If you enjoy the challenge of high-level mathematical calculations, the actuarial profession could be the perfect fit for you. This high-paying career applies mathematical techniques of analysis to the understanding of risk management. To become an actuary, you’re going to need a bachelor’s degree in a math-focused area of study.
What Is an Actuary?
Actuaries are, simply put, professional analysts who apply mathematical and statistical calculations to the analysis of risk for practical purposes. By using statistical analysis and risk modeling programs and tools to perform mathematical calculations involving real-world information, like medical or property data, an actuary can quantify risk.
Most actuaries work in the insurance, finance or business industries in some capacity. Putting a number on risk is an important step toward managing risk. An actuary’s work guides the decisions and operations of organizations that operate in these industries that are highly affected by risk and uncertainty.
Examples of Actuarial Science Applications
Putting a number on financial risk in this way helps company executives and insurance underwriters make decisions to manage risks. For example, actuarial analyses inform whether an insurance carrier will offer a policy to an applicant and what insurance premium rates they should charge, based on the level of risk involved. Actuaries work for all types of insurance companies, including health insurance companies, auto and homeowners insurance companies, live insurance companies and business insurance companies.
Businesses may use actuarial calculations to determine the risk associated with new business directions – like launching new products and services or acquiring new companies – and to decide whether the likelihood of growth and success outweighs the financial costs and risks.
Even the federal government relies on actuaries to calculate the financial risks and benefits of making changes to federal programs like Social Security and Medicare, according to the United States Bureau of Labor Statistics (BLS).
Types of Actuarial Careers
All actuaries analyze the mathematical likelihood and financial costs of risk, but actuarial skills can be used for different applications in different industries. Actuaries use their strong analytical skills to identify risks – including future risks – and test insurance policies, investment strategies and other methods to manage risk.
There’s a reason that actuaries are best known for their work that contributes to pricing insurance products. More than three-quarters of all actuaries worked in the finance and insurance field as of 2020, according to the Bureau of Labor Statistics (BLS). Around one in 10 actuaries worked in the professional, scientific and technical services industry, often for consulting firms.
The management of companies and enterprises industry employed 5% of the field, and the government – at federal and state levels – employed 4% of actuaries. Around 2% of the field is self-employed.
The likelihood of an aspiring actuary ending up working for an insurance company is high, but there are still several different roles for insurance actuaries.
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Property and Casualty Insurance Actuaries
The property and casualty field of insurance encompasses all kinds of insurance policies that cover damage to the policyholder’s property (property insurance) and the policyholder’s liability for harms that arise out of related accidents (casualty insurance). Car insurance, homeowners insurance, renters insurance, condo insurance, landlord insurance and even power sports insurance fall under the umbrella of property and casualty insurance.
Actuarial employers in the property and casualty insurance industry use their technical skills in calculating risk to determine, based on data, the likelihood of a claim. The more likely a claim is, the more money the insurance carrier needs to charge to make offering a policy worthwhile for the company.
Actuaries typically look at a wide array of data to make these determinations. In the case of auto insurance, for example, the policyholder’s driving history, age, type and age of vehicle and other factors may be used to determine the statistical probability that the company will have to pay a claim during the coverage period.
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Health and Life Insurance Actuaries
The health and life insurance industries also rely on actuaries. A life insurance actuary analyzes demographic and health history data to determine how long an applicant is likely to live. The likelihood of having to pay out on the policy during the policy term determines how much the life insurance company will charge the policyholder.
The basic tasks of a health insurance actuary – compiling data to develop spreadsheets and databases, using statistical methods to analyze data and writing reports on the statistical likelihood of risk and its accompanying costs – are comparable to that of actuaries in other areas of the insurance industry. However, instead of focusing on whether the company will have to pay benefits on the policy, actuaries in this field are seeking to calculate the expected amount of health benefits the insurer will have to pay under the terms of a medical insurance policy. Health insurance actuaries have to account for changing healthcare regulations, in addition to the other factors that come into play in this analytical field that emphasizes the techniques of mathematical statistics.
