What is an actuary?
An actuary is a business professional who deals with the financial impact of risk and uncertainty. They use mathematics, statistics, and financial theory to study uncertain future events, particularly those concerning insurance and pension programs. Actuaries may work for insurance companies, consulting firms, government, employee benefits departments of large corporations, hospitals, banks, and investment firms, or, more generally, businesses that need to manage financial risk.
The value of an actuary lies in their specialized skills in assessing risk and uncertainty. By evaluating the likelihood of future events, designing ways to reduce the likelihood of undesirable events, and decreasing the impact of these events should they occur, actuaries play an indispensable role in financial planning and long-term strategy for businesses and organizations. Their work is vital for the financial health of their organizations and for the peace of mind of individuals and businesses availing of insurance and pension services.
Duties and responsibilities
The primary responsibility of an actuary involves identifying and evaluating risk and uncertainty. They apply mathematical and statistical techniques to determine the likelihood of certain events, such as death, sickness, injury, disability, or loss of property. They also assess the potential financial impact of these events to help their organization or clients develop policies and strategies to manage these risks.
Beyond risk assessment, actuaries are also involved in policy and product development, pricing, financial forecasting, and overall strategic planning. They may also present reports and findings to stakeholders, provide advice to policyholders, and work with regulatory bodies to ensure compliance with industry standards.
Actuaries typically work in office environments, though the rise of remote working arrangements has led to more flexibility in their workplace. Their work is largely computer-based, with a significant amount of time spent using specialized statistical software and spreadsheets to analyze data and create models.
While the role is largely individual in nature, it also involves a fair amount of collaboration with other professionals, such as financial analysts, underwriters, accountants, and business managers. This interaction happens in team meetings, conference calls, and presentations.
Typical work hours
Actuaries usually work full-time during regular business hours, though some overtime may be required when approaching project deadlines or during busy periods. Despite the demanding nature of the role, it offers substantial rewards in terms of intellectual challenge, job satisfaction, and remuneration. The profession is often recognized for its balance of high earning potential and relatively low-stress levels.
How to become an actuary
Becoming an actuary involves a blend of strong analytical skills, business knowledge, and understanding of human behavior to manage the financial impact of risk and uncertainty. The path to this profession is known for its demanding series of examinations, but it also involves gaining relevant education and work experience. The steps below outline a comprehensive path to becoming an actuary.
Step 1: Obtain a bachelor’s degree
The first step to becoming an actuary is to earn a bachelor’s degree. The most common fields of study for aspiring actuaries are mathematics, statistics, economics, or actuarial science. These fields will provide you with the mathematical and statistical background that is crucial to the actuarial profession.
Step 2: Pass actuarial exams
The actuarial profession is notable for its rigorous examination process. In the United States, this is governed by two professional societies: the Society of Actuaries (SOA) and the Casualty Actuarial Society (CAS). Aspiring actuaries typically begin taking these exams while still in college. The first few exams are the same for both societies, allowing you to decide later on which actuarial field to pursue.
Udemy offers a variety of online courses to help you prepare for these exams. Here are a few great options:
- To study for the SOA or CAS exam, check out the Probability for Actuaries Part 1 and Probability for Actuaries Part 2 courses, which provide the necessary skills and knowledge prior to the test. With practice problems and sample questions, these courses focus exclusively on getting you a passing grade come exam day.
You will develop a solid understanding of mathematical statistics as well as a strong foundation in models, correlations, and hypothesis testing in this Mathematical Statistics course. This is a great choice for anyone interested in entering into the actuarial profession.
Step 3: Gain relevant experience
While not always a strict requirement, internships or entry-level work experience in actuarial science can be beneficial. This practical experience can provide a deeper understanding of the insurance industry and the application of mathematics and statistics in this field.
Step 4: Achieve associate-level certification
After passing the initial actuarial exams and gaining some experience, you can achieve associate-level certification from the SOA or CAS. This level of certification demonstrates a solid understanding of fundamental actuarial principles.
Step 5: Pursue fellowship
The final step is to pursue fellowship, which involves passing a series of additional exams and modules. The fellowship tracks are specialized, allowing you to focus on a specific area of actuarial science such as life and annuities, group and health benefits, or finance/enterprise risk management.
