What Is an Actuary and How To Become One?

Several career opportunities involve using analytical skills and mathematical applications, and the employment rate of these skill sets is increasing. One of these career opportunities involving mathematical and analytical reasoning is the job of an actuary. But what is an actuary, and how do you become one?

An actuary is a highly trained professional specializing in financial analysis and risk management and uses data analysis techniques to predict the potential cost of certain events. Actuaries help determine possible issues that may arise and help find practical solutions to these problems. Becoming one requires extensive training and certifications.

For more information on the duties of an actuary, what it takes to become one, employment opportunities, prospects, and answers to possible questions that you might have if you’re considering becoming one read on.

What Do Actuaries Do?

Actuaries make use of mathematical and analytical reasoning to evaluate situations. Most work in corporate finance and insurance and use math skills, reporting, theories, algorithms, and statistics to assess possible risks that could arise in an event. They apply this knowledge to control the cost of the risks and losses for clients.

Here are some of the duties actuaries carries out:

  • Research and review data, statistics and create reports to help guide policies and procedures. 
  • Access and determine the potential cost of different events.
  • Draft reviews for insurance policies, pension plans, investments, business strategies, and other risk-prone strategies to help manage, eliminate losses, and maximize profits.
  • They communicate findings and developments to the companies or government agencies they work for.

Actuaries employ several different methods and techniques to carry out their duties; most use some of the latest devices and analytical software to compile and analyze data from multiple sources such as u.s. Bureau of Labor Statistics. There are various advanced statistics and modeling software packages that actuaries should be familiar and conversant with since they are relevant in determining potential risks and the cost of the risks.

There are several areas and parastatals where Actuarial positions are critical to their operation. Actuaries often work with other professionals such as accountants, data analysis, report managers, and other personnel concerned with data and information gathering in an organization. 

The common area where the services of actuaries are most employed in the private sector insurance. Insurance companies deal endlessly in risk management. They have to foresee potential risks and the cost of that risk and prepare for it in advance, which actuaries receive training to do. A career as an actuary can offer opportunities in senior management and executive positions such as Chief Financial Officer or chief risk officer.

There are different aspects of the insurance industry that actuaries can specialize in:

Health Insurance

Actuaries that specialize in health insurance are responsible for drafting and editing health insurance policies. They develop long-term policies by using statistics and previous data to predict potential health risks and the cost of the risk. They make use of data like family health history, job, location, hobbies, and more.

The actuary’s role is also beneficial to the insurance company’s customers and the insurance company itself. The data collected and analyzed by the actuary helps the insurance company determine the potential cost of Health Care for their customers and guides price negotiations with providers.

Life Insurance

In this aspect of the insurance industry, Actuaries are responsible for guiding the creation of life insurance policies for people and groups. They gather information on the individuals or groups that can affect the cost of certain events and estimate the possibilities of death over time. 

Property and Casualty Insurance

This aspect of the insurance industry is involved in insuring properties from damage due to accidents, natural occurrences, and other factors. Actuaries who work with property and casualty insurance companies professionally help draft insurance policies covering personal and property losses. 

The actuaries estimate the potential claims that might arise from vehicle accidents. They also gather information on the person applying for the insurance policy, such as age, driving history, possible traffic violations, the type of car model the person drives, and many other factors. They then use this information to determine the possibility of an accident occurring and its cost to manage that event.

Pension and Retirement Benefits

This aspect of the insurance and finance industry deals with drafting pension and retirement benefits for organizations.

Actuaries that specialize in this aspect are tasked with designing, testing, and evaluating the pension scheme of that organization; the make of the financial statements and revenue of the organization to determine if it can support the pension plans that have been drafted. 

These actuaries also must present their findings to the government. 

Pension and retirement benefits actuaries also help organizations draft retirement plans and health plans, and they also provide advice to individuals close to retirement.

Enterprise Risk

Actuaries in this field are tasked strictly with predicting any type of risks, either long-term or short-term, that might arise; it could be economical, geopolitical, financial, and more. As long as that risk can pose a threat to the organization, the actuary has to predict it and develop possible solutions and strategies to help overcome it. 

