College students and recent graduates sometimes ask me for advice about an actuarial career. Here are some of my thoughts:
There are many actuarial societies whose mission is educational. In the US and Canada, we have the Casualty Actuarial Society (CAS) and the Society of Actuaries (SOA). Their scopes sometimes overlap, but in 15 words or less, the CAS does property and liability, and the SOA does life, health, and pension. Both do finance. Until you are ready to specialize, you should look into both societies.
Many countries have their own country-specific actuarial society. Some of them give their own exams, and some of them accept the CAS and SOA exams. If you are not in the US and Canada, please consult your country's specific requirements.
The first actuarial exam is on Probability. This is calculus-based probability (for example, if your college probability and statistics courses never mentioned the exponential distribution or moment generating functions, then your courses were "probably" not calculus-based). Some of the problems will use vocabulary from risk and insurance; this can be self-studied, but you really need to get the item from the reading list that addresses this (namely: "Risk and Insurance," Society of Actuaries Study Note P-21-05;).
Note that in contrast to many years ago, we no longer test calculus directly. Instead, we test probability in such a way that you need some mastery of calculus to understand the probability and the insurance concepts.The second actuarial exam is on Financial Mathematics. You really need to use the suggested reading list because it is unlikely you have studied precisely this in your college classes. This exam covers theory of compound interest with a calculus prerequisite, and introduction to financial instruments including derivatives and the concept of no-arbitrage.
The three subjects of Economics, Corporate Finance, and Applied Statistical Methods fall under a category called Validation by Educational Experience (VEE). These subjects may be satisfied in several ways including earning a B- or better in an approved college course. The details for this are best discussed in the SOA and CAS web sites. Note that the approval of the course is by the actuarial societies, so your college needs to work on the approval process if it has not already done so.
Besides math, you should take a writing course, preferably a business writing course if one exists. A lot of actuarial work involves communicating the results of actuarial calculations, in writing, to people who are not actuaries. Obviously if there is a course called introduction to insurance, or something similar, take that. Some other useful courses would be calculus-based statistics, economics, finance, accounting, and business law.
You can get the reading list and sample problems for the first few exams here. You can register for the first few exams here.
If you are looking for plenty of problems, try Mad River Books; 1-800-282-2839.
The first two exams and the fourth exam are offered jointly by the CAS and the SOA. The third exam is called actuarial models. Exam 3 is actually two separate exams: one in Financial Economics which is the same exam for both CAS and SOA, and one in Life Contingencies where the CAS and the SOA each give their own version of the Life Contingencies exam.
After the first four (and also with number three), you will need to pick a specialty. Each society offers its own set of exams, and they are not the same.
Not an easy question to answer. The reading list for the first exam describes the topics tested on the first exam and will suggest whether these topics either look familiar to you or not. If not, you will have to learn them on your own. Any math major (or someone with another major who has taken a lot of college math) has already seen many of these topics, although he or she probably needs to review them for the exams. The subsequent exams take some of these math topics and extend them to insurance applications. No math major has already seen these topics, but the issue is how well a person can use their basic math (calculus and calculus-based statistics) and understand how they are used in new applications. I use very little advanced math on the job in my daily work, and often my work is just arithmetic. But on the other hand there are business problems that other insurance professionals have no idea how to attack, and an actuary has a wealth of mathematical tools at his or her disposal. Statistics, economics, finance, business,science and engineering majors who have taken a lot of math and who like math are also good candidates to become actuaries.
The first few actuarial exams are pure math and are similar to the subjects you study in college. You should try to pass the first few exams while you're still in school for several reasons. First, so that you have some idea how difficult they are. Second, because the material should be fresher to you than it will be a few years later. Third, because most employers expect that you have passed one or more exams when you apply for that first job, especially since you will be competing against other people who have passed some.
You should also try to continue passing exams as quickly as you can while you're working. The obvious reason for this is because this will help you advance in your career, give you exam raises, give you more flexibility for job assignments or job changes, etc. There is also a less obvious reason for this which I have not often heard actuaries say, although I doubt if experienced actuaries would disagree: The more responsible your job is and the greater your family responsibilities are, the harder it will be to make time to study for actuarial exams. In other words, it is one level of difficulty to pass an exam when you are 24, single, and doing routine actuarial work, but it is an entirely different level of difficulty when you are 45, married with three kids, and the chief actuary reporting to the company president. (Having been in both positions, I can say this from personal experience.)
The work varies by employer and specialty, but very generally speaking you will be working with lots of data, looking for patterns and trends, performing various actuarial calculations, and ultimately recommending either the price to charge for some sort of insurance deal or else how much to set aside to pay for claims. That of course is a gross over-simplification, but it is impossible to describe the kinds of work done by an entire profession in one sentence.
