Reprint of an article by Mark Alan Chesner, Milliman & Robertson, Inc. Printed in Careers and the College Grad, Crimson & Brown Associates. Reprinted by permission of Mr. Chesner, 31 Jan 97
In its broadest sense, an actuary is a person who expresses the likely future results of actions in monetary terms. How much more will it cost the taxpayers of New York State if the maximum age of an existing dental insurance program for children is extended from 12 to 18? How much should residents of Northern New Jersey be charged for flood insurance? How much more in dividends on a particular class of whole life insurance policies will be paid next year if the dividend formula is revised? These are typical questions actuaries are asked to answer.
An individual becomes an actuary by passing a lengthy series of challenging exams administered by either the Society of Actuaries (SOA) or the Casualty Actuarial Society (CAS). There are fewer than 20,000 people who have reached either Fellowship (all exams passed) or Associateship (a partial prescribed list of exams). Don’t underestimate the difficulty of the actuarial exams. The passing rate for the first few is below 50%!
The current edition of the Jobs Rated Almanac ranked 250 jobs from accountant to zoologist and placed “actuary” as the number one profession in America. The six criteria were job environment, income, outlook, physical demands, security and stress.
New hires with one exam can expect to earn from the mid 30s to nearly $40,000. Some new Fellows may earn $100,000. Successful entrepreneurial actuaries and senior officers in insurance companies make multiples of $100,000.
Most employers assist exam takers by providing study time and by paying for after-work classes, books and exam fees. Automatic raises typically accompany passage of exams. Actuarial students pick up knowledge on the job while working for more senior people. Large insurance companies often have a formal job rotation program, where the student will work in a particular area for one or two years and then move on to another area. This gives the student a broad exposure to multiple departments within an insurance company. Students hired by consulting firms should expect to work longer hours with less study time than those joining insurance companies.
While in college, students should take courses which prepare them for at least the first two actuarial exams. These two exams cover calculus, linear algebra, probability and statistics. Students should obtain a copy of the exam syllabus and take courses covering as many topics as possible that will be tested in later actuarial exams. Students hoping to become actuaries often graduate college with one or more exams already passed.
All aspiring actuaries must excel at math as the early exams are pure mathematics exams. Other topics covered in the actuarial syllabus include economics, finance, law, accounting and investments. The broader a person’s computer knowledge, the better, as it enables the student to become involved in a greater variety of projects.
In addition to strong math skills, successful new actuaries must demonstrate superior communication, leadership and teamwork skills as Fellows are expected to eventually hold senior positions within their organizations. Problem-solving skills are also essential.
In the past, actuaries have had the reputation of being back-room number crunchers. This is becoming less and less the case. Assignments vary tremendously from actuary to actuary and often from week to week.
Actuaries have traditionally worked for insurance companies, consulting firms, government and colleges. In recent years, the proportion of consulting actuaries has increased while the proportion of insurance company actuaries has decreased. However, there may not be enough new positions created to handle new Associates and Fellows. In response, the SOA began to change the exam syllabus and will continue to do so. In the near future, the syllabus likely will be expanded to cover actuarial mathematics applied to industries beyond the traditional ones, such as manufacturing. There has been concern over the increased length of time spent attaining Fellowship status and it is anticipated that the upcoming syllabus will return to fewer but much longer exams than the current piecemeal testing approach.
Recently, for the first time in the history of the profession, some actuaries are unemployed. This resulted from several forces including insurance company mergers and acquisitions. Ironically, another of the causes of the unemployment was achieving the same number one rating several years ago in the First Edition on the Jobs Rated Almanac. This premier rating caused a large increase in exam takers who are now wending their way through the syllabus. In response to unemployment among actuaries, the SOA began a few job assistance service matching resumes of unemployed actuaries with company-supplied available positions. The SOL individual coordinating the job assistance service reports that the situation recently has improved tremendously with the number of positions available now greatly exceeding the number of people with resumes on file.
Other trends in the profession involve increased internalization and working with new classes of risk takers. For instance, a U.S. insurer may want to begin doing business in several new countries in Asia. Accordingly, actuaries are being sent to work in foreign countries with increasing frequency. The health field is undergoing a tremendous shift in risk away from commercial insurers to Health Maintenance Organizations (HMOs) and other healthcare providers. Current growth areas — from entry-level students to Fellows — are managed healthcare and asset/liability matching. In addition, pension positions have had a recent resurgence.
Mark Alan Chesner is a Consulting Actuary with Milliman & Robertson, Inc. in Manhattan. The Society of Actuaries has a package of information available. Contact the Society at 475 N. Martingale Road, Schaumburg, IL 60173-2226.