Apart from private organizations, these actuaries are also common in parastatal companies or agencies. Actuaries working for the Federal government access potential changes to government implementations such as Social Security benefits, and they also research economic and demographic factors that can affect the country. Actuaries working in the state-level government can also edit and control insurance rates.

Some actuaries work as financial theory or financial risk consultants; they provide technical, financial services, and economic strategies to their clients. They can also work as auditors for other actuaries working in insurance companies, and they can also perform the duties of insurance actuaries. 

How To Become an Actuary

Becoming an actuary is not an easy task that one can achieve without commitment. To become an actuary, you will need a certain level of education and training. Actuaries are in a position where many trusts are placed on them and can’t afford to make mistakes. It can be very costly, so being an actuary is not a position that one should take lightly — or without proper qualification.

To become a professional actuary, there are certain levels of training you must pass through and qualifications you must achieve.

1. Get the Right Education and Proper Training

The fundamental and essential requirements are proper and adequate mathematics, business, and statistics mastery. These three fields of study are crucial if you want to be an actuary because they are the foundation on which all your work will revolve. 

If you want to become an actuary, you should have an undergraduate or bachelor’s degree in mathematics, statistics, actuarial science, and analytical studies. 

As an aspiring actuary, it is crucial for you to have a strong foundation in mathematics because you will deal a lot with crunching numbers, formulas, and the likes. You will also need to have a strong foundation in economics because you will deal with finances concerning the economy. 

Statistics is also vital for an actuary because you will need to analyze different information using statistics such as chats, flows, and the likes. You’ll also need statistics when making presentations; it is vital to arrange your data and findings in statistical formats that will be easy to understand and very informative. 

Apart from having a solid foundation in mathematics, statistics, and business education, other skills and training are needed to function as an actuary effectively. You may need to take extra courses on computer science, programming languages, the use of data analysis packages and software, statistical tools, and other related skills. 

All these technical skills will help you become an even better and sophisticated actuary, and it will help boost your rating and work effectiveness. 

Also, as mentioned earlier, it is part of the duty of an actuary to convey their findings to the appropriate body, and to do this, you must have good communication skills. As an actuary, you should be able to pass across your message clearly and concisely without confusing the party at the receiving end; you can take classes in writing and public addressing.

You should know that without becoming an actuary, you can’t have all these skills and knowledge.

2. Learn and Develop Relevant Skills

As an actuary, here are some basic skills that you should be adept with:

Computer Skills

In this age we live in, it is an essential requirement that you as an actuary should use the computer better than the average computer literate. It would help if you learned the current and most popular analytical software available like spreadsheet packages, programming languages, and the likes. You should also be able to make presentations with the computer. 

Communication Skills

It is crucial as an actuary to have good communication skills, and you should be able to pass along information in a straightforward and easy-to-understand format. 

Besides, an actuary works with quite a variety of clients, and not all can easily understand the complex workings of an actuary. For this reason, an actuary must be able to break down complex data sets into simpler but understandable bits for the client. 

3. Get Certified

If you wish to be a professional actuary, there are specific organizations that you must get approval from, the regulating professional societies, the Casualty Actuarial Society (CAS), and the Society of Actuaries (SOA). These organizations are professional bodies that anchor programs through which you can attain a recognized status as an experienced actuary.  

The Casualty Actuarial Society and the Society of Actuaries have two types of professional certifications that you can achieve; you can become an associate and a fellow. 

For actuaries specializing in insurance like health insurance, life insurance, retirement benefits, and finance, the Society of Actuaries is responsible for certifying them.

On the other hand, the Casualty Actuarial Society is responsible for certifying actuaries specializing in property and casualty areas. 

Here is a breakdown of the required certification process, associate certifications, and other actuary-related seminars/training.  

Associate Certification

Before you can be considered for certification by any of these bodies, you will need a college certificate in some educational fields such as mathematics, economics, business finance, and statistics.

To attain the certificate for Associate, you will need to write seven exams and pass all seven. These exams will require a lot of studying and commitment, and they will test your ability and skill as an actuary. If you can pass all seven, you become qualified for the certificate of an associate.

