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(D.O.T. 020.167-010)
Nature of the Work
Working Conditions
Employment
Training, Other
Qualifications, and Advancement
Job Outlook
Earnings
Related
Occupations
Sources of Additional
Information
- A strong background in mathematics is essential for persons interested in a career as an actuary.
- Competition for jobs is expected due to relatively high earnings, the small size of the occupation, and downsizing and merger activity in the insurance industry.
Actuaries answer questions about future risk, make pricing decisions, and formulate investment strategies. Some design insurance, financial, and pension plans and ensure that these plans are maintained on a sound financial basis. Most actuaries specialize in life, health, or property and casualty insurance; others specialize in pension plans.
Actuaries assemble and analyze data to estimate probabilities of death, sickness, injury, disability, retirement income level, property loss, or return on investment. They use this information to estimate how much an insurance company will have to pay out in claims, or to make other business decisions. For example, actuaries may calculate the expected amount of claims due to automobile accidents, which can vary depending on the insured's age, sex, driving history, type of car, and other factors. Actuaries ensure that the price charged for such insurance, or premium, will enable the company to cover claims and expenses as they incur. Finally, this premium charged must be profitable and yet be competitive with other insurance companies. The actuary calculates premium rates and determines policy contract provisions for each type of insurance offered.
To perform their duties effectively, actuaries must keep informed about general economic and social trends and legislation, as well as developments in health, business, finance, and economics that may affect insurance or investment practices. Using their broad knowledge of business and mathematics, actuaries may work in investment, risk classification, or pension planning.
Actuaries in executive positions help determine company policy. In that role, they may be called upon to explain complex technical matters to other company executives, government officials, shareholders, policyholders, and the public in general. They may testify before public agencies on proposed legislation affecting their businesses or explain changes in contract provisions to customers. They also may help companies develop plans to enter new lines of business.
A small but growing group of actuaries work in the financial services industry, where they manage credit, prepayment, and other risks, and help price corporate securities offerings.
Consulting actuaries provide advice to various clients on a fee basis. Their clients include insurance companies, corporations, hospitals and other health care providers, labor unions, government agencies, and attorneys. Some consulting actuaries design pension and welfare plans, calculate future benefits, and determine the amount of employer contributions. Others provide advice to health care plans or financial services firms. Consultants may be called upon to testify in court regarding the value of potential lifetime earnings lost by a person who has been disabled or killed in an accident, the current value of future pension benefits in divorce cases, or the calculation of insurance rates. Pension actuaries enrolled under the provisions of the Employee Retirement Income Security Act of 1974 (ERISA) evaluate the pension plans covered by that act and report on their financial soundness to plan members, sponsors, and Federal regulators.
Actuaries have desk jobs that require little physical activity, and their offices are generally comfortable and pleasant. They usually work at least 40 hours a week. Some actuaries, particularly consulting actuaries, often travel to meet with clients. Consulting actuaries may also be expected to work more than 40 hours per week.
Actuaries held about 16,000 jobs in 1996. Some actuaries held faculty positions in colleges and universities. (See the statement on college and university faculty elsewhere in the Handbook.)
Almost one-half of the actuaries who were wage and salary workers were employed in the insurance industry. Most worked for life insurance companies; others worked for property, casualty, and health insurance companies, pension funds, and insurance agents and brokers. Most of the remaining actuaries worked for firms providing services, especially management and public relations, and actuarial consulting services. A relatively small number of actuaries worked for security and commodity brokers or government agencies. Some are employed developing computer software for actuarial calculations.
A good educational background for a beginning job in a large life or casualty company is a bachelor's degree in mathematics, actuarial science, or statistics, or a business-related discipline, such as economics, finance, or accounting. Some companies hire applicants without specifying a major, provided the applicant has a working knowledge of mathematics, including calculus, probability, and statistics, and who has demonstrated this ability by passing at least the beginning actuarial exams required for professional designation. Courses in economics, accounting, computer science, and insurance are also useful. Companies increasingly prefer well-rounded individuals who, in addition to a strong technical background, have some training in liberal arts and business. Good communication and interpersonal skills are important, particularly for prospective consulting actuaries. About 55 colleges and universities offer an actuarial science program, and most colleges and universities offer a degree in mathematics or statistics.
A strong background in mathematics is essential for persons interested in a career as an actuary. It is an advantage to pass, while still in school, two or more of the examinations offered by professional actuarial societies. Two professional societies sponsor programs leading to full professional status in their specialty. The Society of Actuaries (SOA) administers a series of actuarial examinations for life and health insurance, pension, and finance and investment fields. The Casualty Actuarial Society (CAS) gives a series of examinations for the property and casualty field, which include fire, accident, medical malpractice, workers compensation, and personal injury liability. Because the first parts of the examination series of each society are jointly sponsored and cover the same material, students need not commit themselves to a specialty until they have taken the initial examinations. These examinations test an individual's competence in subjects such as linear algebra, probability, calculus, statistics, risk theory, and actuarial mathematics. The first few examinations help students evaluate their potential as actuaries. Those who pass one or more examination have better opportunities for employment and higher starting salaries than those who do not.
