What is an Actuary?
Actuaries come up with numbers for insurance companies, working with accountants and underwriters to see what insurance rates should be based on these risks and their financial outcomes. They also use statistics to calculate the probability of risks and the financial consequences of those risks. It’s the perfect career for someone who loves numbers!
What does an Actuary do?
Actuaries use their wide range of knowledge in the fields of math and statistics as well as business and finance probability to come up with the premiums of insurance plans. They calculate the risk factors for floods, fires, unemployment, accidents, death, and other risks to give an accurate depiction of the risk that insurance companies will take by insuring an individual or business.
Actuaries work with insurance companies that specialize in many things including life insurance, health insurance, automobile insurance, and homeowners insurance. These professionals generally specialize in one type of insurance but can be certified in multiple areas.
Property and casualty actuaries research what will happen to insurance companies and businesses of that nature in the case of undesirable events. They are responsible for creating financial solutions that will manage these risks and that will benefit the interest of every party—not only the insurer, but the policyholder as well.
They use their keen skills of analysis and risk management, including basic human behavior, to create strategies that will bring positive outcomes to tragic situations. They develop tables that show researched data regarding death, fire, auto accidents, and other tragedies that affect the insurance trade.
Actuaries not only research and create strategies; they must also be able to correctly evaluate how well these strategies will work to lessen the risk borne by the insurance companies they work for while still giving an appropriate benefit to the policyholders.
They use their immense sea of knowledge and creativity to lessen the impacts of risks. Actuaries document their findings and use these reports to predict the probability of negative occurrences and the impacts they will have on the individual or business.
Qualified actuaries possess superior skills in mathematics, organization, and planning. Communication skills are a must in this position, as actuaries must be able to clearly communicate the cause and effects of risks to the company when updating premiums for insurance plans.
Actuaries must have a clear perspective of risks and each facet of risk factors, which can be variable depending on demographics of the area the companies and policyholders are located.
What is the workplace of an Actuary like?
Most of the work performed by actuaries is done at a desk. This desk job is most often a full-time position of 40 or more hours per week. Actuaries work closely with insurance professionals to create plans that work well for the company and the policyholders.
The job is relatively low-stress for qualified candidates with extensive knowledge of probability, statistics, mathematics, and business. Actuaries may spend time in meetings with other insurance companies if they are in the business of reinsuring policies.
Frequently Asked Questions
What is the difference between an actuary and an accountant?
Actuaries and accountants both work with the same information, both handle financial data, and both generate statistics. Yet each will perform different business functions, and will serve different purposes.
The majority of actuaries are employed in the insurance industry, and deal primarily with risk. They will provide the statistical probability of a future event occurring (such as accidents or natural disasters), and advise managers on how to reduce any likely financial impact of adverse events. They also advise insurance companies how much to charge in premiums and which customers to insure.
Accountants work with individuals or organizations, handling monetary transactions by recording financial information. Their job may also include financial analyzing and reporting, preparing tax returns, auditing accounts, and/or acting as consultants on a wide variety of financial matters. Their duties are typically broader than that of an actuary.
What is the difference between an actuary and a statistician?
Both actuaries and statisticians have similar skills sets, such as computer knowledge, mathematical knowledge, and the use of statistical techniques. Where they differ is their employment settings, and the scope of their work.
Actuaries work specifically within the insurance industry, and handle data related to risk, providing companies with statistical probabilities of future occurrences. They focus on the financial losses that are associated with accidents, illnesses and natural disasters, and help insurance companies assign what coverage and premiums the client should be charged.
Statisticians (sometimes called data scientists) can work in a variety of settings, with multiple types of data. They are employed in banks, government agencies, consulting firms, technology firms, health-care organizations.. anywhere that collects and handles large amounts of data. They use statistical techniques to extract, analyze and summarize, turning complicated data sets into usable information. This information is then given to management, which will in turn use it to make informed decisions and policies.
What is some good advice for actuary students?