Claims may or may not happen under an auto insurance, homeowners insurance or life insurance policy, but they are almost a certainty under a medical insurance policy. Even a person who stays healthy all year long will still use their insurance coverage for wellness checkups, routine vaccinations and any prescriptions they are taking to manage their health.
Pension and Retirement Actuaries
Actuary jobs are most commonly associated with working in the insurance industry, but the finance industry is the other top employer of actuaries. In particular, most employers in the finance industry seek to hire pension actuaries whose job is to put their data analysis skills to work assessing retirement benefits.
Will company pension plans have enough funds to actually pay out the promised benefits? What about the defined contribution 401k plans? These are among the questions pension actuaries seek to answer based on statistical calculations performed using real-world data.
Enterprise Risk Management Actuaries
The finance and insurance industry may account for approximately three-quarters of the actuary workforce, but that still leaves nearly one in four actuaries working outside this industry. Actuaries who apply their analytical skills to the evaluation of risk in business enterprises outside of the insurance and finance industry are known as enterprise risk management actuaries.
It’s in the best interests of all companies to minimize risk that could undermine their profits. However, risk is part of doing business, especially when taking steps to grow that business. Companies in different sectors and industries may face specific risks, such as geopolitical risks that arise out of current events like military conflicts and natural disasters or out of changing political movements and new legislation.
Additionally, just about all companies face the potential for economic and financial risks, such as the cost and availability of the supplies needed to offer their products and services or consumers’ interest in and illness to pay for these products and services.
Actuaries in this area of specialization typically work to determine what risks could potentially impact a company in terms of both short-term and long-term performance. The analyses of experienced workers in this actuarial position guide the company’s business strategies and the formation of risk mitigation policies.
Chief Risk Officer
For an experienced actuary with plenty of ambition, the sky is the limit when it comes to career advancement. Some actuaries advance to senior management “C-suite” roles like chief risk officers (CROs). These senior executives are the ones in charge of identifying, analyzing and minimizing and mitigating risks to the company or organization at a high level.
Chief risk offers may lead risk management or corporate compliance departments within a company. As such, their day-to-day work has less to do with completing the mathematical calculations commonly involved in actuarial practice and more to do with planning and developing strategies and policies for risk assessment and management. Chief risk officer isn’t an actuarial position, per se, but it is the executive position most closely related to actuarial work.
Nonprofit and Public Sector Actuaries
Business organizations in the insurance and finance industry are, generally, for-profit companies. However, an actuary may also find work opportunities in the government or for a nonprofit organization. In addition to being employed in-house at a government agency or nonprofit organization, public sector actuaries may work for a consulting firm that specializes in actuarial consulting for nonprofit organizations.
The Social Security Administration is one example of a federal government agency that employs actuaries. State governments also employ actuaries, particularly in insurance regulation departments and divisions of pensions and benefits.
Outside of government actuarial roles, nonprofit jobs for actuaries might encompass roles in data analysis for larger nonprofit organizations or in the analysis of charitable fundraising campaigns.
Job Outlook and Earning Potential for Actuaries
In 2022, both the job market and salary potential for actuaries make the career path appealing.
How much do actuaries earn? The median annual salary reported for actuaries of all kinds in 2021 was $105,900, according to the BLS. Median salary rates were highest for actuaries working for the government ($110,590), followed by the median annual wage reported for the finance and insurance industries ($110,000). Actuaries in the professional, scientific and technical services industry and the management of companies and enterprises industry reported a median salary in the range of $101,500.
At the top of the earnings scale, experienced actuaries who have achieved fellowship status earn upwards of $150,000 to $200,000 per year, according to BeAnActuary.com, a resource jointly provided by the two major professional organizations in the actuary field, the Society of Actuaries (SOA) and the Casualty Actuarial Society (CAS).
Naturally, more experienced actuaries who have completed the certification process are the ones earning these exceptionally high salaries. For entry-level actuaries, PayScale.com reported a national average salary of $60,201. As they make their way through the exam process, workers in this field earn more money for each of the certification exams passed.
