How to Become an Actuary
If you are thinking about becoming an actuary, it’s unlikely you’ll find someone who might discourage you from going down the actuary career path. Actuary jobs were rated as the top job in the United States by Careercast.com in 2015 as well as 2013 and had a second place finish in 2012.
Actuarial careers frequently garner widespread attention in the news because of high job satisfaction rates and salaries.
Job Prospects for Actuaries
The US Department of Labor predicts a 26% growth rate in actuary jobs between 2012 and 2022, which is considerably faster than the average growth rate forecasted for all jobs. According to Department of Labor statistics, actuary jobs in 2014 were distributed in the following industries:
- Almost 66% of actuary jobs (14,200 out of 21,490) were in the insurance industry
- Almost 15% in the consulting field (3,160 jobs)
- 10% were in corporate management (2,160 jobs)
The insurance industry will fuel the majority of job growth over the next decade.
This is one field in which employees will rarely lament about low paying jobs. CNN Money puts the pay of entry level actuary jobs between $45,000 and $50,000. Not a bad start for a career. An actuary starting salary supplants remuneration paid at the beginning of many other professional careers.
The starting salary is endowed to you before you actually become a certified actuary and by the time you are finished with your exams and certification, your salary may jump to $90,000.
Actuary average salary in 2014 was just over $110,000 and the middle 50% earned between $72,390 and $136,110. Given the recession of the past few years and the jittery economy, this salary range promises a bright future to potential actuaries.
What is an Actuary?
An actuary is defined as “part super-hero, part fortune-teller, part trusted advisor” by beanactuary.com. We can also add part-nerd to this definition.
It’s common to be slightly confused about the difference between actuaries and professional accountants. Accountants mostly deal with the past and their job is to represent past performance of a company in financial statements.
Even when analyzing future capital investments, accountants focus on scrutinizing numbers to highlight which option will create the greatest ROI, not the potential risk of an activity. Actuaries, on the other hand, do not particularly care about past events unless such events have direct ramifications on the future.
In short, the definition of an actuary is essentially to manage risk. The future is volatile and full of risk yet very few could predict the 2008 market crash or the 2014 oil price crash. Risk is the possibility an adverse event will take place, but if you can manage risk well, you can profit from future events. Therefore, risk also represents opportunities and an actuary must identify these.
An actuary’s job description includes:
- Analyzing the possibility of future events by using numbers, not a magical crystal ball
- Creatively designing methods to decrease the possibility of negative effects from an undesirable event
- Building safeguards into decisions regarding the future, laying the groundwork for profit in certain situations
It might be safe to assume actuaries will always be in demand because humans can never grasp the future and all its complexities, but then again an actuary will tell you it’s dangerous to assume anything!
Finding efficient methods to manage risk is a critical part of management decisions and the actuary profession leads the field in this area of expertise. An actuary needs a combination of abilities, including refined business knowledge, sharp analytical skills, and a thorough insight into human behavior to manage the complex risks industries are continuously facing.
Actuaries often work in management groups of large corporations that deal with a lot of risk. In today’s fast-paced world, where the internet, the power of social media and transfer of information quickly precipitate changes, actuaries have unmatched opportunity to grow personally and professionally.
With intense analytical abilities, actuaries help businesses plan their future and insulate them from losses. They play a crucial role in allowing organizations to grow and for people to invest for their retirement with confidence and peace of mind.
How Does an Actuary Assess Risk?
Assessing future risks is more easily said than done. Actuaries gather data and then analyze it to estimate the probability and likely cost of events, such as death, illness, injury, disability or loss of property. Then, they create policies which reduce the cost of that risk.
For this reason, actuaries are essential to the insurance industry. Actuaries help design insurance policies, pension plans, and other financial strategies. Specifically, they investigate financial questions like the level of pension contributions required to allow for a comfortable retirement. Actuaries also recommend investment strategies an organization or pension fund should undertake in order to maximize the return on investments using their broad knowledge of statistics, finance, and business.
