As an actuary, you will be responsible for the analysis of financial costs of uncertainty and risk. Actuaries use statistics, mathematics and financial theory to perform risk assessment for various types of events. In that way, actuaries assist businesses and clients to devise policies that reduce the cost of risk. The work of actuaries is critical in the insurance industry.
Most actuaries do their work today with computers and database software to compile information. Actuaries also use advanced modeling and statistical software to forecast how probable it is that an event will occur, what the costs would be, and whether the insurance company possesses the capital to pay possible future claims.
Actuaries often work on teams that including professionals who work in accounting, finance and underwriting. They may work with financial analysts and accountants to establish the price for insurance and security offerings.
What Is Actuarial Science?
Actuarial science is the specialty that uses statistical and mathematical methods to perform risk analysis in finance, insurance and related disciplines. Most actuaries work in the insurance field, and some of the common work in actuarial science includes:
- Compiling statistical information for future analysis
- Estimating the likely economic cost of a future event, such as sickness, death, accident or natural disaster
- Designing, testing and administering insurance policies, pension plans and investments to reduce risk and increase profits
- Producing charts, reports and tables that explain proposals and calculations
- Explaining findings and proposals to managers, executives and other stakeholders
There is strong growth potential in the actuarial science field. The Bureau of Labor Statistics or BLS reports that employment for actuaries will increase by 22% from 2016-26. This is much faster than average compared to other occupations. Keep in mind, however, that the actuarial science field is comparatively small, and this increase rate of growth will net only approximately 5,300 new jobs by 2026.
It is expected that actuaries will be needed to devise, price and evaluate new types of insurance products and to determine what the costs of possible risks are. Actuaries are expected to be able to find a lot of work in the coming years, and one in three worked more than 40 hours per week in 2016.
The strong demand for new actuaries is reflected in the current median salary in the field: $100,600, with the top 10% earning in excess of $186,000 per year.
BLS states that there were 23,600 actuaries working in 2016. The largest industries that employed them were:
- Finance and insurance: 70%
- Professional, scientific and technical services: 16%
- Management of companies and enterprises: 7%
- Government: 4%
- Self employed: 1%
One of the advantages of working in actuarial science is the ability to specialize in various areas of interest, For example, you may be able to work in actuarial science in these areas:
- Health insurance: Develop long term care and health insurance programs as you predict what the expected costs are of offering care under a health insurance contract.
- Life insurance: Develop new annuity and life insurance products for both groups and individuals by making estimates of such risk factors as age, gender and whether the person is a smoker.
- Property and casualty: Work with insurance policies that insure the person or entity against property liability and loss due to accidents, fires and other unexpected events.
- Pension and retirement: Design, test and evaluate pension plans to see if the capital will be available to pay benefits in the future.
The median salary as of 2016 for all actuaries was $100,600. The top 10% earned $186,000 per year. Also, median annual salaries were as follows in these industries:
- Professional, scientific and technical services: $104,500
- Finance and insurance: $101,000
- Government: $95,500
- Management of companies: $93,300
Where you work also will make a serious impact upon your salary. Some of the top cities and employers for actuaries are:
- Philadelphia PA: Average salary is around $112,000 with a low cost of living. Top employers are MetLife, ING and Towers Watson.
- Dallas TX: Average salary here is $118,000 per year. While there are not as many jobs recently, top employers are Blue Cross Blue Shield and Fidelity, and salaries are high with a low cost of living.
- Columbus OH: The cost of living here is low, and the salary is $104,000 on average. Look for work at Nationwide Financial, State Auto Insurance and Mercer Insurance Group.
- Kansas City MO: The average salary here is $111,000 and a low cost of living make this a desirable destination for actuaries. Top employers are Kansas City Life Insurance Company, Amerco Life, Assurant Employee Benefits and Employers Reassurance Corp.
