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🧮 '''Actuarial method''' is a systematic analytical technique that actuaries use to estimate uncertain future financial quantities in insurance, such as [[Definition:Ultimate loss | ultimate claim costs]], appropriate [[Definition:Premium | premium]] rates, or the present value of future [[Definition:Liability | liabilities]]. Each method prescribes a structured way to organize data, apply assumptions, and arrive at a numerical result — and the choice of method can materially influence the [[Definition:Actuarial estimate | estimates]] that flow into a carrier's financial statements and pricing decisions.

⚙️ Common actuarial methods in property-casualty insurance include the [[Definition:Chain-ladder method | chain-ladder (or development) method]], the [[Definition:Bornhuetter-Ferguson method | Bornhuetter-Ferguson method]], the [[Definition:Expected loss ratio method | expected loss ratio method]], and various [[Definition:Frequency-severity method | frequency-severity approaches]]. In life insurance and [[Definition:Health insurance | health insurance]], methods may center on [[Definition:Mortality table | mortality or morbidity tables]], [[Definition:Decrement model | decrement models]], and [[Definition:Discounted cash flow | discounted cash flow]] frameworks. Actuaries rarely rely on a single method in isolation; standard practice calls for applying several methods to the same data set and comparing the results. When different methods converge on a similar answer, confidence in the estimate rises. Divergence, on the other hand, prompts the actuary to investigate why — perhaps one method handles immature [[Definition:Accident year | accident years]] better, or another is more sensitive to recent changes in [[Definition:Claims handling | claims-handling]] practices.

📌 Selecting and justifying the right actuarial method is not a mechanical exercise — it requires deep understanding of the [[Definition:Line of business | line of business]], the insurer's data quality, and the economic environment. [[Definition:Actuarial Standards of Practice (ASOP) | Actuarial Standards of Practice]] require actuaries to document which methods they used, why alternatives were considered or rejected, and how the chosen methods interact with key assumptions. [[Definition:Insurance regulator | Regulators]] and external auditors evaluate method selection as part of their review of [[Definition:Actuarial report | actuarial reports]] and [[Definition:Rate filing | rate filings]], making it a frequent point of dialogue — and occasionally dispute — between carriers and their overseers.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Chain-ladder method]]
* [[Definition:Bornhuetter-Ferguson method]]
* [[Definition:Actuarial estimate]]
* [[Definition:Loss reserving]]
* [[Definition:Rate making]]
* [[Definition:Actuarial methodology]]
{{Div col end}}

Definition:Actuarial method - Revision history

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