Skip to main content

The business of risk

Two ASU professors give us the inside story on one of the top US jobs that you probably have never heard of


April 05, 2018

We worry about a lot of dangers in the modern world, but what's actually most likely to hurt us?

It's an actuary's job to know the answers — or at least the probabilities.

And that knowledge can be lucrative. Actuaries regularly earn more than $100,000 per year, according to the U.S. Bureau of Labor Statistics. ASU Now spoke with Arizona State University Professors of Practice John Zicarelli and Jelena Milovanovic about the actuarial scienceASU's actuarial science program is in the School of Mathematical and Statistical Sciences in the College of Liberal Arts and Sciences. program at ASU to get some insight on the field.

Question: What does an actuary do? 

Zicarelli: Actuarial sciences is fundamentally about analyzing and quantifying risk. Certainly, the risk of dying, or what we call a mortality risk, is a risk that a few actuaries work on explicitly, but the field is much broader than that. I never did that at all. My specialty was in business or commercial property-casualty risks. 

Milovanovic: For example, for premium calculations a pricing actuary determines the rating factors with a whole team behind the scenes. Having said that, it’s always a compromise between what should be charged and what can be sold; underwriting versus marketability. Then there’s the financial health of an institution — will the insurer be solvent to meet liabilities associated with written policies when needed? That would be one of the roles of the reserving actuary. There are also nontraditional actuarial roles: banking, finance, infrastructure, etc.

Q: Can you give an example of analyzing risk?

Milovanovic: So, I have a friend, a medical underwriter, and she wrote a general liability (GL) policy for a mortuary. What could go wrong in a mortuary?

Zicarelli: The clients are dead …

Milovanovic: Many things apparently. At one particular mortuary, they switched the deceased’s ashes. Another mortuary cremated a body when they were supposed to embalm (it).

Q: What are some misconceptions about your area?

Zicarelli: I think there is a perception that we’re incommunicative math geeks. It’s something that’s widely perceived within the insurance industry, and it’s true that we need to be reasonably skilled at math to do this kind of work. But, with some exceptions, most actuaries end up in much broader corporate roles. In order to be successful, we have to be good communicators.

Q: In 2004 Ben Stiller played an actuary in "Along Came Polly" who calculated and avoided risk in the office and his personal life. What did you think of his portrayal of an actuary?

Milovanovic: When I meet someone, more often than not, that’s the very first connection when you say you’re in actuarial sciences. I think the movie painted a very negative connotation of the type of personality an actuary has. Over the last decade, I would like to say that more people on average are aware of what an actuary is, but … they still try to buy insurance from me!

Q: People think skydiving is risky, but I’m sure other activities are riskier. How does actuarial science look at that?

Milovanovic: You are in your car for a much longer period of time over your lifetime than a one-time deal that you go skydiving. Unless of course that’s your profession, but that’s something different.

Zicarelli: I don’t have the information on exactly how many accidents have occurred related to skydiving — it’s likely a tiny fraction, less than 1 percent — (compared with) the number of accidents or deaths that have occurred from people driving cars down the road. But the reason that we see so few skydiving incidents is because there is a relatively limited exposure. The average person never does it all and the people that do do it at all are likely once a month or a year, and the exposure lasts for five minutes and it’s over. Whereas with automobiles, I commute from the northern part of Scottsdale to Tempe, and I take my life in my hands every time I do that. It’s that kind of continuous exposure over time that really creates a higher likelihood that something is going to happen to me than would happen to my stepson who likes to go skydiving.

Milovanovic: It’s a habit; you have this false sense of comfort that has been developed by repetitive motion.

Q: Do you see the role of actuaries as trying to change behavior or just to inform? 

Zicarelli: In general, we’re in the business of identifying and quantifying risk as opposed to giving life advice. Some of the work that we do can be interpreted as being prescriptive, but that’s really not the spirit of what we're doing and why we do it.

Milovanovic: I can see the association of trying to "alter" human behavior. The first thing that came to mind was a deductible; a cost sharing between the insurance company and the policyholder. If there wasn’t a deductible you’d pass the entire risk amount on to the insurer, so there is some altering behavior when the insurer decided to implement cost sharing through a deductible. Maybe now I’m going to alter my risky behavior because I know I have a $1,000 deductible on my policy?

Q: What do actuaries know that we don’t?

Milovanovic: I don’t double insure or under insure. That’s the biggest trick, like travel insurance, most credit cards have some form of travel insurance embedded but most people don’t know that. Also I think for me it’s more the knowledge, like having multiple plan Bs, specifically ones that entail the worst-case scenarios. In property and casualty insurance, sure we have a lot of small risks and I can deal with that, but can I deal with a very rare, large one?

Q: So, I just purchased liability insurance for myself as a photographer because I thought, "What if I’m taking a photo portrait and my light falls and injures a client?" What is the worst-case scenario from an actuary's point of view?

Milovanovic: The worst-case scenario is the light falls and not only kills the client but then burns down the building, which in turn results in multiple other casualties. No coverage equals you are done financially going forward!

Top photo: John Zicarelli and Jelena Milovanovic, both professors of practice in the School of Mathematical and Statistical Sciences, teach risk management and actuarial forecasting at ASU. Photo by Deanna Dent/ASU Now

More Science and technology


Large exoplanet orbiting a star.

ASU researchers contribute to groundbreaking discovery on exoplanet formation

A team of astronomers have discovered the small exoplanet GJ 3470 b shrouded in a surprising yellow haze of sulfur dioxide, making the planet a prime opportunity for scientists trying to understand…

Digital rendering of the bacteria salmonella.

ASU researchers gain insight into how a deadly strain of salmonella fine-tunes its infection tactics

Disease-causing microbes have evolved sophisticated strategies for invading the body, flourishing in often hostile environments and evading immune defenses. In a new study, Professor Cheryl…

Solar panels with a blue sky and white clouds in the background.

ASU researcher clarifies rapid glass-formation process with wide-ranging applications

Glass is formed by vapor deposition through a process in which vaporized material is condensed onto a substrate, layer by layer, to create a solid glass film. This method involves heating the source…