It is advisable to start practicing some of these actuarial exams while still an undergraduate. Most reputable organizations look for people pursuing an actuarial career with the relevant educational experience, work experience, and interpersonal skills who can pass these exams.

Fellowship Certification 

Apart from the exams you write, both the Casualty Actuarial Society and the Society of Actuaries expect aspirants to undergo professional seminars. They have mandatory online courses that aspirants are expected to go through. 

Attaining the associate-level certification takes 4 to 7 years on average because the certification exams are not something that comes easy; you will need to put in long hours of intensive study over a long period before you can adequately pass all the exams. This standard is set this high to prevent mediocre actuaries from getting into the system and ensure that anybody with the title of “Associate” actually deserves it and can defend it. 

When you’ve achieved the status of Associate, it usually takes up to 2 years on average to achieve the level of a Fellow.

The Society of Actuary offers certificates for Fellowship in different specialties such as; group and health benefits, retirement benefits, investments, finance risk management, and life and annuities. However, the Casualty Actuarial Society doesn’t do this.

4. Attend Society Organized Seminars and Training 

If you get certified by the Society of Actuaries or the Casualty Actuarial Society, that is not the end of the road. Both organizations have a continuous education policy; even after you’ve achieved the status of Associate or Fellow, you will still have to keep learning. You are expected to keep going for seminars and training organized by the societies. 

The whole point of this continuous education policy is to keep the actuaries on their toes and to ensure they remain sharp as ever. These educational seminars also bring actuaries up to date on new skills and developments that can help further their effectiveness. In these seminars, new technological developments and other advancements are introduced.

If you believe that becoming a certified actuary is easy, it is best to get rid of that idea. The fact is, it is not an easy path to walk, and you will need a lot of determination and commitment to attain the status. Still, in the end, you can rest assured that your efforts will not be in vain because there are a lot of benefits that come with being an actuary.

Benefits of Becoming an Actuary

Several benefits come with being an actuary, one of which is the payment; actuaries make a median annual wage of about $111,030. Regardless of which area you specialize in, you are sure to make a comfortable earning. The average rating of a new actuary is approximately $56,279; that of an experienced actuary is close to twice the amount.

Also, actuaries are the most employed, and the demand for actuaries in the economy is rising. You can be confident that once you’ve earned your certificate as a professional actuary, you are going to get a well-paying job. According to reports, it is said that the employment rate for actuaries will likely experience a boost of about 18%.

There are many opportunities for the full-time employment of actuaries in both the public sector and private sector. Depending on your geographic location, qualified actuaries can find work in state and federal governments performing tasks such as analyzing insurance policies to ensure they follow state regulations.

There are many different entry-level areas of specialization for a qualified actuary, such as pension actuaries, health insurance actuaries, Casualty Insurance actuaries, financial and market analysis, to name a few.

Frequently Asked Questions

How Long Does It Take To Become an Actuary?

To become an actuary, you must be ready to give it a lot of time. It can take 7 to 10 years to attain the highest certificate possible, which is the status of a Fellow. There are a series of 10 exams that you will have to take to achieve this level, and they require a lot of studying and months of preparation.

Is It Hard To Become an Actuary?

It is pretty challenging to become a professional actuary because you will need to study continuously and write several exams. Most people have to rewrite some of these exams several times before they eventually pass them.

A career as an actuary is not a joke, it pays in the end, but the process of getting there is not very easy. What matters eventually is your willingness to persevere.  

Is It Worth Becoming an Actuary?

It is worth becoming an actuary if you have the time. The number of available opportunities to an actuary is limitless, and you are sure to get a well-paying job irrespective of where you are. From research and statistics, there is a very bright future for actuaries.

The employment rate is also sure to boost, and the amount of revenue you can generate from being an actuary is sure to increase with time.

Final Thoughts

The road to becoming an actuary is not an easy one. However, with a commitment to the certification process, you can be an actuary. If you’re ever going through a rough patch while trying to attain any of the actuary certifications, remember this; actuaries are relevant in a vast range of fields, and their skillset is highly valued.  

This career path promises great things, and it can only be achieved if you make it through the rigors of obtaining a professional certification as an actuary. 

By Bryan Greene