If you want to become an actuary, you should never try to do the minimum amount of work needed just to pass. Actuaries are responsible for massive amounts of other people's money. It makes sense for actuarial examinations to have very high standards. Never cram for a test; when you take an actuarial exam and you read a problem, you should immediately know how to do it. The formulas should all be memorized; do hundreds of practice problems and review your list of formulas for memorization daily.
Take a course on insurance. If you're going to work in the insurance industry, it helps to know something about it. If you hate insurance, then you most likely won't enjoy being an actuary.
Most employers look for candidates that have had some actuarial experience before consideration. An internship is pretty much a requirement, so try to get one, or ideally two internships during your summer months. This will also help you decide if you're headed on the right career path. Employers also look for good computer skills, so the better they are, the more likely you will be considered for a position.
What is it like being an actuary?
In the first year of actuarial work, you will most likely be learning the actuarial, insurance, and company environment, and will probably be assigned some pretty routine calculations. After you've gained some experience, you will be given larger dollar amount projects, and higher level work.
The work varies by specialty and by employer, but typically you'll be working with quite a bit of data, performing various calculations, looking for patterns and trends, and recommending what price to charge for an insurance deal or how much to set aside to pay for claims.
Should I become an Actuary?
The Society of Actuaries defines an actuary as ‘part super-hero, part fortune-teller, part trusted advisor.’ This characterization speaks both to the expanse of the work and to the kinds of people that tend to do it best.
It’s about more than just numbers
While most actuaries have an analytical mindset and are passionate about decoding large sets of data, it is important to realize that not all of them graduate with a degree in actuarial science or a business/accounting/finance/mathematics related field.
In the words of Joseph Kudrle, a senior mathematics lecturer who helped develop the University of Vermont’s Actuarial Science Sequence, ‘For sure, you need to have quantitative skills, but a National Life Insurance Company representative told me they’re also looking for individuals who are dynamic and who can communicate, who can think critically and who can do the work. One company mentioned their head guy was a philosophy major and that they don’t like getting candidates from far-factory schools. They feel those students are pigeon-holed.’
What Mr. Kudrle’s comments suggest is that the actuary business welcomes ‘outside-the-box’ type graduates. It sees a space for individuals who have taken an unconventional pathway, as long as they demonstrate the capacity to do the work; that is, to prosper in the world of statistics, economics, and corporate finance. It sees the benefit of hiring such individuals, who can take creative, innovative approaches to protect companies and individuals against emerging risks in a fast-changing world.
It is complex and challenging work
Actuaries tend to work with a diverse set of industries. While this variety provides intellectual stimulation, the need to solve often complex problems in sometimes pressure-filled situations can be stressful. Quite simply, the best actuaries thrive under pressure and they love to solve problems and overcome challenges.
The above truths about working as an actuary explain why the list of required skills for these professionals compiled by the U.S. Bureau of Labor Statistics is a mix of technical and soft skills:
• Analytical skills • Understanding of human behavior • Business knowledge • Ability to think clearly and logically; problem-solving skills • Ability to use database software, programming languages, and statistical modeling software • Capacity to communicate and consult with clients and colleagues
Are Actuaries happy?
Actuaries rank among the least happy careers. Overall they rank in the 6th percentile of careers for satisfaction scores. Please note that this number is derived from the data we have collected from our Sokanu members only.
This strikingly low happiness quotient in the actuary field may simply be coincidentally, randomly associated with our specific pool of users, who are quite likely new career seekers. There does not seem to be anything inherent to the profession that would explain our finding.
What are Actuaries like?
Based on our pool of users, Actuaries tend to be predominately investigative people. The actuary’s work of managing risk involves analyzing the possibility of future events by using numbers, building safeguards into decisions concerning the future, and laying the groundwork for profit. Every one of these activities clearly calls for an investigative mindset.
Actuaries are also known as:
Life Health and Pension Actuary Property and Casualty Actuary Casualty Actuary General Insurance Actuary Life Actuary Health Actuary Pension Actuary