Becoming an actuary is a challenging journey, but it can lead to a rewarding career in a variety of industries, including insurance, finance, and consulting.
How much do actuaries make?
The salary of an actuary depends on various factors such as their level of education, experience, professional certifications, the industry they work in, and geographical location. Actuaries with advanced certifications such as Fellowship of the Society of Actuaries (FSA) or the Casualty Actuarial Society (FCAS) often command higher salaries.
Experience is another significant factor in determining an actuary’s salary. Those with several years of experience in the field generally earn more than entry-level actuaries. The industry of employment can also affect salaries, with actuaries working in finance and insurance typically earning more than those in other industries.
Geographical location plays a role too. Actuaries in regions with a higher cost of living or a high concentration of financial services firms, such as New York or California, often earn higher salaries than those in other parts of the country.
Based on data from the Bureau of Labor Statistics (BLS) and other authoritative sources, here are the top-paying industries and states for actuaries:
Highest paying industries
- Securities – $140,000
- Insurance Carriers – $135,000
- Management of Companies and Enterprises – $130,000
- Consulting Services – $125,000
- Government – $120,000
Highest paying states
- New York – $145,000
- Connecticut – $140,000
- California – $138,000
- Massachusetts – $135,000
- Illinois – $130,000
The average national salary for an actuary is:
Types of actuaries
In this career guide section, we’ll explore the various specializations within the actuarial profession.
Life insurance actuary
Life insurance actuaries specialize in assessing risks associated with life insurance policies. They use statistical data to forecast mortality rates and life expectancy, which in turn helps in pricing life insurance products and determining the reserves necessary for future claims.
Health insurance actuary
Health insurance actuaries focus on the risks associated with healthcare costs. They analyze medical data and trends to predict future healthcare costs for various populations. Their analyses are vital for pricing health insurance products and for long-term financial planning of healthcare institutions.
Property and casualty actuary
Property and casualty actuaries deal with insurance policies that cover accidents, natural disasters, and other non-life events. In order to set policy premiums and ensure sufficient reserves for future claims, these professionals evaluate the risk of these events occurring.
Pension and retirement actuary
Pension and retirement actuaries ensure that plans are financially sustainable, they analyze longevity, investment risk, and inflation. They also help businesses manage their pension liabilities.
Enterprise risk actuary
Enterprise risk actuaries help businesses identify, manage, and mitigate their overall risk exposure. By analyzing various risk scenarios, they help organizations make informed strategic decisions based on their understanding of the potential financial impact.
Investment actuaries apply their mathematical and statistical skills to investment analysis and portfolio management. They help institutions manage their investment strategies by assessing risks and returns, optimizing portfolio performance, and ensuring regulatory compliance.
Reinsurance actuaries analyze risks associated with large-scale catastrophic events and help design reinsurance policies that protect insurance companies from significant losses.
Top skills for actuaries
Actuaries are professionals who use their deep understanding of business, statistics, and financial theory to evaluate the financial cost of risk and uncertainty. They are often employed by insurance companies, consultancies, and government bodies. To excel in this role, an actuary needs a combination of mathematical proficiency, problem-solving skills, business acumen, computer literacy, and communication skills.
Mathematical proficiency is the cornerstone of an actuary’s skill set, so it’s imperative to have a strong understanding of calculus, probability, and statistical analysis to create complex mathematical models that predict future financial scenarios. Their models often influence significant business decisions, so they must be confident in their ability to manipulate numbers and interpret their findings accurately.
Problem-solving skills are another essential attribute for an actuary, who is often presented with complex financial challenges that require innovative thinking and creative solutions. They must be able to break down a problem, analyze its components, and devise a plan to address it. This ability to think critically and solve problems is integral to the success of an actuary.
Business acumen is crucial for actuaries as they need to understand the wider business context of their calculations. They must be familiar with economic trends, financial markets, and business strategies. This understanding allows them to make more accurate predictions and provide more relevant advice to their employers or clients.
Computer literacy is increasingly important in the actuarial field for using specialized software to create and run mathematical models. Actuaries need to be adept at using spreadsheet programs and databases to manage and analyze data.
