Actuaries Overview
Typically, actuaries hold a bachelor’s degree and spend 4 to 8 years passing a series of exams to reach full professional status. Strong mathematics skills are a must. The number of qualified candidates is expected to be greater than the number of available jobs, resulting in keen job competition. Insurance carriers employ 55 percent of actuaries.
Nature of the Work for Actuaries
Actuaries are essential to the insurance industry. They use their background of finance, business and statistic to assess and help create policies to minimize the costs of risks.
Actuaries crunch numbers to predict the likelihood and potential cost to a company in case of injury, disability, sickness, loss of property or death. Financial matters, such as how a client should invest to achieve a particular retirement income or how a company can invest resources to maximize their return on investments also falls under the actuaries umbrella. The key is ensure insurance plans are kept on a sound financial basis using their risk assessment expertise. Actuaries also help design financial strategies, insurance policies and pension plans.
The insurance industry employs more than half of all actuaries and those professionals specialize in property and casualty insurance or life and health insurance. Actuaries forecast the probability of particular events and their impact on claims and company losses using sophisticated modeling techniques. For example, by looking at the age, sex, car, driving history and so on of insured drivers, property and casualty actuaries can estimate probable automobile accident claims to ensure premiums charged will cover a company’s claims and expenses while being competitive with other companies and profitable.
Life and health insurance actuaries assist in the development of health and long-term-care insurance policies by studying common groups (those with a family history of illness or those living in a certain area for example) and predicting the chances of cancer, stroke, diabetes, heart disease and so on. Again, their work can help insurance companies develop fair risk-based premiums for consumers that will cover a company’s bases. Life insurance actuaries also assess individuals to develop annuity and life insurance policies based on their individual life expectancy.
Actuaries can also work in other financial services industries, managing credit and setting a price for corporate security offerings for example. They can also help firms compete by helping to devise new investment tools. Social Security and Medicare are managed in part by government actuaries. And pension actuaries follow the Employee Retirement Income Security Act (ERISA) of 1974, which sets minimums for health and pension plans in private industry.
Actuaries also assess corporate risk. They may help develop avenues for companies to enter new lines of business or markets by forecasting demands. They may need to explain complex concepts to shareholders, policyholders, the public, government officials or executives. Some actuaries must explain changes in contracts to customers or testify before public agencies about proposed legislation that could affect their business.
Actuaries can work on a consultant basis, too. Job duties are similar to other actuaries including evaluating company pension plans by predicting future contribution values and determining if they’re cover future retirees’ needs; reducing insurance costs by determining ways decrease on-the-job injury risk. Some consulting actuaries must testify in court about values attained through complex calculations such as potential lifetime earnings of someone killed in an accident or the current value of a pension in a divorce case. The field of reinsurance, in which one insurance company shares a liability policy with another in exchange for part of the premium, also employs some actuaries.
Typically, an average workweek is 40 hours or more for an actuary and those who consult may need to travel.
Training, Other Qualifications and Advancement for Actuaries
Strong skills in math, statistics and general business are essential for actuaries. For the career, students usually seek a bachelor’s degree in mathematics, statistics, actuarial science or a related business field— economics, business or finance. Professional certification requires coursework in corporate finance, economics and applied statistics regardless of major. Many students also complete internships for hands-on experience during school. Most colleges and universities offer programs in economics, finance, mathematics and statistics, but only 100 have actuarial science programs.
Before hiring, more and more companies require prospective employees to pass an actuarial exam, which tests proficiency in calculus, statistics and probability.
In the beginning of their careers, many actuaries rotate through different jobs in the company including underwriting, product development, financial reporting and marketing. This process helps them to learn the actuarial operations and phases of insurance work. Entry-level actuaries often complete simple project such as preparing data. With experience, actuaries draft reports, conduct research or supervise clerks. To advance their careers, many move from company to company frequently early on.
Both the Casualty Actuarial Society (CAS) and the Society of Actuaries (SOA) sponsor series of exams for full professional status in the field. The CAS covers property and casualty including workers compensation, personal injury liability, medical malpractice, automobile and homeowners insurance. The SOA covers life insurance, finance and investment, retirement systems and health benefit systems.
The two societies jointly sponsor four of the seven first exams in the series as they cover the same material. Thus, students can take the first part of the exam to see if they have the mathematics skills required to be an actuary before committing to a particular field. And the exam can be taken while in college. Those who pass the first four exams can study and take courses for the next parts. Passing two or more leads to better employment opportunities and starting salaries.
Often, candidates start working as actuaries right out of college, working as they continue the certification exams. Many employers foot the bill for exam fees and provide study time to employees—though months of additional study time at home will likely be necessary. A pay increase usually follows when employees pass the exams.
The CAS certification is predominantly exam-based. The first level of certification, the associate or ACAS level, requires the completion of seven exams, a course on professionalism and required coursework in corporate finance, economics and applied statistics. The process usually takes 4 to 8 years. Another 2 to 3 years is usually needed to reach the fellowship or FCAS level. Two more exams must be passed in advanced topics include valuation of insurance, dynamic financial analysis and investment and assets.
