New Zealand currently has a short supply of many professions — including actuaries. What exactly is an actuary, and what does an actuary do? Seven Sharp reporter Julian Lee does the arithmetic and finds out.
In maths class at high school, I used to sit behind the smartest kid in our year group.
We used to have these things called "The Order", where they publicly ranked all the students academically once every six weeks and sent the reports home to all the parents. The late 90s — what a time to be alive. Anyway, this kid was number one every single time. No one could ever knock him off his perch.
One day, I talked to this kid and asked him what he wanted to do when he was older. I was expecting a quantum physicist, maybe a mathematician. He told me he wanted to be an actuary. I didn’t know what that was. He explained.
Numbers are important
An actuary works out the odds of things – the chance of a tornado or an earthquake happening. The teacher told us to shut up, and I didn’t have time to probe. I soon forgot about actuaries and the actuarial world. I wish I hadn’t.
Over 20 years later, an old colleague contacted me, suggesting I do a story on actuaries. He said it’s one of the best-paid jobs in New Zealand that no one’s ever heard about. He said it’s low-stress. He said they’re now in high demand, and there’s even a school for them.
He also works at a PR firm for an insurance company looking for actuaries. So, it sounded too good to be true. I had to investigate.
Turns out he’s right. So, that smart kid from high school was not only grade-smart, he was life-smart. He’d eyed up a career that seemed to have the best of it all.
But there are two massive catches: First, you must be good at maths. Really good at maths. Second, you have to be naturally intuitive – you can be the best number cruncher in the country but, if you can’t figure out why the numbers are important, you’ll be on the wrong side of the equation. Book-smart and street-smart.
(Source: Seven Sharp)
Kate Dron, chief and appointed actuary at Partners Life, puts it nicely. You’ve done all this pretty maths, but "so what?" What does it all mean?
Actuaries work out risk. They work out the odds of things happening. It’s a lot more complicated than that, and I’m doing the industry injustice, but that’s the simplest way of putting it.
This previously unknown career had its beginnings in the insurance industry. Traditionally, they work out how much insurance companies should charge people, payouts for claims, and things like that.
Associate Professor Eric Ulm, who runs the Actuarial School at Victoria University, offers a neat hypothetical example.
An actuary might calculate the odds of a red car and a blue car having a crash and discover that red cars have more crashes. But this is where the "so what?" comes in here – the human intuition.
(Source: Seven Sharp)
Why would someone buy a red car over a blue car? The answer in this hypothetical example may be that people who prefer red cars make rasher life decisions — they drive faster; they live life on the edge. In this example, the insurance company might decide to charge owners of red cars higher premiums.
Actuaries are no longer confined to the insurance offices. People are starting to find out their superpowers. Banks, financial institutions, stockbrokers, government departments, and even sports teams – everyone is discovering their prowess and wants in. But we don’t have nearly enough to go around.
I enjoy the odd punt, so when I interviewed Ulm, I said, “You guys must be amazing at gambling.” Oh no. He didn’t like that. Actuaries seem to hate gambling. Why? They don’t like the odds.
Ulm explained that at the TAB, for example, everyone has access to roughly the same information, so you don’t have an advantage. And naturally, the house always wins.
Got it: Seven Sharp reporter Julian Lee is now clued up on all things actuary. (Source: Seven Sharp)
I also said something that made Ulm feel uncomfortable.
I called actuaries the “soothsayers of the modern era” because I’m a dramatic TV person. He vehemently disagreed. He correctly pointed out that fortune-tellers would say for sure something would happen in the future.
Actuaries are scientists – they only calculate the odds. They would never predict anything. It goes against everything they believe in.
So, I’ll rephrase: Actuaries are the closest thing we have to fortune tellers in the 21st century.
Hopefully, that’s a more accurate interpretation of the data.
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