Predicting the unexpected and minimizing risk is important for today’s companies to stay competitive in a tight market. That’s precisely where actuaries come in. An actuary is a financial guru who uses in-depth statistical analyses to evaluate the costs of uncertainty. Actuaries focus on assessing the risk that certain events will occur, such as fires:
- car accidents
- deaths
- unemployment
- natural disasters,
Probability charts constructed by actuaries play a pivotal role in helping executives develop smart policies that reduce the potential for financial loss. Most actuaries select a specialization like:
- health insurance
- life insurance
- casualty insurance
- retirement benefits
- enterprise risk
Actuaries typically work for insurance carriers or financial institutions to appraise the risk of applicants and ensure there’s enough money for future claims.
Salary
According to the Bureau of Labor Statistics, the average yearly salary for the 22,260 actuaries in the United States is $120,970, which equals $58.16 per hour. Actuaries employed by insurance carriers make an average of $121,070. The highest-paid work for actuaries is for computer systems design and related services with a mean yearly income of $141,120.
Beginning Salary
When just starting out, actuaries can expect to land in the bottom 10th percentile of earnings with an annual salary of around $64,860.
Key Responsibilities
Actuaries have the primary responsibility of analyzing the potential for undesirable events to happen and helping companies prepare for them. Actuaries track data and calculate the numbers to evaluate the likelihood of future events and estimate their financial costs. They utilize high-tech computer software to compile statistical data. Modeling software then helps actuaries forecast the probability of events occurring. Most actuaries help their company design:
- policies
- investments
- pensions
- other plans to minimize financial risk
They’ll advise insurance carriers on how much to charge in premiums. Actuaries present charts and tables of their findings to senior executives for explaining how to maximize company profit.
Necessary Skills
Succeeding as an actuary requires having strong analytical skills to review complex data sets and pinpoint patterns that suggest probability. Actuaries must be skilled communicators to concisely explain their findings to managers and company officials. Good computer skills are essential for actuaries to accurately utilize statistical analysis software and databases. Working with accountants and financial analysts is common, so interpersonal skills are a must. Actuaries must have advanced mathematical skills to use calculus and statistics in quantifying risk. Having intuitive and creative problem-solving abilities helps actuaries develop effective solutions for managing financial threats. Actuaries should also be:
- self-motivated
- ambitious
- detail-oriented
- organized
- independent with keen business acumen
Degree and Education Requirements
Before becoming an actuary, you must attend an accredited four-year college or university to earn at least a bachelor’s degree. Most actuaries declare an undergraduate major in one of these:
- statistics
- mathematics
- accounting
financeSome universities offer bachelor’s programs specifically for actuarial science. Students are encouraged to take classes in:
- probability
- loss modeling
- corporate finance
- applied statistics
- market research
- data analysis
- insurance
- computer programming
Faster advancement is possible for actuaries who earn a:
- Master of Finance
- Master of Business Administration
- Master of Actuarial Science
Earning a Ph.D. is only required for actuaries wishing to teach actuarial science or conduct research in academia.
Pros and Cons of the Position
Like other finance jobs, actuaries can expect both rewards and challenges with their titles. On the plus side, actuaries enjoy a lucrative, six-figure average salary that could potentially reach the half-million-dollar mark. Actuaries conduct meaningful statistical analyses that could influence their company’s success. “Numbers” people can exercise their logic to mathematically solve key business problems. Actuaries benefit from great job security because risk modeling becomes even more important during economic crises. There’s room for advancement into the coveted CRO and CFO positions.
On the other hand, actuaries must invest heavily in their higher education and maintain good grades to compete. Passing rigorous actuarial exams is enough to give even the most talented actuaries a headache. Actuaries must deal with above-average stress levels by basically determining an organization’s fate. Most of an actuary’s day is spent behind a computer with limited physical activity too.
Getting Started
While earning an appropriate degree, aspiring actuaries must begin developing their resume with professional actuarial experience. Completing an internship or co-op is advised to start forming contacts in the insurance industry. Most entry-level actuaries complete training with experienced actuaries as mentors. New actuaries may start with basic data entry and analysis before conducting their own reports. Working part-time as a financial analyst, credit analyst, risk analyst, or loan officer could aid in promotion. Most employers prefer hiring actuaries with at least two years of experience. Professional certification is also desired for most actuary jobs. The Society of Actuaries (SOA) offers three credentials:
- Associate (ASA)
- Fellow (FSA)
- Chartered Enterprise Risk Analyst (CERA)
Becoming an ASA usually takes four years because you must study for five exams and pass three e-learning courses. You can also become certified through the Casualty Actuarial Society (CAS).
Future Outlook
Today’s competitive global economy makes it crucial for companies to avoid and manage their potential financial risks to keep ventures secure. Especially after the Affordable Care Act (ACA), insurance carriers must analyze large masses of data to accurately project premium costs. Tighter regulations mandated by the federal government will also force organizations to adjust their business strategies to prevent fines. According to the BLS, the employment of actuaries will grow faster-than-average by 20 percent through 2028. Since the actuarial field is small, this dramatic job growth will only result in 5,000 new positions. Actuaries can find favorable job prospects in insurance companies, banks, investment firms, private corporations, government agencies, and securities exchanges.
Overall, an actuary is a highly-skilled financial professional. They’re devoted to helping businesses plan for negative future consequences and protect themselves from monetary loss. Actuaries are called the “backbone of financial security.” Actuaries carefully study data with statistical modeling to safeguard companies against catastrophic events that trigger bankruptcy. The U.S. News and World Report ranks actuary as the 11th best business job in America. If you decide to become an actuary, you’ll build a lucrative, rewarding career using mathematics to mitigate economic uncertainty.
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