A career as an Actuary

Actuaries analyse the financial costs of risk and uncertainty. They use mathematics, statistics, and financial theory to assess the risk that an event will occur, and they help businesses and clients develop policies that minimise the cost of that risk. Actuaries’ work is essential to the insurance industry.

The need for Actuaries

Actuaries are needed to develop, price, and evaluate a variety of insurance products and calculate the costs of new risks.

More actuaries will also be needed to help companies manage their own risk, a practice known as enterprise risk management. Actuaries will help companies avoid, manage, and respond to any potential financial risks across all areas of their business operations. This analysis helps companies adjust their business or investment strategies to achieve economic returns and respond to new financial regulations and requirements.

Insurance companies will need actuaries to analyze the large amount of information, such as medical or property data, collected from consumers. The increase in available data will allow insurance companies to better develop new products, set competitive prices, predict consumer behavior, and make more accurate projections of future risks and costs.

In addition, health insurance companies will require more actuaries to help evaluate the effects of changing healthcare regulations and guidelines, expand into new insurance markets, and offer products to new customers. However, consolidation among health insurance companies and providers may limit growth in this area.

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Duties of Actuaries

Actuaries typically do the following:

  • Estimate the probability and likely economic cost of an event such as death, sickness, an accident, or a natural disaster.

  • Design, test, and administer insurance policies, investments, pension plans, and other business strategies to minimise risk and maximize profitability.
  • Compile statistical data and other information for further analysis.
  • Explain their findings and proposals to company executives, government officials, shareholders, and clients.

Most actuarial work is done with computers. Actuaries use database software to compile information. They use advanced statistics and modelling software to forecast the probability of an event occurring, the potential costs of the event if it does occur, and whether the insurance company has enough money to pay future claims.

Actuaries typically work on teams that often include managers and professionals in other fields, such as accounting, underwriting, and finance. For example, some actuaries work with accountants and financial analysts to set the price for security offerings or with market research analysts to forecast demand for new products.

Most actuaries work at insurance companies, where they help design policies and determine the premiums that should be charged for each policy. They must ensure that the premiums are profitable yet competitive with other insurance companies.

Actuaries in the insurance industry typically specialize in a specific field of insurance, such as one of the following:

Health Insurance

Health insurance actuaries help develop long-term care and health insurance policies by predicting expected costs of providing care under the terms of an insurance contract. Their predictions are based on numerous factors, including family history, geographic location, and occupation.

Enterprise Risk

Enterprise risk actuaries identify any risks, including economic, financial, and geopolitical risks that may affect a company’s short-term or long-term objectives. They help top executives determine how much risk the business is willing to take, and they develop strategies to respond to these issues.

Life Insurance

Life insurance actuaries help develop annuity and life insurance policies for individuals and groups by estimating, on the basis of risk factors such as age, gender, and tobacco use, how long someone is expected to live.

Investment Strategies

Some actuaries apply their expertise to financial matters outside of the insurance industry. For example, they develop investment strategies that manage risks and maximize returns for companies or individuals.

Property & Casualty Insurance

Property and casualty insurance actuaries help develop insurance policies that insure policyholders against property loss and liability resulting from accidents, natural disasters, fires, and other events. They calculate the expected number of claims resulting from automobile accidents, which varies with the insured person’s age, sex, driving history, type of car, and other factors.

Pension & Retirement

Pension and retirement benefits actuaries design, test, and evaluate company pension plans to determine if the expected funds available in the future will be enough to ensure payment of future benefits. Pension actuaries also help businesses develop other types of retirement plans and healthcare plans for retirees. In addition, they provide retirement planning advice to individuals.

Public Sector

Actuaries also work in the Public Sector. For example, actuaries may evaluate proposed changes to Social Security or conduct economic and demographic studies to project future benefit obligations. Actuaries also examine the premium rates charged, and regulate the amount held as insurance liabilities, by insurance companies.

Consultant

Some actuaries act as consultants and provide advice to clients on a contract basis. Many consulting actuaries audit the work of internal actuaries at insurance companies or handle actuarial duties for insurance companies that are not large enough to keep their own actuaries on staff.

How to Become an Actuary

Actuaries need a bachelor’s degree, typically in mathematics, actuarial science, statistics, or some other analytical field and subsequently must pass a series of further exams to become certified professionals.

