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How to Become an Actuary: Degree Requirements & Certification Exams

Learn how to become an actuaryMany people have no idea what actuaries do, except that it sounds more complicated and boring than accounting. It is true that actuaries do very complex work, but for someone with mathematical and problem-solving skills, being an actuary can be one of the most fascinating jobs. Add to this excellent pay, many job opportunities, and paid study time while you work towards certification–and you have a hidden gem of a career.

The road to becoming an actuary has a number of steps, and it can take about four to seven years to make it all the way there, but once you do, you are pretty well assured of having employability in this growing field. Investing in the education and training to become an actuary, though many people don’t know what this career entails, can be your secret weapon to achieving life success.

Quick Facts About Becoming an Actuary

Why Become an Actuary?
Job growth between 2018-2028 is expected to be about 20%, according to the Bureau of Labor Statistics, with a current median salary of $102,880 per year. That amounts to an average pay of almost $50 per hour. Combine that with the demand for actuaries and you have the prospect of a secure and prosperous career ahead of you.

What is an Actuary?
Actuaries analyze numerical information to assess risk. They use tools to help companies decrease the negative effects from possible future events. Actuaries help businesses plan for the future and help insulate them from losses.

How to Become an Actuary
Education for actuarial careers starts with an undergraduate degree, which can be in any subject. You can major in actuarial science, or a related field like statistics or business, but you can major in just about anything you like, including liberal arts. You will need to take courses in mathematics and computer programing. As you progress towards taking exams to become an actuary, you will need to take specific courses and study hard for these challenging exams.

Professional Actuary Certification
Actuaries will need to have at least two or three of their exams passed to get most jobs in the United States. Many people work while they continue on to complete the full battery of seven exams to become certified at the associate actuary level. For those who want to become a fully qualified and certified actuary, known as fellowship level, they will need to complete three more exams for a total of ten. These exams are administered by the either the Society of Actuaries (SOA) or the Casualty Actuarial Society (CAS), and are used in both the United States and Canada, though Canadians will also want to register with the Canadian Institute of Actuaries. The exams are challenging and require lots of study and often more than one attempt to pass.

Starting Your Actuary Career
While you can begin your career with just one or two exams completed, you will be required to take more exams and courses as your career progresses towards the associate level. Some people will choose to stop at this level, taking jobs as an actuarial analyst. But many employers offer compensation for study time to complete further exams, so this educational benefit, which is standard in the industry, can help those starting out to continue through to certification.

Big Data and the Future of Actuarial Careers
Big data is changing the work in many industries, and the actuarial field is one of those most influenced. Increasingly, actuaries will be working on teams with statisticians and computer and data scientists. Actuaries are responsible for maintaining high ethical standards, engendering trust from both regulators and the general public. With these new tools, actuaries will be doing more predictive and prescriptive work along with the traditional descriptive and diagnostic assessments.

Why Become an Actuary?

Job Prospects for Actuaries

If you are thinking about becoming an actuary, it’s unlikely you’ll find anyone who will discourage you from going down the actuary career path. Actuary jobs were rated in the top ten jobs in the United States by Careercast.com in 2019 and have continuously placed near the top or at the top of the rankings for the past ten years.

Actuarial careers frequently garner widespread attention in the news because of high job satisfaction rates and salaries. Actuarial careers consistently rank as one of the best jobs in our economy, and this is likely to increase as we come to rely on data in more and more industries.

The US Department of Labor predicts a 20% growth rate in actuary jobs between 2018 and 2028, which is considerably faster than the average growth rate forecasted for all jobs. According to Department of Labor statistics, actuary jobs in 2018 were distributed in the following industries:

  • Almost 72% of actuary jobs (13,480 out of 18,770) were in the insurance industry
  • Almost 17% in the consulting field (3,150 jobs)
  • About 9% were in corporate management (1,610 jobs)

The insurance industry will fuel the majority of job growth over the next decade. Related field like data science are also growing, and more actuarial careers may move to other industries along with a move to using data analytics to perform risk-assessment in more types of work.

Actuary Salary

This is one field in which employees will rarely lament about low paying jobs. Payscale.com puts the average pay of entry level actuary jobs at $60,040. Not a bad start for a career. An actuary starting salary exceeds remuneration paid at the beginning of many other professional careers.

The starting salary is awarded to you before you actually become a certified actuary and by the time you are finished with your exams and certification at the associate level, your salary is likely to jump to over $100,000. Actuary average salary in 2018 was over $116,000 and the middle 50% earned between $76,720 and $141,760.

With a changing globalized economic landscape, the high salary range and growing opportunities promise a bright future to potential actuaries. For those who reach the highest status, top actuarial executives, Salary.com data puts the average compensation including bonus at over $460,000, with the top 90the percentile earning over $700,00 per year. These numbers make it seem much more attractive to put in the hard work to excel in an actuarial career.

