Actuary’s Fault

It’s The Actuary’s Fault

My children (and I have seven of them) have often wondered why everyone and everything seems to be falling apart all around me and I stand strong in midst of turmoil.  I’d be willing to bet that a large number of people don’t even know what an Actuary is or how they affect our everyday life.

An actuary is a business professional who deals with the financial impact of risk and uncertainty. Actuaries provide assessments of financial security systems, with a focus on their complexity, their mathematics, and their mechanisms.

Actuaries mathematically evaluate the probability of events and quantify the contingent outcomes in order to minimize the impacts of financial losses associated with uncertain undesirable events. Since many events, such as death, cannot be avoided, it is helpful to take measures to minimize their financial impact when they occur. These risks can affect both sides of the balance sheet, and require asset management, liability management, and valuation skills. Analytical skills, business knowledge and understanding of human behavior and the vagaries of information systems are required to design and manage programs that control risk

I’ve taken the time to explain to my children the risks that are involved in just doing the simple things that we do every day. Here once more is the key to the “how I avoid or minimize the turmoil that surrounds all of us in everyday life. Actuaries mathematically evaluate the probability of events and quantify the contingent outcomes in order to minimize the impacts of financial losses associated with uncertain undesirable events.

 A very simple and practical example is the following:  When I used to go to work every day (as normal people do), I would come home at the end of the day, park my car and either relax or perform some chores (tasks) around the house.  In all likelihood, unless my wife and I had plans, we wouldn’t touch the cars again until the next day.  With regard to my children, they may drive to work from school or go hang out with friends at the mall, or just go driving around visiting friends.  Even when they came home at the end of the day, they may decide at 9:30 pm that they forgot to buy something they needed the next day for school. 

I don’t know if you are seeing the pattern here: the more they drive, the more exposure they have.  Many times more likely to get a parking or speeding ticket, more likely to get into a car accident, more likely to run out of gas, more likely that their car will breakdown, etc.

If I visit a Casino twice a year, and you visit a Casino three times a week; you are more likely to end up with a gambling addiction, maybe even with your house under foreclosure, or your car repossessed, etc.  You are actually increasing the chances that something negative will happen to you through the process of exposure (repetition).

If you get up and go to the gym (fitness center) at midnight or 4 am to work out in peace (away from the crowded center):  you are running the risk of your car breaking down at a time when you are all alone in the dark empty streets, and worst yet get assaulted, robbed, raped (if you think I’m making reference to women, think again men also get raped).  You also run the risk of having your car vandalized in the empty parking lot. 

I’m not being a spoil sport or doomsayer; have you ever heard anyone you know say, “I didn’t think that could happen to me, or in my neighborhood.”  One of the most common crimes are the crimes of opportunity.  That is the long way to explain why, even when turmoil is all around me, I remain safe to date.  I do play the odds, but I play them to my advantage.  Stay safe.  The best is yet to come…..