Coursework or work experience in computer science, especially programming languages, and the ability to use and develop spreadsheets, databases, and statistical analysis tools, are valuable.

Certification

To qualify as an actuary you need to apply to become a student member of the Institute and Faculty of Actuaries (IFoA) in the UK. You then need to pass their exams, or obtain exemptions from them and gain a satisfactory level of work-based skills

What are work-based skills?

The aim of the work-based skills (WBS) requirement is to help you to demonstrate that you have put into practice the actuarial theory you gain through taking the exams.

What do I need to do?

In summary you will need to do the following:

  • Appoint a supervisor – Once you have joined the IFoA and have received your Actuarial Reference Number (ARN), you need to talk to your employer about appointing a supervisor who will be responsible for your development. Once you have an appointed Supervisor then you can start to complete the work-based skills documents.
  • Complete learning logs – These are records of your “on the job” experience. You and your manager complete the review form every 6 or 12 months.
  • Answer review questions – These are short pieces of written work, presentations or other written work which you have produced and discussed with your supervisor.

How long will it take me?

You should start to maintain your learning logs when you start relevant employment. The minimum time required is then 1 year for Associateship, and 3 years for Fellowship.

Your initial actuarial career

Most entry-level actuaries start out as trainees. They are typically on teams with more experienced actuaries who serve as mentors. At first, they perform basic tasks, such as compiling data, but as they gain more experience, they may conduct research and write reports. Beginning actuaries may spend time working in other departments, such as marketing, underwriting, and product development, to learn all aspects of the company’s work and how actuarial work applies to them.

Most employers support their actuaries throughout the certification process. For example, employers typically pay the cost of exams and study materials. Many firms provide paid time to study and encourage their employees to set up study groups. Employees usually receive raises or bonuses for each exam that they pass.

Advancement for Actuaries

Advancement depends largely on job performance and the number of actuarial exams passed. For example, actuaries who achieve fellowship status often supervise the work of other actuaries and provide advice to senior management. Actuaries with a broad knowledge of risk management and how it applies to business can rise to executive positions in their companies, such as chief risk officer or chief financial officer.

Important Qualities for Actuaries

Analytical Skills

Actuaries use analytical skills to identify patterns and trends in complex sets of data to determine the factors that have an effect on certain types of events.

Communication Skills

Actuaries must be able to explain complex technical matters to those without an actuarial background. They must also communicate clearly through the reports and memos that describe their work and recommendations.

Computer Skills

Actuaries must know programming languages and be able to use and develop spreadsheets, databases, and statistical analysis tools.

Maths Skills

Actuaries quantify risk by using the principles of calculus, statistics, and probability.

Interpersonal Skills

Actuaries serve as leaders and members of teams, so they must be able to listen to other people’s opinions and suggestions before reaching a conclusion.

Problem-solving Skills

Actuaries identify risks and develop ways for businesses to manage those risks.

Careers Related to Actuaries

  • Financial Analysts

    Financial analysts provide guidance to businesses and individuals making investment decisions. They assess the performance of stocks, bonds, and other types of investments.

  • Insurance Underwriters

    Insurance underwriters decide whether to provide insurance and under what terms. They evaluate insurance applications and determine coverage amounts and premiums.

  • Mathematicians

    Mathematicians conduct research to develop and understand mathematical principles. They also analyze data and apply mathematical techniques to help solve real-world problems.

  • Personal Financial Advisors

    Personal financial advisors provide advice on investments, insurance, mortgages, college savings, estate planning, taxes, and retirement to help individuals manage their finances.

  • Statisticians

    Statisticians use statistical methods to collect and analyse data and to help solve real-world problems in business, engineering, healthcare, or other fields.

  • Economists

    Economists study the production and distribution of resources, goods, and services by collecting and analysing data, researching trends, and evaluating economic issues.

  • Accountants & Auditors

    Accountants and auditors prepare and examine financial records. They ensure that financial records are accurate and that taxes are paid properly and on time. Accountants and auditors assess financial operations and work to help ensure that organisations run efficiently.

  • Budget Analysts

    Budget analysts help public and private institutions organise their finances. They prepare budget reports and monitor institutional spending.

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