Homeowners Insurance - Casualty Actuarial Society

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HOW ACTUARIES SEE THE WORLD
WHAT IS AN ACTUARY?
2
PART SUPER-HERO. PART FORTUNE-TELLER.
PART TRUSTED ADVISOR.
ACTUARIES ARE EXPERTS IN:
• Evaluating the likelihood of future events—using numbers,
not crystal balls.
• Designing creative ways to reduce the likelihood of
undesirable events.
• Decreasing the impact of undesirable events that do occur.
3
WHAT DO ACTUARIES DO?
WE MANAGE RISK
• Actuaries use a combination of strong analytical
skills, business knowledge, and understanding of
human behavior to manage today's complex risks
facing our society.
4
WHAT DOES RISK
HAVE TO DO WITH IT?
5
THE FUTURE IS UNCERTAIN AND
FULL OF RISK.
WHAT IS RISK?
• Risk is the chance that an undesirable
event will occur, but risk is also opportunity.
That's where we come in.
6
YOUR TURN!
Let’s play an
insurance game!
7
HOMEOWNERS INSURANCE GAME: Round 1
The Setup:
• You have $100
• You will buy a house for
$60, leaving you with
$40; not enough to
replace your house if it
is destroyed
• You live in an very risky
area, so the likelihood of
your house being destroyed
is once every six years
• Do you want to buy
insurance for $10?
• If you buy insurance you
will have your home
replaced if a storm hits
• If you do not buy
insurance and a storm
hits, you are out of the
game
8
AUTO PRICING 101
HOMEOWNERS
INSURANCE GAME: Round 1
BEFORE WE ROLL:
OUTCOMES:
• How many bought the
insurance?
• How many did not buy the
insurance?
• How many losses might we
expect to see?
• Roll the die and note the
outcome.
• How many losses did we
actually observe?
• How many homes did
insurance replace?
• Was anyone knocked out of
the game?
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AUTO PRICING 101
HOMEOWNERS
INSURANCE GAME: Round 2
BEFORE WE ROLL:
OUTCOMES:
• Does anyone want to
change their insurance
buying decision?
• How many bought the
insurance?
• How many did not buy the
insurance?
• How many losses might we
expect to see?
• Roll the die and note the
outcome.
• How many losses did we
actually observe?
• How many homes did
insurance replace?
• Was anyone knocked out of
the game?
10
AUTO PRICING 101
HOMEOWNERS
INSURANCE GAME: Discussion
Is $10 a fair price for this
insurance?
• The insurance company
needs to have enough
money to pay for a $60
house when a storm comes.
• How many times in 6 years
does an insurance company
expect to replace a house:
1 year in 6.
• How much does it cost to
replace a house: $60.
11
• How much money does an
insurance company need to
collect over 6 years to pay
$60 once?
• $60
• How much should the
insurance company collect
each year to make sure it
has collected $60 over 6
years?
• $10
AUTO PRICING 101
HOMEOWNERS
INSURANCE GAME: Round 3
What happens if we change the
rules?
• Now a storm happens on
rolls 3 and 4
• How many times in 6 years
do we expect a loss?
• Die rolls of 3 and 4
• 2 years in 6
• How much is a loss?
• $60
• What is the insurance
company’s expected loss
over 6 years?
• 2 x $60 = $120
• How much does the
insurance company need to
collect each year to make
sure it has collected $120
over 6 years?
• $120 / 6 = $20
12
AUTO PRICING 101
HOMEOWNERS
INSURANCE GAME: Round 3
Why did the cost of insurance
double?
• The likelihood of a loss
doubled
• In round 1, the likelihood
was 1 loss in 6 years.
• In round 2, the likelihood
was 2 losses in 6 years
13
AUTO PRICING 101
HOMEOWNERS
INSURANCE GAME: Round 4
What happens if we change the
rules?
• Now a storm happens on a
roll of 1, but it costs $30 to
replace a house
• How many times in 6 years
do we expect a loss?
• Die roll of 1
• 1 year in 6
• How much is a loss?
• $30
• What is the insurance
company’s expected loss
over 6 years?
• 1 x $30 = $30
• How much does the
insurance company need to
collect each year to make
sure it has collected $30
over 6 years?