If you are the type of person who enjoys managing a fantasy baseball team by tracking fantasy stats, this might be your type of field, as math, statistics, and management are the core components of your analytical arsenal.
How to Become an Actuary
Like any other professional career, you need an education to get there, but there are actually numerous pathways you can take to become an actuary.
The most popular path is to:
1. Earn an Undergraduate Degree
The most direct educational path is a three-year undergraduate actuarial science degree. Another typical approach is to complete a three or four-year bachelor’s degree in economics or commerce. Prospective actuaries can also choose seemingly unrelated majors like engineering or art as employers care more about completed exams rather than degree major.
2. Complete Additional Courses (If Necessary)
Students completing a degree in an unrelated field will need to complement their undergraduate career with business and statistics courses. All prospective actuaries will benefit from learning programming languages, such as SQL, C++ and VBA. Arts students need to take the greatest number of side subjects, including some actuarial mathematics courses.
3. Apply To a Professional Body & Pass Certification Exams
As soon as you are in the senior year of your undergraduate degree, you can apply for membership in an professional actuarial body. You can then start your certification process by taking their courses and passing exams.
Actuary Education Requirements
Actuaries need a strong background in mathematics and general business. Usually, actuaries earn an undergraduate degree in math, statistics, or in a business-related field, such as finance, economics or business.
- Capella University Bachelor of Science in Finance
- Ashford University Bachelor of Arts in Finance
- Grand Canyon University Bachelor of Science in Business Administration - Emphasis on Business Intelligence
- Utah State University Bachelor of Science in Economics
- Mayville State University Bachelor of Science in Mathematics
While certain skills are important, actuaries come from a variety of educational backgrounds, and many have degrees in operations research, physics, engineering and even fine arts. Major in college is not as important as the ability to pass actuarial exams. Students should, however, take courses in economics, applied statistics and corporate finance, which are requirements for professional certification. If you are unsure about becoming an actuary, a degree in an alternate field may be your best path.
On the other hand, if you are convinced an actuary job is ideal for you, you can select a more direct path. Options abound—over one hundred colleges and universities offer an actuarial science major.
As stated above though, there are many different actuary education paths. Don’t be afraid to do things a little differently as it allows you bring a unique perspective to the field enhancing your career prospects.
For example, a National Life recruiter says they are looking for people who are creative, dynamic, communicate effectively and think critically. Another company’s lead actuary was a philosophy major and their program prefers candidates who are not from the big campuses as they feel students come out with cookie cutter solutions to problems and are pigeon-holed.
Many companies are highly intrigued with graduates out of the liberal arts programs as they felt the individuals showed a real ability to think critically and solved issues with creative concepts. The one caveat was that these students have to demonstrate initially they can do the work.
If you are one of these “outside-the-box” type graduates with an unconventional educational pathway, you will greatly help convince recruiters you can do the job by taking courses in applied statistics, economics and corporate finance. These courses are a requirement for a professional certification. If you are really ambitious you can add a few more business-related courses which will definitely convince recruitment agents they have found a winner with you, even without an actuary degree.
You can also attend job fairs, speak to the career centre at your institution, and apply for an internship while you are studying. An actuary internship will substantially increase your chances of landing higher-paying employment upon completion of your undergraduate degree.
Actuary science requires a lot of computing of formulas and you’ll need the assistance of powerful software to complete your work tasks. Technology, therefore, plays a critical role in the profession. Above-average skills of simple software, like Excel and Access, will increase your marketability.
SQL is almost indispensable in the industry and multiple employers require knowledge of the language before considering a candidate. Gradually, C++ and VBA, programming languages are also becoming requirements and you are better off learning these soon rather than later.
Better computer skills will definitely place you in the upper echelon of candidates and ensure you enjoy success in the field.
