Actuaries analyze the financial costs of risk and uncertainty. They use mathematics, statistics, and financial theory to assess the risk of potential events, and they help businesses and clients develop policies that minimize the cost of that risk. Actuaries’ work is essential to the insurance industry.
Actuaries typically do the following:
- Compile statistical data and other information for further analysis
- Estimate the probability and likely economic cost of an event such as death, sickness, an accident, or a natural disaster
- Design, test, and administer insurance policies, investments, pension plans, and other business strategies to minimize risk and maximize profitability
- Produce charts, tables, and reports that explain calculations and proposals
- Explain their findings and proposals to company executives, government officials, shareholders, and clients
Most actuarial work is done with computers. Actuaries use database software to compile information. They use advanced statistics and modeling software to forecast the probability of an event occurring, the potential costs of the event if it does occur, and whether the insurance company has enough money to pay future claims.
Actuaries typically work on teams that often include managers and professionals in other fields, such as accounting, underwriting, and finance. For example, some actuaries work with accountants and financial analysts to set the price for security offerings or with market research analysts to forecast demand for new products.
Most actuaries work at insurance companies, where they help design policies and determine the premiums that should be charged for each policy. They must ensure that the premiums are profitable yet competitive with other insurance companies.
Actuaries in the insurance industry typically specialize in a specific field of insurance, such as one of the following:
Health insurance actuaries help develop long-term care and health insurance policies by predicting expected costs of providing care under the terms of an insurance contract. Their predictions are based on numerous factors, including family history, geographic location, and occupation.
Life insurance actuaries help develop annuity and life insurance policies for individuals and groups by estimating, on the basis of risk factors such as age, gender, and tobacco use, how long someone is expected to live.
Property and casualty insurance actuaries help develop insurance policies that insure policyholders against property loss and liability resulting from accidents, natural disasters, fires, and other events. They calculate the expected number of claims resulting from automobile accidents, which varies with the insured person’s age, sex, driving history, type of car, and other factors.
Some actuaries apply their expertise to financial matters outside of the insurance industry. For example, they develop investment strategies that manage risks and maximize returns for companies or individuals.
Pension and retirement benefits actuaries design, test, and evaluate company pension plans to determine if the expected funds available in the future will be enough to ensure payment of future benefits. They must report the results of their evaluations to the federal government. Pension actuaries also help businesses develop other types of retirement plans, such as 401(k)s and healthcare plans for retirees. In addition, they provide retirement planning advice to individuals.
Enterprise risk actuaries identify any risks, including economic, financial, and geopolitical risks that may affect a company’s short-term or long-term objectives. They help top executives determine how much risk the business is willing to take, and they develop strategies to respond to these issues.
Actuaries also work in the public sector. In the federal government, actuaries may evaluate proposed changes to Social Security or Medicare or conduct economic and demographic studies to project future benefit obligations. At the state level, actuaries may examine and regulate the rates charged by insurance companies.
Some actuaries are considered consultants and provide advice to clients on a contract basis. Many consulting actuaries audit the work of internal actuaries at insurance companies or handle actuarial duties for insurance companies that are not large enough to keep their own actuaries on staff.
How to Become an Actuary
Actuaries need a bachelor’s degree, typically in mathematics, actuarial science, statistics, or some other analytical field. Students must complete coursework in economics, applied statistics, and corporate finance, and must pass a series of exams to become certified professionals.
Actuaries must have a strong background in mathematics, statistics, and business. Typically, an actuary has an undergraduate degree in mathematics, actuarial science, statistics, or some other analytical field.
To become certified professionals, students must complete coursework in economics, statistics, and corporate finance.
Students also should take classes outside of mathematics and business to prepare them for a career as an actuary. Coursework in computer science, especially programming languages, and the ability to use and develop spreadsheets, databases, and statistical analysis tools, are valuable. Classes in writing and public speaking will improve students’ ability to communicate in the business world.
Licenses, Certification, and Registrations
Two professional societies—the Casualty Actuarial Society (CAS) and the Society of Actuaries (SOA)—sponsor programs leading to full professional status. The CAS and SOA offer two levels of certification: associate and fellow.
The CAS certifies actuaries who work in the property and casualty field, which includes automobile, homeowners, medical malpractice, and workers’ compensation insurance.
The SOA certifies actuaries who work in life insurance, health insurance, retirement benefits, investments, and finance.
Both professional societies require applicants to complete certain educational coursework in economics, finance, and mathematical statistics while in college. Applicants also must pass seven exams for associate-level certification.
Many employers expect students to have passed at least one or two of the initial actuary exams needed for professional certification before graduation.
In addition, both CAS and SOA require that candidates take seminars on professionalism. Both societies have mandatory e-learning courses for candidates.
It typically takes 4 to 7 years for an actuary to earn the associate-level certification, because each exam requires hundreds of hours of study and months of preparation.
After becoming associates, actuaries typically take 2 to 3 more years to earn fellowship status.
The SOA offers fellowship certification in five separate tracks: life and annuities, group and health benefits, retirement benefits, investments, and finance/enterprise risk management. Unlike the SOA, the CAS does not offer specialized study tracks for fellowship certification.
Both the CAS and the SOA have a continuing education requirement. Most actuaries meet this requirement by attending training seminars that are sponsored by their employers or the societies.
