What Do Actuaries Actually Do? Part 1: Pricing Car Insurance

Actuaries assess the financial uncertainty associated with risk... but what does that really mean?
In part 1 of my "What Do Actuaries Actually Do?" series, I discuss how actuaries price car insurance.

[@ap5017]

You're the coolest actuary I know.

[@Ellellevlog]

+AP Media how many people are on that list? 😂😂😂

[@ap5017]

5-6 lol.

[@Ellellevlog]

+AP Media more than I expected. Go me.

[@danielwalsh1912]

This was a great video. I'm in healthcare analytics and am looking to expand into modeling for health insurance pools in the US. I know you Canadians have universal healthcare. I know the larger the pool the more dispersed the risk.

[@Bachoo95]

My feelings are not hurt.

[@mainakghosh3599]

There are not many videos in the KZbin that actually explain what Actuaries do in day to day work. I very much appreciate that you're taking a step towards doing that. I'm currently working in Pension Domain. May be I can get inspired of doing something like this :)

[@Ellellevlog]

You should definitely start making videos! Go for it

[@mwalimuwilliam1310]

That's as simple as it can get ! Awesome explanation!!!

[@Ellellevlog]

Glad you enjoyed it!

[@avishekbiswas4121]

Brilliantly explained! I have an actuarial interview coming up and you helped me so much with my preparation! Thanks Michelle

[@WheresWorm]

Well, learning about actuaries certainly wasn't on my list of things to do today, but that was a really great explanation! Well done!

[@Ellellevlog]

+Zoglo Spontaneous knowledge!! Glad you enjoyed it!

[@hsystem223]

I spend so much time learning Frequency & Severity distributions in technical terms, your examples put them in context and can be easily to understood by non technical audience as well. Well done!

[@Ellellevlog]

+oumar ly Glad you enjoyed it!

[@velyben62]

thank you for your explanation. It was really helpful.

[@bratkneed]

This is so interesting to me. I honestly didn't know this was a thing until I found you.

[@Ellellevlog]

+BratKnee I didn't know it was a thing until my high school guidance counselor told me to look into it. That's why I make these videos - in an effort to educate the world about my seemingly unknown profession

[@bratkneed]

Ellellevlog You're succeeding.

[@gabriellecorpuz4978]

Confused

[@reubenmumbire4597]

That was a good presentation.However could you help me on these questions. Factors which Reinsurance companies would take unto account when assessing and pricing Reinsurance contracts. How do Reinsurance companies manage the behavior of insurance companies after the provision of a reinsurance treaty.

[@Bill_Woo]

Well stated. Accurately presented, across the board. No complaint with that. But in reality automobile insurance pricing is the most inept aspect of the entire actuarial profession. Short answer, the rating granularity is too weak and fails. Someone who lives on a nice block or neighborhood where they "nearly never" have claims are charged essentially the same as everyone else in their zip code (considering other factors of course). Also an idiotically low amount of weight is placed on past accidents, and a stupendously idiotically exorbitant amount of weight is placed on speeding tickets. It's financial idiocy but everyone plays the game the same, and they punish drivers who will never, ever have a claim by forcing them to heavily subsidy the claimants. And I understand risk sharing. Through and through. But I also understand and am calling out violation of risk assignment. When speaking of "fairness in pricing" car insurers fail ineptly. And that goes to the actuaries. And I haven't found a company in all of history that rewards garaging a vehicle at home or even at work. That's just stupidity. If that was properly measured, in my "actuarial opinion" I would postulate that both correlate massively to claim experience. Nay; casualty actuaries smugly charge the person the same as the lower class fellow in the same zip code who parks on the street and every now and then suffers casualty claims that the "good guy" insulates against. And someone who has a claim that exceeds my lifetime premium total (and that's with NO claims) gets a 15% increase - and statistically, that guy will DO IT AGAIN. No amount of statistical hoo-haw can mask the stupidity of that practice. But hey, it's about market share, right? And burying the losses on the virtually non-cost nonclaimants who are lumped in due to faulty rating granularity. Pffffft.

[@Adam_Al-Dawoudi]

Really a great explanation & very interesting side of you Michelle

[@Ellellevlog]

Glad you enjoyed it!

