Someone intrigued by the prospect of assessing and managing risk may enjoy a career as an actuary, a business professional whose job involves consistently and accurately predicting the likelihood of misfortune in the midst of uncertainty and its potential financial cost.
What Actuarial Science Is and Why It Matters
“Actuarial science is about using math to assess what will happen next,” Amy Timmons — a Phoenix-based vice president, senior consultant and actuary with Segal, a consulting firm with U.S. and Canadian offices — explained in an email.
Stefanos Orfanos, a clinical assistant professor at the Georgia State University J. Mack Robinson College of Business and director of its undergraduate actuarial science program, provided a comprehensive definition of the term.
“Actuarial science is the systematic study of insurance data, i.e. data that relate to morbidity or mortality or financial loss due to an adverse event,” Orfanos wrote in an email. “Actuaries analyze trends in past experience and make reasonable assumptions when there are no reliable data so as to develop a model of what the future may look like. This is then used in the design and pricing of insurance products that serve our needs for financial stability and protection against losses.”
Michael Clark, president of the Conference of Consulting Actuaries, described his field in an email as “the science of pricing risk.” Actuarial science is especially applicable to the insurance industry, since it can help insurance companies determine how much money should be held in reserve to ensure that valid insurance claims can be paid, he wrote.
“Beyond insurance, actuarial science can be used to quantify the cost of business risks, pension payments, and any other potential future costs that have a level of uncertainty surrounding them,” explains Clark, managing director and consulting actuary with River and Mercantile Solutions, a division of River and Mercantile Group, an asset management, advisory and investment company.
What an Actuary Is
Actuaries say they play an important role in society by helping to ensure that there are sufficient financial safety nets to guard against financial calamities.
“I truly believe that there is a very real need worldwide for insurance and for understanding risks,” Ariel Weis, an actuary at the Milliman risk management, benefits and technology consulting firm, wrote in an email. “For instance, I want to know that if anything were to happen to me, my loved ones would be able to look after themselves. And I definitely have a need to access care for my health, just as we all do. So there is a sense of fulfillment to be had from knowing that, directly or indirectly, I’m working on problems that affect people and that can ultimately make a difference in someone’s life.”
Mary Kirby, a senior vice president and consulting actuary who leads Segal’s retiree health practice, says actuaries play a pivotal role in ensuring that the insurance system functions. They also contribute to the establishing and maintaining “financially stability” within whatever organization they represent, she wrote in an email.
“There are many different types of actuaries and you can choose which area you would like to concentrate: health, retirement, financial, or insurance to name a few,” Kirby says.
How to Become an Actuary and Advance in the Profession
Entry-level positions in the actuarial profession typically require a bachelor’s degree in an analytical subject such as math, statistics or actuarial science, according to the U.S. Bureau of Labor Statistics, which notes that high-level actuarial jobs often require formal certification or licensure. In order to maintain an actuarial certification or license, actuaries typically need to regularly fulfill continuing education requirements.
Weis emphasizes that training for an actuarial career is difficult, noting that people who become actuaries are expected to maintain their skills and expand their knowledge.
“Becoming an actuary is a long process that lasts well beyond graduating from school,” he says. “It requires hard work and dedication to pass the professional exams and courses to attain the professional designation, while simultaneously gaining practical experience from working in an actuarial field. Once the professional designation is achieved, actuaries are expected to continue applying themselves and gaining relevant professional development throughout their entire career.”
Orfanos explains that someone aiming to become a qualified or credentialed actuary is expected to pass “a series of challenging professional examinations that require dedication and aptitude.”
The types of certification or licensing exams future actuaries need to prepare for will depend on what area of actuarial science they concentrate on, ranging from casualty and property insurance to health and life insurance to pensions. The Casualty Actuarial Society, the Society of Actuaries and the federal Joint Board for the Enrollment of Actuaries each have their own test, and each organization requires people to pass examinations in order to claim credentials.
Deanna Mulligan — CEO of The Guardian Life Insurance Company of America and author of “HIRE PURPOSE: How Smart Companies Can Close the Skills Gap” — suggests that aspiring actuaries should study data science, machine learning and artificial intelligence, since those things are having a huge impact on the actuarial profession.
“So my advice to actuarial students would be to augment their core education in corporate finance and enterprise risk management, with additional training in both technical skills like coding or data analysis skills and soft skills like collaboration or communication,” she says. “It’s also important to realize that attaining your degree is not the end of your education. Actuaries should be prepared for lifelong learning and training — updating the skills in their toolkit as new technology or insurance needs develop.”
What Actuaries Do and Where They Work
Actuaries frequently work for insurance companies, where they calculate premiums and set the rates that customers pay, but they also commonly work for pension funds and retirement planning programs. They can assist any for-profit or nonprofit organization or any government agency that is evaluating the potential financial costs of a catastrophe and attempting to mitigate the harm that such an event might cause, and they often provide critical information to executives making difficult decisions.
Six-figure salaries are common. According to the Bureau of Labor Statistics, the median annual salary among U.S. actuaries was $108,350 as of May 2019. The bureau predicts that employment of actuaries will be 20% higher in 2028 than it was in 2018, a job growth rate that is much faster than the 5% average among all occupations.
This in-demand and lucrative profession demands an aptitude for math and statistics. It requires making sense of data and discerning patterns in numbers, so individuals who work in this field need to have strong quantitative skills, an eye for detail and a meticulous approach, actuaries emphasize.
“You need a love of mathematics and numbers — that is core to being an actuary,” Timmons says. “Everything else is negotiable. There are actuarial positions for introverts, extroverts, people who like to talk and work with people, people who like to travel, people who want to stay home, people who only want to work with numbers, etc.”
Kirby suggests that an aspiring actuary should love learning and studying and that he or she should also have a strong work ethic. “Since there are a number of examinations involved in becoming an actuary, being disciplined and studious are obviously important traits,” she says. “It is much more than just exams. It is important to be able to think creatively to come up with solutions to complex problems as well as be able to communicate them to different stakeholders.”
Weis notes that teamwork is essential. “As actuaries, we seldom find ourselves working alone on any project. A lot of the problems that we are trying to solve are so large and complex that they inevitably take a large number of people to work on.”
Because actuaries typically work on teams with individuals who are not actuaries, they need to be able to explain the concepts they intuitively understand because of their technical training to others who lack that technical expertise, Weis says. “So being able to take technical concepts from an actuarial perspective and explain them to others in terms they understand is an invaluable skill,” he says. “Equally as important is the ability to listen and understand what others are asking of us, so we can provide them with answers that are relevant to their questions.”
Weis suggests that there are certain character traits expected in the actuarial profession, such as curiosity and a collaborative spirit. Strong ethical principles are mandatory, he says. “Personality-wise, actuaries value integrity and honesty, so we expect people entering the field to embody those principles, and take ownership and accountability for their work and their behavior.”
Orfanos suggests that although the standardized testing component of the actuarial profession can be stressful, the profession doesn’t involve too much stress beyond that. Actuaries who have finished their exams benefit from a fairly relaxed work environment, he says.
“Most actuaries live comfortable lives with low work-related or financial stress,” he says. “Early on, studying for exams takes up a lot of time and your social life will be affected. After you are done with professional examinations, you will have the time and money to travel or to pursue your other interests.”
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Reasons to Study Actuarial Science and How to Become an Actuary originally appeared on usnews.com