If you’re a person who likes data, forecasting, and analytics, then actuarial science could be a worthwhile degree to pursue. Put simply, actuarial science evaluates risks and helps estimate future financial needs for businesses. To become an actuary, you’ll need a bachelor’s degree and certification (which comes from passing several exams).
Whether you choose to earn an actuarial science degree or related bachelor’s degree, the field of actuarial science has a lot to offer. Let’s get into what actuarial science is, what an actuary does and why it’s a good career choice to consider.
Actuarial scientist at computer screen with graph and calculator on phone / https://unsplash.com/photos/NDfqqq_7QWM
What is Actuarial Science?
Actuarial science combines statistical models and math to assess risk in industries like finance, insurance, and related businesses. It relies on mathematical models and data to predict and plan for uncertainty.
All businesses face risks and it requires experts like actuaries to help mitigate and prepare financially for what could happen in the future. Thanks to actuarial science, there’s a way to use the past to inform the future to help make sound business decisions.
In most countries, an actuary will be required to have at least a bachelor’s degree and also pass rigorous exams before entering the workforce.
What Does an Actuary Do?
Actuaries leverage historical data to make predictions about the future. Using this information, they can advise a business on how much money they should set aside to prepare for financial losses that they could incur down the line.
An actuary should not be confused with an accountant (although this occurs commonly). Accountants rely on past financial information to prepare financial statements and represent a company’s overall financial health. An actuary uses past data to help predict the future. While both are number-heavy professions that share the need for many similar skills, they are very different jobs in practice.
For example, if an actuary works for a home insurance provider, one task may be to help prepare pricing models. In order to set accurate pricing for customers’ premiums, they will be tasked to look at data from the past. They can use forecasting models to predict how much risk a certain city is exposed to because of natural disasters like floods or earthquakes. By using past data, they can assess the likelihood of such risk, as well as the financial repercussions.
All this information is used to create the right pricing to pass to customers. In this way, an actuary will help the insurance agency ensure that they will have enough money ready to cover their clients when they make claims in the future.
The main challenge an actuary may face on the job is lack of past data. Forecasting relies on finding trends and patterns to estimate the future. Without this vital information, it would be like an actuary is taking shots in the dark.
Why Become an Actuary?
If you’re passionate about mathematical models and like to help businesses and people prepare for uncertainty, then the answer as to why to become an actuary is obvious!
Additionally, the field is facing immense growth. According to the Bureau of Labor Statistics, the field is expected to grow by 20% between 2018 and 2028. This represents faster than average growth.
The high demand of actuaries is met with lucrative pay. In 2019, the median pay was $108,350 per year (which equates to roughly $52 per hour).
How to Become an Actuary
Becoming an actuary requires quality education, but it doesn’t have to necessarily be an actuary degree (although it’s the most fitting, of course).
Students can major in related fields like: statistics, business administration (which you can study tuition-free at the University of the People), economics, or even liberal arts. Actuaries must first earn a bachelor’s degree and then pass actuary exams.
Here’s a look at some important courses that undergraduates should take to help set them up for success for both the exams and to work as an actuary:
- Microeconomics and macroeconomics
- Computer science
- Linear algebra
- Business management
- Communication courses
In the United States, actuaries must typically pass 2-3 exams to be hired. While they work, they can continue to complete the seven exams necessary to become certified as an associate actuary. If there’s interest in becoming a certified actuary (fellowship level), then there are 3 more exams making a total of 10 to pass.
Exams in both the United States and Canada are issued by either the Society of Actuaries or the Casualty Actuarial Society.
The job of an actuary is highly important to get right. It can literally make or break an entire business model. As such, those who work in the field should possess the following skills:
- Be proficient at math and statistics
- Understand models and data analytics
- Know how to leverage and transform data
- Have strong knowledge of computer science (and the use of software/hardware)
- Be confident in communication skills (written and verbal)
- Enjoy problem-solving
Rules & Regulations
Not only does an actuary work in a team environment and help impact big decisions, but they must also stay up-to-date on government rules and regulations. They work in industries that tend to be highly regulated and ever changing. This means that actuaries have to stay motivated and take initiative to remain informed and aware of new laws and rules that help to minimize their employer’s risk.
The increase in big data and constantly updated regulations mean that an actuary should be someone who is up for a challenge. In truth, most people who become actuaries find this to be a benefit of the job as it offers variation and critical thinking skills!
Actuary holding a briefcase / https://unsplash.com/photos/6dW3xyQvcYE
The Bottom Line
While there are many degrees you can major in to become an actuary, an actuarial science degree is the most obvious one. For those who have already started earning their degree in a related field or are more interested in a different major, you can still become an actuary once you pass the several exams to earn your certification.
Actuarial science is like mixing a mathematical genius with a psychic to help foresee the future. While actuaries don’t know exactly what will happen, they can leverage past data to help create accurate forecasts. These forecasts serve as insight for big decisions within businesses, so an actuary has an important job to uphold!