[@adobertmugyabuso247]

Woow...nice video....im having a bachelor degree in insurance and risk managmement and ihv just applied for masters in insurance and Actuarial science...im having that same worry maybe Actuarial is having this crazy numbers...Thanks fir the video it has really encouraged me..😊😊😊😊

[@TheMrShameem]

Enjoyed and looking forward to the rest of the series :)

[@Ellellevlog]

+TheMrShameem Thanks! I have plans for future videos, but I'm not sure how soon I'll be making them... only time will tell!

[@jehushaphat]

Thank you. This has helped me understand my job more :)

[@TonyTheAzn]

Been looking forward to another video about actuaries! Very well explained. Can't wait for the next one!

[@Ellellevlog]

Aw thanks!

[@jonathanhall7201]

Finally, I now know what actuallys actuary do!

[@talhanaeem2606]

Love u dear you are doing great when I watch your video I become more excited to become an actuary your style is too cute❤💕

[@thinkingofothers353]

information , knowable facts , open mind , how to get help for the facts.......l think your videos will be a help for me. I do thank you for your time to make them.

[@ricardojimenez1284]

Thank you for your video! i loved to know more about actuarial work

[@rasker3955]

Thanks for the information! Great video. It doesn't sound like a job for me, personally, but my confusion about the actuarial proffession has been remedied.

[@Ellellevlog]

Any idea what job you would like to do?

[@rasker3955]

Ideally I'd be a pure math researcher/professor, but landing a job like that is rather competitive. I've had some experience tutoring high school math and really enjoyed it, so maybe that could be a fallback. I'm starting university this fall and I still plan to pursue pure math, but since that's not very employable I'm thinking that I should also gain expertise in another field (probably in teaching and/or in programming).

[@Ellellevlog]

Those sound like good options!

[@joshurlay]

@@rasker3955 What are you doing now? I'd recently thought of my dream job as a pure math researcher if money wasn't an object. I also tutored in college, starting two years ago and ending in January. Alas, I've been leaning heavily towards actuarial work but I've been saddened to hear how non-math intensive the workload actually seems.

[@likeitordiy6335]

This is awesome and I love your videos! Just subscribed to your channel 💕

[@alehax27]

What's your perspective on vehicle automation and how that will affect the car insurance industry? I've heard some people express concern that driving automation will simplify the work that actuaries do to the point that jobs will be cut in that part of the field.

[@Ellellevlog]

I've heard several perspectives on the subject. Some people think that it will be the end of car insurance, other people think it will just change the types of claims. Regardless, I don't think that it will be the end of the industry. There are always new emerging issues to insure against. Cyber risk. Drones. The market is changing, but personally, I'm not worried about my career becoming obsolete.

[@think.nourishlee]

I love watching your videos! You explain things so well! So, thank you! I do have a question though, do actuaries actually make 90,000< ?

[@Ellellevlog]

+Taralee Haines that depends on where you're working, how many exams you have, how many years experience you have etc. I wouldn't expect that as an entry level salary, but it wouldn't be unreasonable to assume that your salary would go above 90k during your career

[@think.nourishlee]

Ellellevlog if you don't mind me asking *PLEASE DON'T FEEL OBLIGATED TO ANSWER * how much do you make...?

[@think.nourishlee]

I have another question! I haven't been in a math class in like 3 years.. So my memory isn't the greatest when it comes to it. So basically my question would be : If one isn't good at math, could they still become an actuary?

[@univuniveral9713]

like any othe cliche answer you just amnswered "It depends". How sweet. Clearly he is asking that do actuaries really earn double tha salary of an electrical engineer (both in similar levels and companies, same city, identical twins, everything else equal, apart from their specialties).

[@taylorgregory3864]

Hi I love your actuarial videos so so much!! Can you please do a part 2 of this series? I'd love to hear more about the actuarial profession and your videos are so helpful!

[@Ellellevlog]

I tried to film a part 2 back in December and it was horrible! I need to definitely need to try again! Glad you're enjoying my videos :)

[@Ellellevlog]

I posted part 2!

[@taylorgregory3864]

Ah thank you so much - you're incredible!

[@dragonslayer2794]

I laughed a lot and I learnt !!! That is amazing!! thank you!

