About Actuaries

This Website relies in large part on actuarial practice and its historical development. The role that actuarial practice has played in the development of our western and now global economic systems has been of great value and significance. A few criteria (reader-interest, contribution to the development of such practice and its relevance to Actuarial Work-Products) were followed in summarizing the topic into these six parts:
1. Renaissance (The Need Developed)(Pre-1700)
2. Enlightenment (The Tools Were Created)(1700 to 1850)
3. Actuarial Practice Developed (Actuarial Practice became Actuarial Science)(1850-1950)
4. Role of Computers
5. Modern Enhancements (primarily cybernetics)
6. Purpose of this Website

The Renaissance period brought on trade and commerce and the creation of wealth as measured by the double-entry accounting system. As a result of these activities, the concept of risk came into being.

Concept of Risk
Earlier civilizations and cultures had viewed risk differently than did the western world in the Renaissance, for reasons of religion or philosophy (Greek stoicism largely ignored the concept of risk and some Eastern belief systems held that the past and future were implicit in the present). Renaissance people, in the emerging mercantile environment, were also swept up by the newer practices of demonstration, experimentation and investigation being motivated, in part, by their desire to understand and control the future. The development of risk theory was begun by Pascal and the Bernoulli(s) by accepting the reality that risk and time are but different sides of the same coin.

Early Risk Transfers
Several examples of risk transfer during this period are these; (a) the formation of what is now maritime insurance is traceable to the sea trade which began in Venice and (b) an early example of long term care is traceable to the practice of corody (whereby a contribution to the early Church would be made in exchange for the promise of monastic care should old age or disability occur).

Beginning in the early 1070s, there was a flurry of activity which made possible the development of what is now known as actuarial science. Halley (of comet fame) created some of the earliest mortality tables for death benefits. Abraham DeMoivre, famous for "de Moivre's formula" which links complex numbers and trigonometry, created one the earliest mortality tables for annuity benefits. Well-known mathematical heroes such as Euler, LaPlace and Gauss made huge contributions in such topics as probability, expectations, and statistics. Advancements in the use of these new concepts were offered by Simpson (reversions) and Gompertz and Makeham (laws of mortality).  Early lectures by Simpson laid the cornerstone for the business of life insurance.

Actuarial Practice Developed
Beginning in the early 1800s the British organizations known as friendly societies were being replaced by insurance companies; such were mutual in nature as contrasted to being stockholder-owned.  In 1860, the first professional actuarial organization was formed (the British Institute of Actuaries) and is active and vibrant to this day.

To some, the name actuary was a bit odd (the root is the past participle of the Latin word agere which means to act or to do). In Roman days, the court official in charge of records was called actuary. The British, even before there was a structured organization, titled such person who was responsible for the financial sanctity of risk-driven enterprises as actuary.  Such name and duties remain essentially unchanged to this day.

The high professional standards established by the Institute of Actuaries have been adopted with little modification by actuarial organizations world-wide. A few of the principles and practices worthy of mention are these: (a) the actuary is a business professional who uses mathematics, statistics and financial theory to analyze the financial consequences of risk; (b) the actuary considers risk only in the context of both past and future events (i.e., the actuary relies on experiential data in some form in looking to the future and does not act as a futurist who only ideates the future); (c) the actuary asserts the practice to be one of science thereby relying on Ruskin’s rule to substitute facts for appearances and demonstrations for impressions and (d) the actuary should be so fair as to be able to always say that my estimate is the best possible using relevant evidence provided or available – it will  prove out to be either too high or too low – but I do not know which.

Role of Computers
A brief chronology of computer development will follow. Of interest to the reader is that mathematicians (including actuaries) have been either the inventors, or the primary users thereof. In constructing his mortality tables, Halley might have used an abacus, logarithms, a primitive slide rule or a rudimentary mechanical (or geared) calculator but not much else.

During the period before 1,600 AD, the only recorded mechanical device was the abacus (or a modification thereof).
In the 1600s, Napier gave us logarithms; Oughtred  developed a slide rule and both Pascal and Leibniz built a rudimentary mechanical computer.
In the 1800s, Jacquard invented the perforated card to control his loom. Babbage designed his analytical machine which received instructions from punched cards thus becoming the first general purpose computer; Lady Ada Byron (daughter of Lord Byron) documented the works of Babbage as well as doing the requisite programming. Boole developed his binary-based algebra of logic which became the foundation of future computer development. Hollerith invented the punch cards which were activated mechanically by piano wires.  Burroughs invented the business adding machine.
In the period 1900-1950 electric circuitry was used to activate the punch cards.  Electronics and vacuum tubes based upon the binary system saw the creation and development of the earlier large-model computer.

In the period 1950 to date, a plethora of inventions (transistor, magnetic tape, microchip, e.g.) and computing needs and opportunities (home computer, e.g.) created what is now a nearly 100% wired world. The culmination of the centuries of the development of the computer is the World Wide Net.

Modern Enhancements
Having been provided with the mathematical foundations and computerized calculation abilities, newer Web-based enhancements are now practical. Some examples include stochastic modeling and simulations.

Purpose of this Website
Thus, this health care plan-related Website exists for these reasons: (a) the obligation of our trade and commerce laws is that all business and professions should seek and build the better and cheaper mousetrap and do so fairly; (b) the modern enhancements of cybernetics and available mathematical foundations make this obligation more easily met; (c) the legacy of professionalism and scientific purity claimable by the actuary should result in the work-product being fair and (d) making available complex computations in a simple model form to a group of buyers whose needs are not now being met is a rational response to this obligation.