Insurance is all about risk. When you take out car insurance  you do so to protect you from the risk or possibility that your car may to stolen or you may be involved in an accident. With short term insurance such as car insurance there is always uncertainty involved and the degree of risk therefore equates to the amount of uncertainty that exists in any given situation.

For Insurance Companies to operate profitably they need to be able to calculate the degree of risk with reasonable accuracy to enable them to set insurance premiums correctly. It is part of the actuary’s job to analyse all the available statistics and so calculate the degree of risk. Actuaries will look at the statistics of different age groups, gender, the type of car and many other factors when calculating the degree of risk. They then draw up risk profiles for the different groups they have identified.

For example, it has been proven that female drivers pose a lesser risk and therefore they can obtain cheaper car insurance than men. Drivers under the age of 25 have been proven to be of a high risk and therefore car insurance will cost them much more. At the same token you will pay more if you drive a sports car.