[@amberchan7462]

LOVE YOU!!!! IT HELPS! and YOU ARE LIT!!!!!

[@ShanePonMusic]

this is a great series, keep it coming!

[@Ellellevlog]

Glad you enjoyed it!

[@jannigelsimon4503]

This video is really great that I had to take down notes!

[@Ellellevlog]

+iggienigs glad you enjoyed it!

[@marcoantonioortizdavila5145]

Nice video!!! i've been doing pricing models for last 2 years and you explain it so well!!! What do you think about telematics for car insurance? (an idea for a new video) Regards!

[@Ellellevlog]

Glad you enjoyed it. I think it's probably only a matter of time before telematics are the new standard for insurance. I think the privacy concerns are justified, but from an insurer's perspective, having all that data is going to become incredibly important. We live in a data driven world right now.

[@santesh]

That was awesome..

[@shavitraraguram7413]

Hi Ellelle 😃 I love watching your videos. You talk with so much of excitement. Also, you give simplest explanations for whatever you talk about. Thank you so much for that. I just have one question. Do actuaries focus more on statistics or calculus?

[@Ellellevlog]

You're so sweet. I would say that a lot of the foundations for theories that we use are based in calculus, but I don't use calculus day to day. I do, however, base a lot of my analyses in statistics.

[@shavitraraguram7413]

Ellellevlog Thank you so much for taking your time to reply Ellelle. Much appreciated. Will be waiting for your next video 😃

[@aundreajones4615]

Great video

[@jugglingisgreat]

I am taking a course on Insurance, basically insurance 101 (midterm on thursday). I knew what adverse selection was! I also know Lemon's Problems, Moral Hazard, Principal-Agent... Ahh too much studying :/

[@Ellellevlog]

First semester and already learning things! Glad you're putting your degree to good use!

[@DenzilBoydJr]

Do Lemon's problems make you feel sour?

[@timpiku]

Great Video into the details of what Actuaries do. Where should I look for internships for becoming or evolving into an Actuary? Should I just be a walk-on to random insurance companies or just wait till I have a few Exams completed to try?

[@Ellellevlog]

Are you in university? If so, I would start by checking your university's "career board" or whatever they call it. That's usually a decent place to look for job postings. Having an exam will help an internship application, but I don't see it as a requirement. Worst thing that happens is that they say no, right? Can't hurt to apply.

[@timpiku]

Ellellevlog Ellellevlog Yes I'm currently in my first year of college and I'm taking upper level math courses and Economy. They don't have a "Actuarial Sciene" program so I'm taking class that'll help me with the exams.

[@Ts1nd]

Does this job require alot of social interactions? Can you work at home? Do you work in weekends? Do you need to work extra hours if there is alot of work to do?

[@univuniveral9713]

If I was paid that much I would also be that funny and making people laugh. That is cool. I have been at 30 interviews, here in the Uk. PhD in maths, expience in programming, predictive, machine learning, business analysis. Lost my job 4 months ago and it seeks they do not wanna give me a job anywhere.

[@rhythmandacoustics]

Sounds like you can easily automate it. I think a statistician or mathematician or computer scientist can significantly reduce the number of actuaries. Software will do the rest.

[@richardvazquez7925]

This is awesome and so helpful. Please make more! :)

[@Ellellevlog]

+Richard Vazquez glad you liked it! I'll make another one in a few months!

[@purnachandrakanamarlapudi6942]

well explained.. you cracked it..

[@Ellellevlog]

+purna k hahahha yaaaaay

[@CaIibeRR]

Sounds interesting, I'm in school right now studying economics and thinking of working as an actuary. Any tips?

[@mariee_ee]

It's been 4 years..any update ?

[@TimTripon]

@@mariee_ee I am not an actuary lol how about you?

[@mariee_ee]

Still in school

[@lizkel]

Great explanation, thank you girl!

[@Ellellevlog]

+Elizabeth Naff glad you enjoyed it!

[@obioravo]

what computer science courses do you think are necessary to learn in university(like you mentioned databases,) do you have to learn programming to become an actuary?

[@admiremadyira9873]

Maybe

[@stardustdragon125]

Thank you for the great video!

[@danielkushner5963]

How much statistical analysis do you do on the day-to-day?