Another reason to become an actuary is the excellent job outlook. The actuarial career field is seeing exceptional job growth. Between 2020 and 2030, the BLS expects job opportunities for actuaries to increase by a much faster than average rate of 24%, or four times the percentage of job growth predicted for all occupations during that timeframe.
Being a certified actuary isn’t easy. You must excel at math and learn to use computer programming languages so that you can run complex calculations using statistical analysis software.
For most actuaries, career advancement isn’t based strictly on job performance or years of work experience. To advance your career or even just stay competitive in your field, you need to take numerous certification exams – generally, seven exams just to reach the associate actuary level of certification and additional exams to achieve fellowship-level certification – of increasing levels of difficulty. Passing exams is a major factor in an actuary’s job prospects for career advancement and earning potential.
If you have what it takes to become an actuary, you will be rewarded with high earning potential and plenty of job opportunities. Employers of actuaries often award raises or bonuses for each passed exam as the actuary makes their way through the certification process.
The Best Degree for Actuary Careers
To become an actuary in any area of the field, you’re going to need an undergraduate degree in a math-related field. While strong math skills are more important for success in actuarial careers than any particular major you could choose, some programs of study are preferable to others for becoming an actuary.
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A degree in actuarial science is the most direct route to the profession, but students often major in either math or statistics with the goal of becoming an actuary, as well.
Actuarial Science
If there’s one degree that most closely relates to the actuary career, it’s the actuarial science major. In actuarial science programs, students pursue a course of study specific to building mathematical and statistical skills in data analysis – and using analytical software – to calculate risk. Developing broad knowledge of the business world and the finance and insurance industries allows future actuaries to understand the applications of the statistical data and methods with which they work.
For actuarial science majors, the curriculum typically encompasses an actuarial internship and a curriculum that aligns with the content of the first actuarial certification exams administered in the exam process. Prospective actuaries typically take their first exam as early as the summer after their freshman year of college.
Mathematics
Not all colleges and universities offer degrees in areas as specific as actuarial science. However, degree programs in mathematics are widely available at both four-year institutions and community colleges. Math skills are critical for success in the actuarial field, which makes mathematics a solid choice of study for an aspiring actuary.
Majoring in mathematics doesn’t provide students with the background in business or the focus on preparing for the certification process that the more specialized actuarial science major would. However, this course of study does equip you with the skills needed to perform high-level calculations of financial risk.
Math is a versatile major, since you can apply your mathematics skills to other math-related occupations outside of insurance. If you decide to major in math as part of your preparation for an actuarial career, you should consider using your elective courses to build a background in business and computer science.
You should also spend some time researching the certification process. It’s in your best interests to start taking your actuary exams before you finish college. Since you won’t be taking courses designed specifically to align with the content of the first professional exams, you’re going to have to prepare for these difficult certification exams independently. Find study materials from reputable sources and start studying for the exam early. Adequately preparing for a three-hour actuary exam like the Probability (P) Exam or the Financial Mathematics (FM) Exam requires about 300 hours of study using the appropriate study materials.
Statistics
Actuaries typically use statistical analysis tools in their daily work, so the more you know about statistics and probability, the better. If you decide not to pursue your undergraduate degree in actuarial science, majoring in statistics is a great option that offers plenty of versatility.
Coursework in an Actuarial Science Degree Program
Suppose you take the plunge and enroll in an actuarial degree program. What can you expect from majoring in this specialized subject of study?
What Is Actuarial Science?
Actuarial science is the field of study concerned with professional actuarial practice. This math-based discipline is intended to prepare students for the specific career of an actuary. Actuarial science is a field of data analysis that pertains specifically to the quantitative analysis of risk, and as such, the subject of study includes classes pertaining to business topics.
An important part of an actuarial science program is preparing prospective actuaries to pass their first certification exams. Additionally, gaining hands-on work experience through an internship is particularly important in this field of study.
Common Classes in an Actuarial Science Curriculum
The Society of Actuaries recognizes specific Universities & Colleges with Actuarial Programs (UCAP) that offer a bachelor’s degree in actuarial science. Even among UCAP schools with actuarial degree programs, there are levels of recognition depending on the extent to which the program prepares students for preliminary exams and other eligibility requirements.