Professional Actuary Certification
Although some universities have started offering undergraduate actuarial science degrees, which technically permits you to work as an actuary, this diploma is not sufficient in the industry.
The well-travelled path and the one legitimized by potential employers is to complete a set of exams with one of two professional bodies, the Society of Actuaries (SOA) or the Casualty Actuarial Society (CAS). These societies administer a series of six actuarial science exams that typically take four to six years to complete for associate status, and a series of three exams and another two to three years to achieve fellowship level.
The SOA certifies actuaries in the fields of life insurance, health benefits systems, retirement systems, and finance and investment. The CAS covers the property and casualty field—auto, homeowners, medical malpractice, workers compensation, and personal injury liability.
Timeline of Certification
Students need between six and nine years before they can become fully certified at the fellowship level. Beyond the first few tests, the course material can get extremely complicated and failure in a few exams is quite normal.
Those who pass one or more actuarial certification exams while still in college have a better chance of getting a higher-paying job upon graduation.
Actuarial science exams are difficult tests and the general study standard says you need to study 100 hours for each hour of exam time. For instance, if you have a three-hour test, you should schedule 300 hours of study time to give you the best chance at successfully passing the exam.
Failing exams is often an issue as a majority of students who sign up for an actuarial career are bright and many will not have experienced failure in their academic careers.
At this stage, the learning curve varies for each student. Professionals, whether actuaries or from another difficult-to-get-certified profession, will advise you to stick to the path and not beat yourself up too much over a failed exam.
Keep in mind it’s rare for anyone to successfully complete all their actuary exams on the first attempt, so a couple of failing grades will not harm your job prospects.
Starting Your Actuary Career
The general path, as mentioned earlier, is to complete an undergraduate degree and then start your actuary certification process with one of the two professional bodies in the US, SOA or CAS. However, there is no requirement to complete your undergrad before starting the certification exams.
Take the first actuarial exam as soon as possible, whether you’re in school or not. This will demonstrate your aptitude for the type of math and other skills required on the job and show recruiters you are serious about your commitment to the industry.
Employers would prefer to hire potential actuaries with at least one passed exam; they then are likely to train you and pay for your continuing exams. Reimbursement of exam fees and even paid time off for studying is standard industry practice.
Companies will have a set policy about how many paid hours you get per week to study and additional paid study hours before exams. Every successfully completed exam may provide you with additional work responsibilities and a corresponding pay increase.
Alternate Career Path
After you have passed the first couple of exams, you will be able to land a job as an actuarial analyst. Even if you have a hard time with the rest of the exams, you do have the option to stop here and continue your career as an analyst or an actuarial consultant for which you will still be well compensated.
Also, if you’ve followed the traditional path and choose to stop after a couple of exams, you will have a number of business and finance skills which will allow you to successfully switch careers. Jobs in finance, as a business analyst, or in project management are all great related career choices.
Long-term Career Expectations
An actuary’s work is greatly affected by government rules and regulations. These rules are continuously evolving with successive governments making changes based on their campaign promises and general ideologies regarding the role the government should play in regulating industry.
An actuary has to continuously stay on top of these changes and adapt strategy to minimize risk for their employer. The challenges faced by actuaries today are quite different than they were five years ago and will be considerably different five years from now.
Although actuaries deal mostly with financial risk, these risks are impacted by a huge variety of variables. In the interconnected world we live in today, a burst pipeline in Russia or slowing economic data out of Asian countries will affect markets in the US. Actuaries have to deal with a fast-paced environment which is shifting continuously and they are expected to take all these variables into consideration before making their recommendations. Tough job? Yes, definitely, but it is the challenge that actuaries most enjoy!
Currently, actuary jobs are in a state of flux because big data is affecting the information available to inform decisions. Today, actuaries are working to learn about and incorporate big data in their work. Tomorrow, a new set of technology will be available which actuaries will have to wrap their heads around. Lifelong learning is most definitely a requirement of this career field.
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