[@Ellellevlog]

I don't work as a pricing actuary, so I couldn't comment with specifics, but statistics, analysis, and predictive modeling are the bread and butter of our profession.

[@Cyber128]

Great video! I have a question about what you said regarding discrimination. (sensitive topic, no offence meant, genuine question) What's the difference between discriminating based on peoples ages vs their race? You can't change either, they both have insurance implications: why is race any different?

[@a.3160]

Hi Allelle. Why do u say that calculus is used to produce predictive models?

[@guilhermemonteiro8562]

Hello! I'm finishing high school and I wanna know what would you say that are the "recquirements" to a person become an actuary in terms of personality, I guess. Like, I have a friend that loves studying about the global economy and money and trade, so everybody is sure he is going to become an Economist. But me... Well, I'm good at Math. And that's pretty much it, due to my comatose goldfish memory. Do you think that I'd be able to become a good actuary or should I try something else? (BE HONEST, JUST WRECK MY HEART)

[@andrewmckechnie9319]

Guilherme Monteiro u in university becoming an actuary yet? Or are u doing something else?

[@AineDonnellan]

Ahahah this is so awesome 😂😎✌️️

[@sandolinic]

Thank you! If I may, I will actually use your content for a presentation I am working on

[@Ellellevlog]

Feel free. What kind of a presentation?

[@sandolinic]

Ellellevlog high level presentation to position the algorithmic insurer, an analytic platform for the Insurance industry

[@jenredero]

omg you are so adorable! such a great video and so much info! thnx!

[@Ellellevlog]

Glad you enjoyed!

[@MultiWilliam15]

Hey Elle, I noticed you aren't posting that much videos about the actuarial profession anymore. However, I was just curious, of calculus and statistics, which of the two are more likely to be encountered by actuaries? I know, both are required and it's a tough question. I am currently studying a BSc in Mathematics, and I noticed that my course is like a major in calculus, minor in statistics. Basing on experience, I know that calculus and statistics are not far apart, except statistics has constants and equations that are based on how we react with the real world whereas calculus/analysis are closed in the world of math. They say if I can't get a bachelor's degree directly relating to actuarial science, I should get a BSc in Mathematics/Statistics/Applied Mathematics. Since no university in our country offers actuarial science as a bachelor's degree, I opted to take a BSc in mathematics. But I feel like the statistics side has been compromised in my course. We have 1 introductory statistics class, 1 mathematical statistics class, 1 applied statistics class, and an elective on probability theory. However, the mathematical statistics class has an advanced calculus prerequisite so I don't really know what to expect. Also, our University offers a Professional Masters in Actuarial Science, but unlike other universities, it is found in the Institute of Mathematics, not in the Institute of Statistics. Maybe it's just because I study on a top University in our country and mathematics is their specialty. Anyway, what's your take on this?

[@MultiWilliam15]

Also, I decided that I want to take the actuarial profession. I've been inspired by my 31 year old sister with a husband currently undergoing dialysis. We won't expect him to last that long, and they have two kids, so my mathematical instincts rang, and suddenly I wanted to project how will their family will fare in the long run.

[@lisat7850]

Thanks for your video. How often do actuaries review their pricing model ? monthly ? quarterly ? or is it specified by the regulators or the respective insurance companies ?

[@Ellellevlog]

+lisa t that would depend on what line of business you're talking about, how profitable it Is, how big the company is.. If a line is less profitable, they'll probably check it more frequently. There's no easy answer to this question, unfortunately!

[@Jamstarii]

Whats the difference between this and what a Pricing Analyst would do?

[@jessiewang195]

Just found your channel! I'm an actuary too :)

[@Ellellevlog]

+Jessie Wang Hello fellow actuary!

[@aadarshmishra1996]

waiting for part 2

[@loveinseattle]

Do your classmates and coworkers watch your videos?

[@Ellellevlog]

I sure hope not!

[@linkinparker1]

Wow very nice video explaining things! I am in between becoming an actuary or study computer science but will i be able to study computer science and then become an actuary?

[@Ellellevlog]

Computer science is an asset in many professions these days, and that's no exception when you want to be an actuary. There is a need for people who can program. Personally I code in SAS at work. I know people who code in R or python as well. The two are not mutually exclusive, seems like a tough decision!