I am not a lawyer, doctor or accountant, but if I were I would guess that in my first year in those professions I would not be arguing in front of the Supreme Court, doing open heart surgery, or doing Bill Gates's tax return. Analogously, in the first year of actuarial work you will be doing some pretty routine calculations as you learn the insurance, actuarial and company environment. Experienced actuaries do higher level, large dollar amount projects, and generally do not describe their work as boring.
If you are still in college, you should encourage your math department to find out who the local employers of actuaries are, and then invite them to send an actuary to speak to your school about what actuaries do. You may need help from the college career placement office if your math department does not know where to find these employers. Not every actuary enjoys public speaking, but many do.
It would not hurt once in a while to read some insurance periodicals to see what is currently important to insurance professionals. The National Underwriter, Business Insurance, and Bests' Review are three such periodicals. Note that each of these has a separate life edition and property/casualty edition, and the online versions are abbreviated. Unless your college offers an actuarial or insurance major, these periodicals may not be in your college library. Ask your college librarian where to find them.
The following is a piece of advice that I stumbled on: Volunteer to join the financial committee of a non-profit organization that you already belong to, such as your religious organization. This will get you involved in reviewing the financial statements (balance sheet, profit and loss statement, others) of that organization, and will prepare you for the time when you will be involved in the financial statements of your insurance employer. Further, try to find out who buys the insurance for your non-profit organization, and find out what kinds and how much insurance they buy.
Although actuaries can be found in nearly every state and province, most actuaries work in or near the very biggest cities. Go to your college placement office or to the library and find a list of insurance companies and their home offices. Not all actuaries work for insurance companies (other employers are consulting firms, government, organizations that buy insurance or serve the insurance industry, etc.), and not all insurance company actuaries work in the home office, but this is a good way to start your search. Or, if you are looking for a credentialed actuary in say, Fargo ND, you can search the actuarial directory.
There are some actuarial recruiters that provide salary survey data: D. W. Simpson & Co., and Ezra Penland.
Most actuaries, myself included, only have experience in one of these, and in my opinion are poorly equpped to do a fair job in comparing life versus property/casualty. Stuart Klugman, PhD, FSA, and professor of actuarial science at Drake University, concedes he has worked in neither the life nor the property/casualty field, but he offers the following opinions:
1. If by "actuarial techniques and knowledge" it is meant formulas with special symbols (e.g. A(m)x:n) then the life folks win. If a more general view is taken, that an actuarial technique is the application of modeling tools to risk financing problems, then it is a tie with the Property/casualty world leading with regard to the amount of creativity needed and the lack of cookbook solutions to many problems.
2. My guess is that life companies use more actuaries in non-actuarial capacities than do Property/Casualty companies and in part that contributes to the higher numbers. If your ultimate goal is to be VP of information systems, of marketing, or of some other non-actuarial department, the prospects are better in a life company.
3. There are boring jobs on both sides (Property/Casualty - doing state-by-state personal auto filings by filling in the blanks from last year's method. Life - completing form 5500B for defined benefit pension plans).
4. Probably most critical to decision making today is what skills/tasks will be important 10 years from now when today's entry-level actuarial will be doing really serious work. Here is my forecast: Life -- The most successful actuaries will be "financial engineers" who are conversant on both sides of the balance sheet. Financing the risk is more important than underwriting the risk. Property/Casualty -- Statistical modeling will still be key. The randomness inherent in the loss process for PC coverages is much harder to deal with than age at death.
5. One area of convergence of the two sides to our profession is the emerging field of enterprise risk management. (Excerpted from Wikipedia - It is the methods and processes used to manage those risks, possible events or circumstances that can have negative influence on the enterprise in question. It can also include credit risk and market risk.) Much of the progress in introducing actuaries to this subject has been through joint efforts of the CAS and SOA. When looking at the entire company, many of the line of business distinctions become less important.
(Thanks, Stuart, for granting permission to me to post this.)
If you are advising people about actuarial careers and the appropriate courses to take, then you should be advising them to take at least one course on insurance. If a student decides he or she hates insurance, they are not going to enjoy being an actuary. If your institution does not currently offer a course in insurance, can you find one at a nearby college? Or online? When I interview someone for an actuarial job, is it too much to expect that the applicant knows SOMETHING about insurance?
Also, professors and college advisors should get the appropriate Economics, Corporate Finance, and Applied Statistical Methods approved under the Validation by Educational Experience (VEE) concept discussed above.
What else can you do with a degree in math?
If you or a friend are considering becoming a high school or middle school
math teacher, in the US you will need to take one of the Praxis II math exams.
This url is http://jerry.praxisiimath.com/advice.html and was last updated Apr. 2, 2012
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also my actuarial joke page. Good luck!
Jerry Tuttle, FCAS.