Finally, communication skills are vital for an actuary. While their work is heavily based on numbers and data, they must be able to communicate their findings and recommendations clearly to non-specialists. They need to distill complex mathematical concepts into understandable language, so decision-makers can use their insights to guide business strategies. An actuary with strong communication skills can bridge the gap between technical analysis and practical business application.
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The career path of an actuary usually begins with an entry-level role, often referred to as an actuarial analyst. In this role, you will apply mathematical and statistical models to assess risk and uncertainty, usually under the supervision of a more experienced actuary. At this stage, it’s also essential to start working towards professional certification, either with the Society of Actuaries (SOA) or the Casualty Actuarial Society (CAS), depending on your area of interest.
As you gain experience and pass more actuarial exams, you may progress to a mid-level actuarial role. These roles often involve more complex risk assessment, product development, and pricing responsibilities. You may also begin to supervise junior staff and have increased communication with clients.
Upon achieving full actuarial certification (FSA or FCAS), you may become a senior actuary or consulting actuary, where you’ll have a larger role in strategic decision-making and possibly manage a team of actuaries.
Ultimately, actuaries with substantial experience and proven leadership skills may ascend to high-level roles such as chief actuary or roles in executive leadership, where they oversee the organization’s actuarial functions, engage in corporate strategy, and make critical business decisions.
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Position trends and outlook
The actuarial profession is undergoing a significant transformation due to technological advancements and changes in the business landscape. One of the most notable trends is the growing use of big data and predictive analytics. Actuaries are increasingly using advanced statistical techniques to analyze large datasets and predict future events. This has expanded the scope of their work beyond traditional areas such as insurance and pensions to new sectors like healthcare, banking, and even climate change.
Another important trend is the shift towards automation and artificial intelligence (AI). Many routine tasks are being automated, which allows actuaries to focus on more complex and strategic work. However, this also means that actuaries need to keep their skills updated and learn how to work with these new technologies.
Moreover, as businesses face a growing range of risks, there’s a growing demand in risk management roles. Actuaries are being called upon to help businesses identify, quantify, and manage various types of risks, including financial, operational, and strategic risks.
Employment projections for actuaries
According to the Bureau of Labor Statistics (BLS), the employment of actuaries is projected to grow 21 percent from 2021 to 2031, much faster than the average for all occupations. The demand for actuarial expertise is expected to grow as insurance companies, consulting firms, and healthcare providers grapple with the complex risks associated with changing societal, economic, and regulatory environments. The best job prospects are expected for those with strong analytical skills, knowledge of business and economics, and expertise in the latest software tools and technologies.
Actuary career tips
Deepen your understanding of the business
While technical skills are crucial for actuaries, understanding the business side of things is equally important. This includes having a grasp on how the company operates, its strategic goals, financial structure, and the sector in which it operates. The better you understand the business, the more effectively you can apply your mathematical skills to solve real-world problems and contribute to the company’s success.
Refine your communication skills
Actuaries often need to explain complex mathematical concepts to non-experts, so it’s important to develop your communication skills. This includes both written and verbal communication. Being able to articulate your findings in a clear, concise manner can enhance your influence and effectiveness within the organization.
Stay updated with industry regulations
Actuaries work in highly regulated industries such as insurance and finance. It’s crucial to keep up-to-date with changing regulations and standards in your industry. This will enable you to provide accurate advice and ensure compliance.
Build a professional network
Building a network of other professionals can provide a wealth of opportunities for learning, mentorship, and career development. Some professional organizations for actuaries you might consider include:
- Casualty Actuarial Society (CAS)
- Society of Actuaries (SOA)
- American Academy of Actuaries (AAA)
- International Actuarial Association (IAA)
The actuarial profession is becoming increasingly digital, with new technologies enabling more advanced data analysis. Being comfortable with technology and open to learning new tools and software can significantly enhance your productivity and effectiveness.
Commit to continuous learning
Given the ever-evolving nature of the industries where actuaries work, continuous learning is paramount. Here are some suggestions:
- Keep up-to-date with the latest actuarial science research.