Actuaries are encouraged to complete the entire series of examinations as soon as possible, advancing first to the Associate level, and then to the Fellowship level. Completion of the examination process generally takes from 5 to 10 years. Examinations are given twice each year, in May and November. Although many companies allot time to their employees for study, extensive home study is required to pass the examinations; many actuaries study for months to prepare for each examination. Most reach Associateship within 4 to 6 years. Fellowship candidates usually have several years of experience. Most actuaries complete the Fellowship exams a few years after reaching Associateship. Both levels of examinations are extremely difficult.
Pension actuaries who verify the financial status of defined benefit pension plans to the Federal Government must be enrolled by the Joint Board for the Enrollment of Actuaries. To qualify for enrollment, applicants must meet certain experience and examination requirements, as stipulated by the Joint Board.
Beginning actuaries often rotate between jobs to learn various actuarial operations and phases of insurance work, such as marketing, underwriting, or product development. At first, they prepare data for actuarial projects or perform other simple tasks. As they gain experience, actuaries may supervise clerks, prepare correspondence and reports, and do research. They may move from one company to another in their early careers, as they move up to progressively more responsible positions.
Advancement depends largely on job performance and the number of actuarial examinations passed. Actuaries with a broad knowledge of the insurance, pension, investment, or employee benefits fields can advance to administrative and executive positions in their companies. Actuaries with supervisory ability may advance to management positions in other areas, such as underwriting, accounting, data processing, marketing, or advertising.
Prospective actuaries who have passed the beginning actuarial exams will face competition for jobs, since the number of openings each year is limited by the relatively small size of the occupation.
Employment of actuaries is expected to grow more slowly than the average for all occupations through the year 2006, due to expected slower growth in the insurance industry. Anticipated downsizing and merger activity in the insurance industry is likely to have the greatest negative effect on those actuaries with the least experience. The expected growth in managed health plans in the health services industry should provide better prospects for actuaries, however.
Employment growth of consulting actuaries is expected to be faster than employment growth of actuaries in insurance carriers—traditionally the leading employer of actuaries. As many companies seek to boost profitability by streamlining operations, actuarial employment may be cut back by insurance carriers. Investment firms and large corporations may increasingly turn to consultants to provide actuarial services formerly performed in-house.
The liability of companies for damage resulting from their products has received much attention in recent years. Casualty actuaries will continue to be involved in the development of product liability insurance, medical malpractice and workers' compensation coverage, and self-insurance, which may involve internal reserve funds established by some large corporations. The growing need to evaluate catastrophic risks such as earthquakes and calculate prices for insuring facilities against such risks, which may involve huge losses, will be an increasing source of demand for property and casualty actuaries. So is planning for the systematic financing of environmental risks, such as toxic waste clean-up.
In 1996, starting salaries for actuaries averaged about $37,600 for those with a bachelor's degree, according to the National Association of Colleges and Employers. New college graduates entering the actuarial field without having passed any actuarial exams averaged slightly lower salaries.
Insurance companies and consulting firms give merit increases to actuaries as they gain experience and pass examinations. Some companies also offer cash bonuses for each professional designation achieved. A 1996 salary survey of insurance and financial services companies, conducted by the Life Office Management Association, Inc., indicated that the average base salary for an entry-level actuary was about $36,500. Associate Actuaries, who direct and provide leadership in the design and pricing of products received a salary of about $78,600. Actuaries with additional experience earned an average of $93,500.
Actuaries typically receive other benefits including vacation and sick leave, health and life insurance, and pension plans.
Actuaries determine the probability of income or loss from various risk factors. Other workers whose jobs involve related skills include accountants, economists, financial analysts, mathematicians, and statisticians.
For facts about actuarial careers, contact:
American Academy of Actuaries, 1100 17th St. NW., 7th Floor, Washington, DC 20036.
For information about actuarial careers in life and health insurance, employee benefits and pensions, and finance and investments, contact:
Society of Actuaries, 475 N. Martingale Rd., Suite 800, Schaumburg, IL 60173-2226.
For information about actuarial careers in property and casualty insurance, contact:
Casualty Actuarial Society, 1100 N. Glebe Rd., Suite 600, Arlington, VA 22201.
Homepage: http://www.casact.org
Career information on actuaries specializing in pensions is available from:
American Society of Pension Actuaries, 4350 N. Fairfax Dr., Suite 820, Arlington, VA 22203.
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