[@sandheepsridar95]

is this jess from new girl? :P and thanks for the clear explanation!

[@univuniveral9713]

I have some questions: 1) Can any good mathematician and orogrammer who is good at predictive models work as an actuarian without and actuarial degree/exams?. 2) Please can you send me the link of a few sample price worksheets so I can see the variables and actually have a feel.. that wou;d help me when applying for such jobs.

[@CCUK-nine-tailed-saiyan]

What math and statistics course do you really use? Because I don't see how calculus 3 can benefit

[@lionofjudea4146]

Just getting looking. Im interested in financial crimes investigations.

[@dredonkelly447]

Hey, how exactly did you start studying for the probability exam and did you feel like you were a bit behind in your studies or at all inadequate to take the test?

[@Ellellevlog]

+Dredon Kelly I had taken statistics courses in university prior to writing them exam. Then I used the actex manual to study. I never feel ready for exams before I write them, but that's more to do with me as a person than how ready I actually was

[@amitbahadur1]

how many papers have you cleared? or are you a fellow 😎

[@joooeee86]

I am thinking about switching over to P&C from Health. Elle. what are your thoughts? I am right there at the line where SOA and CAS split.

[@joooeee86]

Also great video! You might be a little weirder than me! haha! Maybe not though.

[@Ellellevlog]

I'm obviously biased towards P&C, given that that's what I do, but I don't think health is a bad choice at all. I know that probably wasn't helpful, but you've got 2 good options in front of you.

[@joooeee86]

Helpful enough! I will end up doing more work if I transfer over to P&C at this point since I've completed a couple of the SOA modules. All good though.

[@thinkingofothers353]

....yes....give me more please.

[@Ellellevlog]

hahahahahaha

[@ehitkarim6619]

Is it possible to switch to another field if I get a degree in actuarial science?

[@darthvadar16]

Hi, I'm coming the the end of my Actuarial Science degree and I'd like to go into pricing for insurance. Could you recommend anything I should learn/read about) outside of exams that will help me out in the job? Thanks for the videos!!

[@Ellellevlog]

I'm a big believer in learning by doing, and thankfully my company (& coworkers) are great at mentoring actuaries and teaching them what they need to know. However, if by pricing you mean P&C pricing (cars, homes, businesses), you can go to the CAS website > look under exam 5 > complete online text references > look for Werner & Modlin. I know you said something outside of exams, and I'm leading you to an exam text, but that's really the text that taught me the basics of ratemaking

[@darthvadar16]

Thank you, I'll have a look

[@boikanyomashau418]

What advice would you give to a student who is studying Act. Sci. but does not want to go into insurance?

[@Ellellevlog]

Try to do internships to figure out what it is that you do want to do after graduating :)

[@boikanyomashau418]

Thank you I will do that

[@zhuozhang3863]

actuary exam is rough. I just found out i got a 5 in C.now i wanna stab myself in the eye.

[@Ellellevlog]

No stabbing! No stabbing!

[@tyson1chicken]

cute and energetic personality

[@victorojeda9509]

Is the $150k to $250k salary thing a myth for actuaries?

[@Ellellevlog]

I don't know if it's a myth, but I wouldn't expect it as a starting salary.

[@ASniperGaming]

Victor Ojeda the median salary is something like $99,500 or something, I think saw the starting as around $50,000 and the top end being $150,000-$250,000

[@OperatorBayArea77788]

Can I use calculators on test and exams ?

[@ethant4988]

Then what's the difference between data analyst / scientist and actuary

[@taresy6789pp]

stuck on my maths can you solve the laplacian in three dimensions thanks using fourier method

[@Ellellevlog]

No I can't. There was a time when i probably could... not anymore

[@taresy6789pp]

you sound very intelligent lady

[@BluberryLove21]

I'm very social and I dont think i can sit in front of a computer all day for work...do you think I can still be an actuary like do you have social interactions at work? sorry for my english im french!

[@Ellellevlog]

+Sarah I have very friendly coworkers, we talk throughout the day and often go out after work, but there are long stretches of time where I'm sitting and staring at my computer. If you're looking for a social job, you might not be able to get enough interaction from being an actuary. It really depends on what you're looking for. I would imagine if you went into actuarial consulting, and you were working for clients, it might be easier to interact with more people.

