What is an Actuary?
Actuaries are the guardians of wealth. With mathematical models and statistical methods, they evaluate the costs of future uncertainties to make decisions on how we can best decrease the likelihood and financial impact of these risks. Their work is fundamental to the insurance industry, but actuaries can also be found in consulting firms, government agencies, research centers, and academia. Even actuaries have a little trouble defining the term because of the variety of industries and roles they can take on, but the essential function is to put a price tag on the financial transfer of risk.
What’s the chance of a construction company having a big accident that could seriously hurt their employees? How should health plans be priced in order to keep up with medical trends and government legislation? Actuaries assess the likelihood of certain scenarios and the costs associated with these events. That way, we can create effective financial products that will protect policyholders while maintaining competitiveness and profitability.
How much should a 30 year old female contribute to her pension plan every month to reach her retirement goals? How many millions of dollars does an auto insurance company need to set aside to ensure that they can pay for future claims? Actuaries can determine what your fiscal responsibilities are, so you’ll have the confidence and the capital to pursue other financial interests.
With our esoteric techniques and the intense desire of others to know the answers, it shares many similarities. But we have numbers to back us up.
Actuaries work in office environments, and are known to be mathemagicians and Excel wizards. We rely heavily on data analysis to investigate historical happenings, and to paint a picture of what the future may look like. Those in insurance companies may calculate rates or reserves and advise management on financial impacts. Those in consulting handle a variety of analytical projects to help clients achieve their goals. Day to day work will vary depending on your position, but we all stare at numbers on a computer everyday.
NO. Accountants record historical financial data and are knowledgeable in the rules and procedures for bookkeeping and reporting. Actuaries use historical information to make estimates for the future and try to reduce the financial impacts of adverse events. Sometimes we will work together, using similar information and results generated from each other’s work.
If you’ve got a taste for math and are looking for a stimulating career, actuarial science is a great option to look into! Projects requiring critical thinking skills and mathematical expertise will keep you challenged, and being an expert in statistical analysis and modeling is not a bad thing either.
The actuarial career has consistently been ranked at or near the top of job listings (if it even shows up at all). Reasons are good salaries, low stress environments, work-life balance, job security, and a challenging and fulfilling role.
Most actuaries have a bachelor degree in math, economics, or statistics. A defining characteristic of the career is the examination process needed to become credentialed. This is not a walk in the park. Depending on the path you take, there are about 10 exams with some extra educational requirements and modules, and most people take between 6-10 years to complete. Expect a lot of stress, loss of sleep, and time away from friends and family. If you’re an introvert like me though, this makes a good excuse to decline invitations that force you out of the house. Thankfully with each passing exam you should expect a sizable increase in salary through your company’s student program.
The preliminary exams cover probability, financial mathematics, financial economics, life contingencies, mathematical statistics, stochastic processes, modeling, and much more. As you go on, they will dive into ratemaking, reserving, insurance accounting, taxation, law, and many more topics depending on your track. Each exam requires hundreds of hours of study time, and due to rigorous grading standards a majority of students do not pass each sitting.
So maybe it’s not enough to say that it is not a walk in the park. It’s more like a tumble off a rock cliff and into the fiery depths of a volcano only to have your ashes spit out of an undersea vent and eaten by a filthy crab.
Trust me, it’s worth it. The exams are a major hurdle but when you finish them, you’ll feel great. Maybe.
Take a look at these resources to learn more about the career and how to prepare your body for it.
Actuarial Digest (coming soon)
Actuarial FAQ and Mythbusting (coming soon)
Resume Prep (coming soon)
Interview Prep (coming soon)
Technical Skills (coming soon)
My Exam Progress