But at its core, insurance is really quite simple.
Insurance companies collect premiums today. so
they can pay claims sometime in the future. Now
think about this. A healthy 22 -year -old woman
can purchase a 10 -year, $1 million term life
insurance policy for around $15 a month. So over
the entire 10 years, she might pay only about
$1 ,800 for a policy that could pay out $1 million.
So how can an insurance company confidently make
that promise? Well, the answer is mathematics.
Insurance companies do not know what will happen
to any one individual. They cannot predict exactly
who will file a claim or when that claim will
occur. But by combining mathematical models with
high -quality data, they can make remarkably
accurate predictions. about large groups of people.
And this is the work of actuaries. Actuaries
use probability and statistics and financial
mathematics to look into an uncertain future
and help companies make promises that they can
keep. Their models allow insurance companies
to offer affordable premiums while remaining
financially strong enough to pay claims when
they occur. And this predictive power extends
far beyond insurance. Meteorologists estimate
the probability of rain several days in advance.
Engineers use mathematical models to design aircraft
and spacecraft that travel hundreds or thousands
of miles and return safely. Economists forecast
trends. Doctors evaluate medical treatments.
Businesses use data to make better decisions.
And the list goes on. Notice the common theme.
Mathematics does not remove uncertainty, but
it does help us to understand it. As our world
becomes increasingly driven by data, the ability
to build and interpret mathematical models will
become even more valuable. The more data we collect,
the more important mathematics becomes in turning
that data into meaningful predictions. And that
is one of the greatest powers math gives us.
We will never know the future with certainty,
but mathematics helps us to make wiser decisions
about it today.