In addition to the companies mentioned above, below are some top employers to consider in the insurance field:
- USAA – San Antonio TX
- Assurance – Schaumburg IL
- Allianz Life Insurance Co. – Minneapolis MN
- Hagarty – Traverse City MI
- Blue Cross and Blue Shield of Vermont – Berlin VT
- First American Financial – Santa Ana CA
To begin a career in actuarial science, it is recommended to earn a bachelor’s degree in actuarial science, but a degree in statistics or mathematics also can be appropriate for some students. Coursework must be taken in statistics, mathematics, computer science, programming languages and database programming.
Actuarial science professionals who want to become managers and/or directors in their organization often earn a master of science in actuarial science. This advanced degree will prepare you for an advanced actuarial career by stressing the theories that undergird risk processes. You then will apply this theory to insurance pricing, management and practical risk related problems.
The types of courses that are taken in this master’s program will vary somewhat, but typically include:
- Mathematical Statistics
- Mathematics of Finance
- Statistical Inference
- Loss Distributions
- Topics in Actuarial Science
- Corporate Finance
- Credibility and Survival Analysis
- Regression, Time Series and Forecasting
- Life Contingencies
The majority of actuarial bachelor’s and master’s degrees are offered in on campus format. But you also have the option of getting a bachelor’s or master’s degree in statistics or mathematics. There are many online degree options in these fields. This can be more convenient for working professionals who are earning their degree in their spare time.
All universities and programs have individual requirements. You should expect to see requirements such as these for an actuarial science master’s program:
- Bachelor’s degree in actuarial science, mathematics or statistics
- Official undergraduate transcripts
- Prerequisites in mathematics, statistics, economics, etc.
- GMAT and GRE scores may be required
- Two or three professional references
- Resume with related work experience
To become an actuary, you must pass an examination after you have completed your degree program. There are two professional societies that administer these tests:
- Casualty Actuarial Society (CAS): This organization certifies those who work in property and casualty.
- Society of Actuaries (SOA): this organization certifies those who work in health insurance, life insurance, pensions, investments and finance.
Each of these examinations requires hundreds of hours of preparation. To become an associate level actuary, it takes four to seven years of study typically. Most employers expect you to have passed your initial examination before being hired.
Both the CAS and SOA offer a variety of specialities in which you can focus; there are specific examinations for all of these tracks listed below:
- Corporate Finance and ERM
- Quantitative Finance and Investment
- Individual Life and Annuities
- Retirement Benefits
- Group and Health
- General Insurance
Given the strong and increasing need for actuaries, it is not surprising that there are many grants and scholarships available for students who are earning a degree in actuarial science:
- Actuarial Foundation Actuarial Diversity Scholarship
- IABA Foundation Actuarial Scholarship
- Milliman Opportunity Scholarship
- Mutual of Omaha Actuarial Scholarship for Minority Students
- Robert Morris University/Highmark Presidential Actuarial Scholarship
It is not technically required to have a degree in actuarial sciences to work in this field. But it is required to be certified. Before you can work as an actuary, you will need to be certified through the Casualty Actuarial Society (CAS) or the Society of Actuaries (SOA).
The first designation you must have is the associate certification. After you have earned your associate certification and have worked for several years, you then can work on your next certifications through CAS.
Below are some associations to consider if you want to enjoy a rewarding career in actuarial science:
- Casualty Actuarial Society
- Society of Actuaries
- International Actuarial Association
- American Academy of Actuaries
Becoming an actuary and earning an actuarial science degree will open the door to plenty of lucrative job possibilities and a very bright future.
- Actuaries. (2015, Dec. 18). Retrieved from https://www.bls.gov/ooh/math/actuaries.htm
- Actuarial Science Overview. (n.d.). Retrieved from https://www.iwu.edu/math/ActuarialScienceOverview_DerekEngland.pdf
- Best Cities for Actuaries. (2013, June). Retrieved from https://www.valuepenguin.com/2013/06/best-cities-actuaries
- Master of Science in Actuarial Science. (n.d.). Retrieved from https://stat.uiowa.edu/graduate-programs/ms-actuarial-science