Are you interested in becoming an actuary and curious about what the career actually entails? What exactly does an actuary do, how much can an actuary earn and how do you become one yourself?
Let's dive in.
What is the work of an actuary?
An actuary is someone who deals with the measurement and management of risk and uncertainty.
More specifically, "actuaries analyze the financial costs of risk and uncertainty," according to Truity. "They use mathematics, statistics and financial theory to assess the risk that an event will occur and help businesses and clients develop policies that minimize the cost of that risk."
In general, actuaries work on teams of managers and other professionals in the finance field, such as underwriters, accountants and financial analysts. That said, actuaries usually hold supervisory roles, responsible for delegating tasks and offering advice for senior management, as well as sometimes responsible for testifying before public agencies on proposed laws that affect their business.
Actuaries usually work for insurance companies, designing policies and determining profitable yet competitive premiums for those policies. Within the insurance field, however, actuaries are usually specialized.
They may specialize in fields such as one of the following:
- Health insurance actuaries: Health insurance actuaries "develop long-term care and health insurance policies by predicting expected costs of providing care under the terms of an insurance contract," according to Truity. They base their predictions on numerous factors such as family history, geographic location and occupation.
- Life insurance actuaries: 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," according to Truity.
- Property and casualty insurance actuaries: 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," according to Truity.
- Pension and retirement benefits actuaries: 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," according to Truity. They are then required to report their evaluation results to the federal government. They may also help businesses come up with other retirement plan types, such as 401(k)s, as well as help come up with retiree healthcare plans for companies and offer retirement planning services for individuals.
What is the average starting salary for an actuary?
According to data reported by the U.S. Bureau of Labor Statistics (BLS), the median annual pay of an actuary was $101,560 as of May 2017. This breaks down to an average pay of $48.83 per hour. That said, experienced actuaries have the potential to earn from $150,000 to $250,000 annually.
Of course, not all actuaries start at such a high salary, however. Starting salaries for actuaries average around $56,202 a year, according to ZipRecruiter. This will depend on experience, training, location and other factors, of course.
How do you become an actuary?
Becoming an actuary requires a lot of hard work — school, a certification process and training.
Actuaries usually hold a bachelor's degree, typically in mathematics, actuarial science, statistics, business or another analytical field, and some students might even complete coursework in applied statistics, corporate finance, calculus, economics, accounting, management and more.
To help prepare them for the career as an actuary, many students will also complete coursework in computer science, such as on programming languages, and using spreadsheets, databases and statistical analysis tools.
Many students will go on to take internships for experience, but most employers will expect students to have passed at least one of the actuary exams needed for professional certification — which leads us to the certification process.
There are two professional societies through which an actuary can become professional certified:
- The Casualty Actuarial Society (CAS): This certifies actuaries who work in the property and casualty field, including automobile, homeowners', medical malpractice and workers' compensation insurance.
- The Society of Actuaries (SOA): This certifies actuaries who work in life insurance, retirement benefits, investments, finance and health insurance. This is the more popular of the two certification programs, as most actuaries in the United States are certified through this program.
Both of these programs (which are usually sponsored by companies) lead to professional status, offering two levels of certification upon the completion and passing of exams:
The CAS requires actuaries to pass seven exams for the associate certification, while the SOA requires actuaries to pass five exams for the associate certification. Both the CAS and the SOA require actuaries to also take seminars on professionalism and take mandatory e-learning courses.
How long does it take to become an actuary?
Because each exam takes hundreds of hours of preparation over months of studying, it usually takes about four to six years for actuaries to get a CAS or SOA certification. That said, for some actuaries with other responsibilities to slow them down, it can take well more than four to six years to become certified in their careers.
Then, they usually take another two to three years (or more) to reach fellowship status, which they can do in a variety of ways. The CAS does not offer a specialized study track for fellowship certification, but the SOA offers five different tracks: life and annuities, group and health benefits, retirement benefits, investments and finance/enterprise risk management. It's up to each person to decide what track they want to pursue, which will, of course, impact their career down the line.
In the actual working world, most actuaries will start out on teams as trainees under more experienced actuaries who serve as their mentors. They'll typically start out doing assistant work, as well, while they learn the ropes. Then, as they progress, they may receive a bonus or raise upon completion and passing of each exam during their certification process. And, eventually, they'll work their way up to be able to mentor the next wave of trainees.
AnnaMarie Houlis is a feminist, a freelance journalist and an adventure aficionado with an affinity for impulsive solo travel. She spends her days writing about women’s empowerment from around the world. You can follow her work on her blog, HerReport.org, and follow her journeys on Instagram @her_report, Twitter @herreportand Facebook.