For a certification from the SOA, coursework, computer learning modules and exams are required. After the initial exams are completed, candidates should choose a specialty from retirement benefits, group and health benefits, individual life ad annuities, investments or finance/enterprise risk management. The process to earn associate or ASA level status takes between 4 and 8 years. Candidates must complete required coursework in economics, corporate finance and applied statistics, five initial exams, a seminar in professionalism and eight computer modules with two subsequent essays. Another 2 to 3 years is required to reach the fellowship or FSA level as candidates must complete another seminar in professionalism, a course in fellowship admissions, three computer modules and two additional exams within their specialty.
Pension actuaries, who verify the financial status of Federal Government benefit pension plans must meet specific requirements. They must pass two SOA exams ad meet certain requirements to qualify for enrollment by the Joint Board of the US Treasury Department and the US Department of Labor for the Enrollment of Actuaries.
Strong computer skills are a must for actuaries who will be expected to use standard statistical analysis software and develop and manipulate spreadsheets and databases. Visual Basic for Applications, SQL, SAS and other programming languages are also helpful. Employers often favor well-rounded applicants who have a strong technical background along with business training and communication skills—interpersonal skills are particularly important for consulting actuaries. For their work, actuaries must follow new developments in finance, business and health, as well as social and economic trends and legislation that could impact investment or insurance practices.
Job advancement is typically linked to the number of actuarial exams passed and job performance. A broad knowledge of employee benefits, pension, investment or insurance can help actuaries reach executive positions such as Chief Financial Officer or Chief Risk Officer in which they’ll apply risk assessments to the company as a whole. Supervisory skills can help actuaries advance to management positions in related departments such as accounting, underwriting, marketing or advertising. With experience, some actuaries prefer to start a consulting firm. A few end up teaching at the college level.
Recommended Education Level
- Masters Degree
- Bachelors Degree
- Associates Degree
- Professional Certificate
Employment and Job Outlook for Actuaries
Number of People in Profession
17,940
Changing Employment (2008-2018)
Employment is projected to grow much faster than average (increase 20% or more).
In 2008, 19,700 actuaries were employed with 55 percent of jobs held with insurance carriers. Management, technical and scientific consulting services were responsible for 16 percent of actuary jobs. Some actuaries worked in the management of companies and enterprises industry or for insurance agents and brokers. A small amount of actuaries worked for government agencies.
Experts predict that employment will grow much faster than average, but competition for jobs will still be tough with more qualified candidates that available positions.
In the next decade, the employment of actuaries will likely increase by 21 percent—much faster than other occupations. The insurance industry employs the largest number of actuaries, but while it will experience some growth, the greatest boost will come from financial services, consulting and other industries.
The insurance industry is experiencing slower than average growth overall, but the employment of actuaries is still expected to increase because their expertise is needed to evaluate, develop and price insurance products and calculate new risks. Demand for actuaries will also result from the growing popularity of annuities offered by life insurance companies. In addition, natural disasters will create a need for actuaries in property and casualty insurance. Some employment growth will also result from actuaries entering non-traditional areas including financial services where they help price corporate security offerings.
Employment of actuaries will also rise due to the increased regulation of managed healthcare companies and new healthcare legislation. Plus, as more industries look to actuaries for risk assessments, consulting firms should see a strong job outlook.
That said, because the insurance industry, the top employer of actuaries, will be downsized and consolidated, job growth may be offset to a degree. As the companies merge and streamline operations, some will shed high level actuaries. The demand for pension actuaries is also expected to decrease as defined benefit plans, which these actuaries review, decrease leading the way to investment-based retirement plans like 401ks.
Since there will be more qualified actuaries than jobs, competition will be tough. College graduates who’ve completed an internship and passed the first two exams will be in the best shape to receive job offers. Strong math skills are a must including statistics and complex probability. Computer programming skills or experience are a plus. Beyond new job growth, some jobs will be available due to actuaries who retire or transfer to other fields.
Consulting firms will offer the best employment opportunities as companies find consulting actuaries more cost-effective for analyzing risks than hiring staffers. Many openings will also arise in healthcare if changes occur in managed healthcare. Actuaries will be called upon to evaluate the risks of new medical issues, such as the impact of new diseases, to accommodate the desire to contain healthcare costs.
Any industry that deals with risk like the airline industry or banking industry find actuarial skills useful and so, job openings may arise in these industries, too.
Earnings and Salary for Actuaries
The median annual wages of actuaries is $84,810. The top 10 percent of workers in the field earned more than $160,780, the lowest 10 percent earned less than $49,150 and the middle 50 percent earned between $62,020 and $119,110.
Graduates with a bachelor’s degree in actuarial science earned an average annual starting salary of $56,320 in July 2009 according to the National Association of Colleges and Employers.