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. If you are heading for a career as an actuary, you should try to take one or two of the exams you will be required to complete before you graduate.

Actuary Education Requirements

Actuaries need a strong background in mathematics and general business. Usually, actuaries earn an undergraduate degree in math or statistics.

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It is also common to major in a business-related field, such as finance, economics or business.

 

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 more general business degree may be your best path.

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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. Most students do an actuarial internship during or after their education. Internships in underwriting, data analysis, investments and risk management are great choices, as are any type of position in the insurance field. Internships provide valuable experience and help an aspiring actuary’s resume, but they are also a great way to test the waters and see how you feel about work that is related to the field. An actuary internship will substantially increase your chances of landing higher-paying employment upon completion of your undergraduate degree.

Computer Skills

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. Actuaries use Excel regularly, so learning how to use advanced features like conditional formatting, power query, formulas, pivot tables, and simulations will be useful throughout your career.

SQL is almost indispensable in the industry and multiple employers require knowledge of the language before considering a candidate. Gradually, C++, SAS, 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. As big data becomes more embedded in the industry, computer programming and data analysis skills will continue to rise in importance.

For Career Changers

Deciding to plunge into a different career path can be daunting, especially with the time commitment—four to seven years–required to end up as a certified actuary. But if you have the math skills and the drive to work hard, this can be a very rewarding career, both financially and in job satisfaction.

Remember that you can often find an entry-level job after passing just two of the initial exams, and then, if you work hard, you can continue your path to certification while working and even getting paid to continue your studying. Your experience in other careers may help you in the business aspects of working as an actuary, but the real skills you will develop along the path are very specific to the job.

Mathematical aptitude and hard work are the qualities that will get you all the way to certification, so be prepared to work alongside colleagues who may be younger than you, but who have experience in actuary science, and learn the ropes as you progress.

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 that take another two to three years to achieve fellowship level. Canadians will also want to register with the Canadian Institute of Actuaries, though they will still take the SOA or CAS exams.

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 FOR 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.

In addition to passing the seven exams, there are Validation by Educational Experience (VEE) courses in economics, accounting, and statistics that are required to become an associate level actuary. These courses can be taken once you have passed your first two exams, and you can take these courses online.

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.

Complexity Level

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. The pass-rates for these difficult exams are generally between 40-60%, meaning that numerous exam-takers will fail. These are strikingly challenging exams, but knowing the statistics on passing can help exam-takers to set reasonable expectations for themselves. Plus, since it is industry practice for those employed in the field to have study time paid by their employers, even a failed exam can be seen as just part of the process.

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.

Big Data and Actuarial Careers

Big data is expanding the roles of actuaries from asking the more classic descriptive and diagnostic questions to also performing predictive and prescriptive assessments. You can think about it this way: in the past, actuaries mostly answered the questions “what happened?” and “why did it happen?” Now, there is more room to use data analytics to answer the questions “what will happen?” and “what should I do?” Advances in statistical modeling methods, like data visualization tools, are posing new conundrums for both actuaries and government regulators of the industry. 

The availability of large data sets and the software tools to analyze them are changing the insurance and pension industries very quickly. InsurTech, or the digital tools that continue to advance the science of data handling and analytics, has led to new products, new distribution channels, and new risks for companies. However, this advanced technology is also allowing industry to use more advanced algorithms than ever before, requiring well-trained, professional actuaries to not only understand, but apply ethical principles to the methods and models being used to create the products and services that are the underpinnings of our society.

Actuaries often work on multidisciplinary teams with statisticians, computer scientists, and data scientists when working with big data. However, actuaries are often the “quarterbacks” of these teams because of their use of professional judgement and experience providing trusted information to both the public and to regulators. In fact, actuaries may be best positioned to explain the uses of big data to the general public, with their extensive knowledge of how risk-assessment and predictive analysis can affect the everyday lives of people.

With the advances brought about by big data, actuaries are able to apply predictive analytics to marketing, customer engagement, underwriting, product development, claims processing, decision-making, and analyzing customer behavior. These new uses provide ongoing challenges for actuaries and regulators alike, in following and enforcing rules to govern the use of data in an acceptable and legal manner. One problem with large data sets is that it is more difficult to ascertain whether data is acting as a proxy for criteria that is not allowed, by law, to be used in determining insurance. Insurers cannot use race or nationality as a factor, but other information could be considered as a stand-in for these criteria, making it trickier to follow the law. This is why advanced training in both mathematical modeling and computer applications is necessary for actuaries today. 

The actuarial profession is one of the least-understood careers by the general public, yet actuaries have a profound impact on all of our daily lives. As our world becomes more complex with the advent of new technologies, actuaries will perhaps remain mysterious to most people, all while working to keep the world as safe from risk as possible. For those who go the distance, a career as an actuary can provide a high standard of living and also the satisfaction of serving a very important function in our society.

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