• $5 = $30 / 6
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AUTO PRICING 101
HOMEOWNERS
INSURANCE GAME: Round 4
Why did the cost of insurance
decrease by half?
• The size of a loss was
reduced by half
• In round 1, the size of a
loss was $60.
• In round 2, the size of a
loss was $30.
15
HOMEOWNERS INSURANCE GAME: Discussion
Concepts:
• How often claims happen is
called frequency
• The size of a claim is called
severity
• Frequency times severity is
the cost of claims
• One claim every six
years times $60 per
claim = $60 per 6 years
= $10 per year
•
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Insurance companies have
many more factors to
consider:
• Age of home
• Geography
• How the home was built
• What the competitors
are charging
WHY DID YOU
BECOME AN
ACTUARY?
WHAT’S GREAT
ABOUT THE
PROFESSION?
LIFE AS AN
ACTUARY…
WHAT IT’S LIKE …
WHERE DO
ACTUARIES
WORK?
| 17
NOT JUST INSURANCE.
Although insurance companies can’t function without actuaries,
that’s not the only place you’ll find us.
•
•
•
•
•
•
Consulting
The Government
Rating bureaus
Colleges and universities
Banks and investment firms
Public accounting firms
18
WHAT’S GREAT ABOUT THE PROFESSION?
TOP-RANKED JOB
• No matter the source, actuary is consistently rated as one of the
best jobs. US News and World Report, the Jobs Rated Almanac,
CNN Money, and others all agree.
GREAT SALARY
• Actuaries are well compensated. Experienced fellows have the
potential to earn from $150,000 to $250,000 (USD) annually, and
many actuaries earn more than that.
• Actuaries earn while they learn. An entry level actuary with 1-2
exams passed will bring in a starting salary of $45-$65,000
(USD) depending on region.
19
WHAT’S GREAT ABOUT THE PROFESSION?
JOB SECURITY:
• Actuaries enjoy certainty in uncertain times. We're always in
demand as the world confronts risk.
LIFE IN BALANCE:
• More than a fulfilling career, being an actuary allows you to
maintain a low-stress, highly sought-after work/life balance.
MAKE AN IMPACT:
• Actuaries manage today's complex risks facing our society.
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WHERE WILL I LIVE?
GEOGRAPHIC REGION
United States
CAS
MEMBERSHIP (%)
SOA
MEMBERSHIP (%)
WHAT 84.6
IS AN ACTUARY
68.6
Canada
8.6
17.6
International members
6.8
13.8
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WHERE WILL I LIVE?
22
WHY DID YOU BECOME AN ACTUARY?
• How I found out about the profession
• Why I became an actuary
• What I like best about being an actuary
23
LET’S COVER SOME
BASICS…
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HOW DO I GET STARTED?
If you want to be an actuary, start preparing now!
•
Follow a college preparatory curriculum of high school classes.
•
Take math classes every year.
•
Take advantage of Advanced Placement (AP) and advanced
courses such as statistics and calculus.
•
Enroll in computer science courses to develop your computer skills.
•
Explore colleges and universities that offer actuarial science
curriculum.
•
Look into scholarship opportunities.
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WHAT ABOUT COLLEGE?
• Among the college majors you might choose: actuarial science,
math, statistics, economics, business and finance.
• Your equation for success should include the following courses:
finance
microeconomics and macroeconomics
calculus
linear algebra
calculus-based probability and statistics
actuarial science courses, as available
computer science courses
business courses, such as marketing
communication courses, such as speech, business writing and
technical writing
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HOW DO I STAND OUT?
While you’re hitting the books, don’t forget to
• Apply for scholarships. There are a number of scholarships open
exclusively to actuarial students.
• Look for internship opportunities. An internship will give you a head
start on an actuarial career with relevant work experience.
• Get involved with your actuarial or math club, if your school has one.
• Talk to an actuary.
• Start taking exams!
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DIVERSITY
PROGRAMS…
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TO DO THIS, WE ACTIVELY SUPPORT:
• Summer actuarial programs for high school students so students
can get comfortable with the profession.
• Reimbursements for qualified minority students who pass either
of their first two exams.
• Opportunities for those who want more guidance on what it
takes to be a professional in today’s economy.
• Scholarship opportunities are available from the Actuarial
Foundation and other organizations.
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FIND OUT MORE…
Follow us:
QUESTIONS?
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