Most actuarial science bachelor’s degree programs start with a series of coursework in calculus, as well as classes in general mathematics branches like linear algebra. More specialized studies of mathematics include data analytics, probability in general and specific to risk management, financial mathematics, models for financial economics and the theory of interest.
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Math is an important part of actuarial work, but an actuarial science degree program encompasses business coursework, as well. Students should expect to take classes in corporate finance, financial accounting, microeconomics and macroeconomics and econometrics, the field concerned with applying statistical methods of analysis to economic data.
The analytical skills upon which actuaries rely go hand in hand with the technical skills needed to use complex statistical analysis software. Often, students of actuarial science take at least a course or two in computer science topics like data structures and computer programming to prepare for the challenges of using statistical analysis these tools.
Advancing Your Actuarial Career Through Actuarial Exams
Actuaries earn more money as their level of professional certification increases. Certification is advanced through the passing of certification exams.
Seeking Certification From the Casualty Actuarial Society or the Society of Actuaries
Both the CAS and the SOA offer professional certification for actuaries, and both organizations require candidates to pass a series of exams to get certified. This can lead to a common question among potential actuaries: through which certification organization should they pursue certification exams?
Which organization you go through to pursue the credentials to become an actuary depends on what work you would like to do in this field. If you’re interested in a career in life and health insurance or in pensions and retirement, you’re going to want to follow the certification exams process under the Society of Actuaries. The SOA certifies actuaries interested in enterprise risk analysis roles as well through its Chartered Enterprise Risk Analyst (CERA) credential. If jobs in property and casualty insurance appeal to you, you should seek certification through the CAS.
How Many Actuarial Exams Are There?
In total, there are 10 actuarial exams, although not everyone working in the actuarial profession takes all 10 of these certification tests.
There are two levels of actuarial certification: associate certification and fellowship certification.
Associate Actuarial Certification
To become an Associate of the Society of Actuaries, a qualification offered by the SOA, you need to pass six or (historically) seven exams. Aspiring actuaries should note that the SOA has recently changed the process to become an actuary with associate-level certification, announcing in 2021 that the Investment and Financial Markets Exam (Exam IFM) would no longer be required, among other changes.
Becoming an Associate of the Casualty Actuarial Society (ACAS), the associate-level credential awarded by the CAS, generally requires passing seven actuarial science exams.
Fellowship Actuarial Certification
You don’t need to attain fellowship-level certification to become an actuary, but having this level of professional credential can increase your earning potential considerably. To become a Fellow of the Society of Actuaries (FSA), you need to pass three to four exams beyond those required for associate-level certification, depending on the specialty track in which you’re seeking certification. Becoming a Fellow of the Casualty Actuarial Society (FCAS) generally requires passing another three exams.
Aspiring actuaries should be aware that it may not be enough to pass actuarial exams. You may also need to take online courses (and their accompanying assignments and exams) through the certification organization and meet validation by educational experience (VEE) requirements. Additionally, certified actuaries must meet continuing education requirements throughout their careers to maintain their credentials in good standing.
When Do You Take Your Actuarial Exams?
Even for entry-level actuary jobs, many employers expect candidates to have already passed at least one exam, if not two or more exams. As such, you should plan to take the first of the preliminary exams – at least the Probability Exam (Exam P) and the Financial Mathematics Exam (Exam FM) – before you graduate. Some students also seek to pass the Models for Financial Economics Exam (Exam MFE) before graduating.
Beyond graduation, you should be prepared to take exams throughout the course of your career until you become a fully certified actuary. This may mean taking exams as frequently as every one-and-a-half to two years. Most employers support actuaries’ efforts to advance their level of certification by paying for exam fees, exam preparation materials and paid time off of work to study for the test. Raises in the actuarial profession are often awarded based on progress toward certification, as measured by the passing of certification exams, according to BeAnActuary.com.
Achieving associate-level professional certification in the actuary profession can take up to seven years, according to the BLS – if not longer. Reaching fellowship status often takes an additional two to three years. If you’re counting the full professional certification process, it can take up to a decade to become an actuary after earning your bachelor’s degree.
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