- Take additional courses or seek advanced degrees in related fields such as economics, finance, or data science.
- Attend industry conferences and workshops.
- Participate in webinars and online training courses.
Develop a strong work ethic
The work of an actuary is demanding, often requiring long hours and the ability to meet tight deadlines. A strong work ethic, including dedication, perseverance, and a commitment to producing high-quality work, is essential for success in this field.
Nurture problem-solving skills
Actuaries are problem solvers. You’ll often be tasked with finding solutions to complex business challenges using mathematical models and analysis. Being able to think critically, approach problems systematically, and come up with innovative solutions is key to succeeding in this role.
Where the jobs are
- Willis Towers Watson
- Prudential Financial
- New York Life Insurance Company
- New York
- Consulting Services
- Financial Services
- Pension Funds
- Simply Hired
What does an actuary typically do on a daily basis?
On a daily basis, an actuary uses mathematics, statistics, and financial theory to study uncertain future events, especially those of concern to insurance and pension programs. They may analyze data to estimate the probability and likely cost of events such as death, sickness, injury, disability, or loss of property. Other daily tasks can involve designing, testing, and administering insurance policies, pension plans, and other business strategies to minimize risk and maximize profitability.
What skills are most important for an actuary?
Key skills for an actuary include a strong mathematical and statistical aptitude, problem-solving abilities, and excellent business sense. Given the nature of their work, actuaries must have a firm grasp of calculus, probability, and statistical analysis. They also need to be skilled in problem-solving to create complex models that predict future risk. Furthermore, business acumen is necessary to apply their mathematical skills to real-world financial and risk management problems.
What kind of education is usually required for an actuary?
To become an actuary, one typically needs a bachelor’s degree in a field such as mathematics, actuarial science, statistics, or finance. After graduation, prospective actuaries must pass a series of exams to become certified professionals. In the United States, certification is achieved through the Casualty Actuarial Society or the Society of Actuaries.
Can an actuary work remotely?
Much of an actuary’s work involves data analysis and modeling, tasks that can typically be done remotely. However, actuaries often work as part of a team and may need to present their findings to non-technical stakeholders, which might be more effectively done in person. The ability to work remotely can depend on the specific job and the policies of the employer.
What are the main challenges faced by an actuary?
One of the main challenges an actuary faces is the need to make accurate predictions based on uncertain future events. This requires a deep understanding of mathematics, finance, and the industry in which they work. Furthermore, actuaries must be able to communicate complex technical concepts to non-specialists, which can be quite challenging.
What is the difference between an actuary and a financial analyst?
While both work with financial data, they focus on different aspects. Actuaries use their skills to predict and manage future uncertainties, mainly around risk, often in the insurance and pension industries. Financial analysts, on the other hand, assess the performance of investments such as stocks and bonds to guide businesses and individuals in their investment decisions.
Is the actuary profession regulated?
Yes, the actuary profession is regulated. In many countries, including the United States, actuaries must pass a series of exams to earn professional certification. In the US, these certifications are administered by the Casualty Actuarial Society and the Society of Actuaries. These organizations also enforce a code of professional conduct that actuaries must adhere to.
What role does technology play in an actuary’s job?
Technology plays a significant role in an actuary’s job. Actuaries rely on advanced statistical software to conduct their analyses and create predictive models. They use databases and spreadsheets to manage and manipulate data. Many actuaries also use programming languages like Python or R to automate tasks and build custom models. Furthermore, advancements in technology, such as machine learning and artificial intelligence, are creating new opportunities and challenges in risk assessment and prediction.
How does an actuary interact with other professionals in an organization?
Actuaries often work in teams with other professionals such as underwriters, accountants, and financial analysts. They need to communicate their findings and recommendations clearly to these professionals, as well as to executives and non-technical stakeholders. In consulting roles, actuaries may interact directly with clients, requiring strong communication and customer service skills.
What impact does economic change have on an actuary’s work?
Economic changes can significantly impact an actuary’s work. Changes in economic conditions can affect the probability of events an actuary models, such as unemployment, retirement, or mortality rates. Actuaries need to consider current and projected economic conditions when making their calculations and predictions.