Pension actuaries typically must be licensed by the U.S. Department of Labor and U.S. Department of the Treasury’s Joint Board for the Enrollment of Actuaries. Applicants must meet certain experience requirements and pass two exams administered through the SOA to qualify for enrollment.
Because there are different types of practice areas, including health, life, pension, and casualty, internships may be helpful for students deciding on which actuarial track to pursue.
Most entry-level actuaries start out as trainees. They are typically on teams with more experienced actuaries who serve as mentors. At first, they perform basic tasks, such as compiling data, but as they gain more experience, they may conduct research and write reports. Beginning actuaries may spend time working in other departments, such as marketing, underwriting, and product development, to learn all aspects of the company’s work and how actuarial work applies to each one.
Most employers support their actuaries throughout the certification process. For example, employers typically pay the cost of exams and study materials. Many firms provide paid time to study and encourage their employees to set up study groups. Employees usually receive raises or bonuses for each exam that they pass.
Advancement depends largely on job performance and the number of actuarial exams passed. For example, actuaries who achieve fellowship status often supervise the work of other actuaries and provide advice to senior management. Actuaries with a broad knowledge of risk management and how it applies to business can rise to executive positions in their companies, such as chief risk officer or chief financial officer.
Analytical skills. Actuaries use analytical skills to identify patterns and trends in complex sets of data to determine the factors that have an effect on certain types of events.
Communication skills. Actuaries must be able to explain complex technical matters to those without an actuarial background. They must also communicate clearly through the reports and memos that describe their work and recommendations.
Computer skills. Actuaries must know programming languages and be able to use and develop spreadsheets, databases, and statistical analysis tools.
Interpersonal skills. Actuaries serve as leaders and members of teams, so they must be able to listen to other people’s opinions and suggestions before reaching a conclusion.
Math skills. Actuaries quantify risk by using the principles of calculus, statistics, and probability.
Problem-solving skills. Actuaries identify risks and develop ways for businesses to manage those risks.
Source - US Bureau of Labor Statistics
ACTUARIES CAREER RESOURCES
An actuary is a business professional who analyzes the financial consequences of risk. Actuaries use mathematics, statistics, and financial theory to study uncertain future events, especially those of concern to insurance and pension programs.
The American Academy of Actuaries https://www.actuary.org/
The American Academy of Actuaries is a D.C.-based 19,500+ member professional association whose mission is to serve the public and the U.S. actuarial profession. Academy members include consultants, corporate executives and staff, regulators, government officials, academics, and retired actuaries. Their areas of practice cover pensions, life insurance, casualty insurance, health insurance, financial reporting, risk management, and more. The Academy assists public policymakers on all levels by providing leadership, objective expertise, and actuarial advice on risk and financial security issues. The Academy also sets qualification, practice, and professionalism standards for actuaries credentialed by one or more of the five U.S.-based actuarial organizations in the United States.
Links to local and regional actuarial associations - https://www.actuary.org/content/links-international-actuarial-organizations
ASPPA. The American Society of Pension Professionals and Actuaries https://www.asppa.org/
The American Society of Pension Professionals & Actuaries (ASPPA) and its four sister organizations — ACOPA, NAPA, NTSA and PSCA — comprise the American Retirement Association, the premier national organization for retirement plan professionals in the industry. Based in the Washington, D.C. area, ASPPA is a non-profit professional organization with two major goals: to educate retirement plan professionals, and to create a framework of public policy that gives every working American the ability to have a comfortable retirement. In pursuit of these goals, ASPPA offers its more than 7,000 members extensive educational opportunities, paired with a strong advocacy operation that puts us at the center of any legislative debates that could affect what you do for a living. Our educational opportunities include robust credentialing, certificate and continuing education programs, along with the best lineup of conferences and networking opportunities in the industry.
Be an Actuary http://www.beanactuary.org/
Watch this new Actuaries in Action video to hear what some of today's actuaries say about the future of the profession and the increasing demand for actuaries, especially in nontraditional roles.
CAS. The Casualty Actuarial Society https://www.casact.org/
The Casualty Actuarial Society (CAS) is a leading international organization for credentialing and professional education. Founded in 1914, the CAS is the world’s only actuarial organization focused exclusively on property and casualty risks and serves over 8,000 members worldwide. CAS members are experts in property and casualty insurance, reinsurance, finance, risk management, and enterprise risk management. Professionals educated by the CAS empower business and government to make well-informed strategic, financial and operational decisions.
Careers - https://www.casact.org/about/careers/
CCA. The Conference of Consulting Actuaries https://www.ccactuaries.org/
The Conference of Consulting Actuaries (CCA) supports consulting actuaries in all practice areas, in many countries. Members of the CCA receive support and assistance with professionalism, continuing education, client work, representing members' interests, and research support.
Guidelines for consulting actuaries - https://www.ccactuaries.org/member-resources/guidelines-for-consulting-actuaries
SOA. The Society of Actuaries https://www.soa.org/
With roots dating back to 1889, the Society of Actuaries (SOA) is the world’s largest actuarial professional organization with more than 30,000 actuaries as members. Through education and research, the SOA advances actuaries as leaders in measuring and managing risk to improve financial outcomes for individuals, organizations, and the public.
Universities and colleges with actuarial programs - https://www.soa.org/institutions/
Job opportunities - https://www.soa.org/prof-dev/pdopportunities/