[@BluberryLove21]

I will think about it then, thank you so much for your advice!

[@implied321]

so all this personal informations about age gender and other things you put together to predict accidents is data science right?

[@Ellellevlog]

+strider there is a lot of overlap. I wouldn't be able to say where actuarial science ends and data science begins

[@implied321]

iam studying maths and i want to do msc in actuarial science but i dont know a lot of finance at the moment just some basics from some books that i have red. am i going to have problem in the msc because of that?

[@ninahoang7793]

Actuaries are not the ones who sell insurance, but unfortunately 99% of people who I have mentioned that I wanted to become an actuary for insurance company, they the immediately associated my future job as an insurance salesman. Some can’t even pronounce “actuary” correctly!

[@DefensiveSloths]

Going into university aiming to be an actuary, which classes/subjects should I aim to take, and how far should I take them? Any advice?

[@Ellellevlog]

Beanactuary.org has a pretty decent list: www.beanactuary.org/study/?fa=what-to-study You need a general idea of -probability & stats -basic derivatives & integrals (calculus) -financial math -computer science is an asset for employers

[@DefensiveSloths]

Thanks a lot

[@alexise0226]

I am currently an accountant but would like to begin a career as an actuary... what tips would you give to me to transition into an actuary career with little to no knowledge? In my undergrad career I did take many math classes including calculus, economics, statistics and finance but would I have to go back to school and take additional classes? Would I be able to take the actuary exams without taking classes?

[@vanguard7674]

Alexis Encarnacion just study for the first 2 exams on your own. Go to the SOA or CAS site to see the textbook syllabus for the probability theory and financial mathematics exam. Buy two of the listed probability books, and buy kellison for the financial math exam and spend at least 100 hours studying the shit out of these books. Once you have the first 2 exams under your belt you'll be off to a great start.

[@alexise0226]

Van Guard thank you so much for the info. I'm starting to study for the exams so hopefully in a couple of months I'll be ready to take the first exam.

[@diancharlovalentine2957]

Hi, what is kellison?

[@vanguard7674]

Kellison is the last name of the author of the book "Theory of Interest" which is probably the best textbook to prepare you for the actuarial exam on financial mathematics.

[@alexise0226]

Van Guard thank you for the info... I haven't gotten the books yet but I am going to start looking for them and studying... I was originally planning on taking the exam this month but I will be taking the next exam. I'll update you on what happens!

[@BarbarianGod]

Do you use any data mining techniques?

[@Ellellevlog]

Short answer: yes Longer answer: I can't guarantee that every company uses data mining, but it's definitely a topic that pops up all the time in webinars and actuarial conferences. The industry is moving in that direction.

[@DenzilBoydJr]

That actuary sounds kinda fun... (See what I did there?) Yup...

[@DenzilBoydJr]

Yup...

[@MarkTheTerror]

How old were you when you became an actuary?

[@ikersanchez8222]

How come race is not a risk factor? I mean, given the fact that there's actually a discriminating and violent global context. Or is it just like that in Canada? 🤔

[@Joeflegend]

99,000 annual median! Divine pay...

[@Ellellevlog]

+The Flash Hub that's not what I'm earning, but give me a couple more years

[@cestjoyous]

CAA or CT?

[@Ellellevlog]

I'm not familiar with either, sorry.

[@omarelfoudeh4370]

Ur hilarious

[@cyberalpha5740]

so you basically judge people

[@Sidsylum]

#friendly comment . please reply :) :)

[@georgea5441]

Damn, if you like Swiss cheese they really make you pay for it

[@Ellellevlog]

+George Asson they really do

[@gauravsinghh1]

hahaha thank you

[@Ellellevlog]

+Gaurav Singh 👍

[@gauravsinghh1]

Ellellevlog i haven't seen a vedio with 0 dislikes after so many views. Cheers :))

[@anilgulati7844]

You speak and look like Emma Watson.

[@univuniveral9713]

you can't use someone's race as a factor, but you can use some other genes such as a disease or affinity to cheese as a factor. all these are genetic. you insurance people got high double standards

[@danieldewet9019]

she looks allitle weird