What is an actuary? You may have heard the term used in relation to the insurance profession, but most people have no idea what an actuary actually does in a professional capacity. R.D. Long, an Actuarial Officer for Assurant Employee Benefits, clears up the mystery in this exclusive Love to Know interview.
What is an actuary?
The easy answer is: we try to figure out how much insurance costs. I use math and statistics and insurance company data to figure out the rates. I work in group insurance…anything relating to employee benefits. That includes health insurance, life, disability, dental, those sorts of things.
However, the profession in general is really trying to expand into more non-traditional fields. Historically, actuaries have been employed by insurance companies or consultants. Today, they are beginning to work in different roles: something called Risk Management for companies, where the Risk Manager for a given company will develop plans for controlling all the different risks a company might face, given the business they are in. Also, actuaries are moving into the broader financial industry, as there isn't a lot of difference in pricing an insurance product as there is an investment product. For example, pricing options or futures involves many similar techniques as pricing a life insurance policy.
How much training do you need to be an actuary?
A Bachelor's degree in one of many different majors, typically math related or economics. We have a sequence of exams, currently there are eight exams plus a few different seminars and web-based modules.
There are different subdivisions in organizations and in the general actuarial profession. I'm talking about the specific one that I am in: The Society of Actuaries, or SOA. There are two levels of designation that you can achieve: Associateship with the Society of Actuaries and Fellowship with the SOA. Fellowship means you're all done; you've gone through the entire battery of exams. Personally, it took me 8 years after college to complete the exams, attempting 2 exams per year.
I went to a non-actuarial smaller school so my degree is just a mathematics major…it has an actuarial science emphasis, which means I took a couple of extra finance and accounting and those types of classes, but it's just a math major.
What classes should someone take in college if they want to become an actuary?
Anything that's on the curriculum in terms of a math-based major, they're probably going to get into statistics, probability-type classes, and that's just in a non-actuarial school. There are colleges dedicated toward actuarial science and they'll have a few more upper-level type classes that are specifically geared toward more advanced actuarial exams. In addition to that it's very business-oriented obviously, so accounting, finance, and economics are all very applicable as well. Computer programming classes are also useful.
What companies will you find actuaries working in?
A very long list, obviously. In my field - group insurance - United Health Care, Blue Cross Blue Shield, Guardian, Aetna, Cigna, Humana, UNUM, that's just in the group insurance field. You go into individual and there are hundreds of companies. Property and casualty you obviously have your Allstates, State Farms, etc.
Do you get to choose what type of insurance you work in, for example: dental versus life insurance, or is that just something you fall into?
I would say mostly it's a "falling into" sort of arrangement. Maybe you get a summer internship with one company versus another, that will probably have just as much to do with your eventual decision as anything, whether you went the property insurance route versus the life insurance route. It's pretty much just where you wind up finding your first job. The first couple of exams, they are co-sponsored by the different organizations and so you can kind of get started in either one, it's just a matter of where you land in terms of getting your job.
In actuary terms, what sort of things do you look for that make you say, "That life span is going to be shorter because of these factors?"
Current age, gender (when allowed by the regulations), wealth level, smoking status, access to health care, and so on.
The factors will depend on the product you are working with. For example, if you are considering disability income insurance, the type of profession an individual works in is a major factor, while in dental benefits, it's quite a bit less important.
For Further Information
For more information on the actuarial profession visit the SOA website.
If you are interested in pursuing a career as an actuary, visit this website: www.beanactuary.com.
For more information on Assurant Employee Benefits, visit their website.