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What is an Actuary?

What is an Actuary

What is an actuary? Although the term actuary may still be unfamiliar to many, these professionals have been solving problems and having an impact on the financial status of companies for many years. An actuary is a trained professional who, with their knowledge of statistics, math, and financial theory, measures, monitors and decreases uncertainty and financial risk. Because of their value in offering good financial advice, actuaries are used in many industries today and have many responsibilities.

What an Actuary Does

An actuary does many things in the course of a workday, but the best way to sum up their job is to say they analyze how much risk an investment would be for a company and the amount of certainty or uncertainty this particular investment involves. Their knowledge of statistical data, financial theory, and analysis helps them with their determination. They also design reports, tables, and charts to explain their proposals and reasoning to clients. Although they work for various industries, actuaries are most often found in the insurance industry. They are very valuable in helping insurance companies determine how much risk a certain client would pose so that they can charge an appropriate premium.

See also: 5 Duties of an Actuary

How to Become An Actuary

To become an actuary, an individual must complete at least a bachelor’s degree in actuarial science, mathematics, statistics, or a similar analytical field. Students studying to become actuaries complete courses in applied statistics, economics, corporate finance, business, and mathematics. Although not necessarily required, courses in computer programming and computer science are beneficial to actuaries, as well as knowledge of statistical analysis tools, databases, and spreadsheets. Actuaries must also pass certification exams.

See our ranking of the 30 Most Affordable Online Bachelor’s In Finance.

Certification

Actuaries can obtain certification from the Society of Actuaries (SOA) and the Casualty Actuarial Society (CAS). The type of certification required depends on where the actuary wishes to work. Actuaries who work almost solely with insurance-based issues can obtain certification through the SOA. Actuaries who wish to work in the property and casualty field can obtain certification through the CAS. These agencies offer two levels of certification: associate and level.

To obtain the associate level of certification, the actuary must pass seven certification exams, which can take four to seven years to do. During this time, actuaries attend e-learning courses and seminars. An additional two to three years is needed to obtain fellowship status. Candidates pursuing fellowship status through the SOA can choose from these five tracks:

  • Group and health benefits
  • Life and annuities
  • Retirement benefits
  • Investments
  • Finance/enterprise risk management

Career Outlook

As the economy continues to pick up, actuaries will continue to be in demand and should experience many career opportunities. The U.S. Bureau of Labor Statistics (BLS) reports that actuaries could see job growth of 20% during the 2018-2028 decade, which is much faster than average. Actuaries also experience excellent wages, particularly those who have completed all certifications. The median pay is $108,350.

U.S.News & World Report ranked actuaries 11th in their Best Business Jobs; 23rd in Best STEM Jobs; 24th in Best Paying Jobs and 54th in 100 Best Jobs. In addition to being a real asset to an organization, actuaries are workers who work in a relatively low-stress environment yet have work that’s extremely stimulating, challenging, and rewarding.

Related resource: 8 Highest Paying Finance Degree Jobs

Where Actuaries Find Employment

In May 2019, the U.S. Department of Labor counted 22,260 actuaries nationwide. Forty-eight percent, or 10,860 actuaries, worked directly for insurance carriers. About 17 percent of actuaries are employed by insurance agencies and brokerages. Another 3,010 actuaries found jobs in consulting services. Private corporations, government agencies, banks, and financial investing firms also hire actuaries. One percent of actuaries are self-employed and travel or telecommute from home. Computer systems design companies pay actuaries the highest average salary of $141,120. New York, Illinois, California, and Ohio employ the most actuaries. The 2,330 actuaries in New York State enjoy the biggest annual mean wage of $152,920 too. Most actuaries work full-time for 40-60 hours per week.

Specializations for Actuaries

Actuaries typically concentrate their work in one financial niche. Therefore, the answer to “What is an actuary?” can vary by specialization. Health insurance actuaries develop risk assessment tools to help carriers estimate the cost of medical coverage policies. Life insurance actuaries weigh factors like age, weight, medical condition, and risk-taking to determine policyholder life expectancy. Property/casualty insurance actuaries predict the likelihood of accident claims by analyzing location data, driving records, vehicle types, and more. Pension actuaries focus on building beneficial retirement plans with enough funding for late adulthood. Investment actuaries run predictive portfolio modeling to devise profitable investing strategies that boost client returns. Product development actuaries use statistical data to assess operational costs and market uncertainty for the pricing of new goods or services.

Skills Actuaries Need to Succeed

Getting a bachelor’s degree and CAS/SOA certification won’t guarantee actuarial science jobs. Employers look for actuaries with the intrinsic skills to excel. Statistical skills are essential to accurately quantify risks with hard data. A deep interest in math and probability is requisite. Actuaries need strong analytical skills to assess how certain factors will affect insurance outcomes. Enterprise risk actuaries particularly need problem-solving skills to help businesses avoid unnecessary losses. Computer proficiency in today’s digital age is crucial. Actuaries must be comfortable making Excel spreadsheets, using databases, and running software like SPSS. Recruiters also seek actuaries with “soft” skills. For instance, interpersonal skills are needed to properly communicate findings. Actuaries need writing skills to produce clear reports and proposals. Successful actuaries are creative, punctual, flexible, and enthusiastic.

Similar Occupations to Consider

Actuaries aren’t the only ones involved in calculating financial costs. Bachelor’s graduates can choose several similar career paths. For example, underwriters review insurance applications to determine whether people are eligible for coverage. Cost estimators analyze production data to estimate the material and labor expenses for manufacturing products. Budget analysts pore over the revenue and expenditures of diverse businesses to set financial plans. Internal auditors examine business ledgers to identify and fix inconsistencies caused by error or fraud. Ratings analysts predict the ability of corporate borrowers to repay their outstanding debts. Like actuaries, risk analysts put a price tag on financial uncertainties to guide investing decisions. Other similar jobs include public accountant, statistician, financial advisor, operations research analyst, management analyst, and insurance claims adjuster.

Overall, the Insurance Information Institute reports that the U.S. insurance industry nets $1.22 trillion each year. The 5,965 insurance carriers contribute $564.5 billion to the country’s GDP. Actuaries have one of the hottest, fast-growing jobs in this industry. Actuaries apply math and statistics to determine the likelihood of future events. It’s their goal to minimize risks and maximize insurance policy, annuity, investment, or retirement plan profits. Actuaries enjoy great upward mobility opportunities up to the titles of Actuary VP and Chief Actuarial Officer. Now that the “What is an actuary?” question has been answered, you can determine if this data analysis job suits your interests.

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