An actuary is someone who brings a fake bomb on a plane because that decreases the chances that there will be another bomb on the plane. Relax! That’s not the real definition.
On a serious note, can you imagine lives of people without insurance? Would as many people be willing to own a home if fire insurance did not exist? Would a company build a factory that could be destroyed in an earthquake if it were not protected by insurance? Would people spend money today and still be confident about their future if there were no retirement programs or social security? Would the banks (and the money deposited in them) be safe if their assets and liabilities were not carefully managed to control financial risk?
The answer to these questions is the real definition of Actuarial Science. It essentially deals with the education of insurance risks and Financial Management of Insurance Companies. It involves the application of Mathematics, Statistics and Economics in the decision making process to a wide range of industries. The most prominent of these industries include insurance, investment and financial planning & management companies. Actuaries are professionals who are qualified in this field through education and experience.
The Actuarial profession was formally established in 1848 with the formation of the institute of Actuaries (London). At one point of time, it was the only institute in the world to conduct the professional examination. It requires intensive training in mathematics & statistics, accounting and insurance probabilities.
Being an actuary requires passing a series of examinations to earn an actuarial designation through the different bodies established by the governments of the respective countries. In most countries, actuaries must demonstrate their competence by passing a series of rigorous professional examinations. It could take from 3-10 years to pass all of the exams, but the good part is that you can begin a career as an actuary by passing the first two exams, and then taking subsequent exams while working as an actuarial assistant.
UK- UK is the best country to pursue Actuarial Science related courses. It spends billions of pounds each year on financial products such as insurance, pensions and mortgages. Colleges like Oxford, Cambridge, Imperial College London, University College London, King's College, University of Southampton, University of Manchester, and University of Brimingham are some of the best colleges in the world which offer courses on Actuarial Science. Other universities like the Heriot-Watt University, Kingston University, University of Leeds, University of Warwick, University of Kent and City University also typically offer 4 years full time B. Sc courses in Actuarial science or related subjects.
USA- The United States is not too far behind in offering specialised courses in Actuarial Science. With most of the top notch Ivy League colleges of the world in this country, you will not go wrong. Apart from the Ivy League colleges, you can also choose from the 4 year full time Actuarial Science courses in University of California-Berkeley, UCLA, UC-San Diego, University of Michigan and Boston University. They are ample scholarships available for deserving students. The Actuarial Science programme in the Wisconsin School of Business (USA) is a Center of Actuarial Excellence as designated by the Society of Actuaries. Its Risk Management and Insurance programme is consistently ranked among the best in the nation.
Canada- The University of Waterloo has the largest English language actuarial science programme in North America and one of the largest university-based actuarial science programmes in the world. Other world class universities in Canada which offer programmes in Actuarial Science are University of Alberta, University of Manitoba, University of Toronto and University of Western Ontario.
India- In India, a fellow member of the Institute of Actuaries is known as an Actuary. To become a fellow, a one has to first become a student member of the Institute and then clear all the papers of the Institute and fulfil other criteria from time to time. The eligibility criteria to appear for Actuarial papers are subjective. 10+2 passed students who have attained 85% marks in Mathematics / Statistics or graduate, or post-graduate students with 55% aggregate or more on Mathematics, Statistics are eligible to apply. There are a total of 15 papers and there is no fixed duration of the course. If pursued with complete dedication, the course could be completed in 3-4 years. The exams are conducted twice in a year in May/June and Oct/Nov. Thankfully; there are no restrictions on the number of attempts per paper. The best colleges which offer courses in Actuarial Science are Bishop Herber college-Tiruchirapalli, C.M.D. School of Insurance and Actuarial Science- Modi Nagar- U.P. and Amity School of Insurance and Actuarial Science- Noida-U.P. There are also many globally recognised training institutes for insurance and risk management courses.
When God created the first Actuary, he was out of ideas. So, he scratched his head and said "Go figure!" The Actuary took the instruction a little too seriously. Therefore, the general perception that Actuaries are nerds might not be completely wrong. Don’t be surprised to find a bunch of mathematical symbols on a conventional caricature of an actuary. If you look at this from an Actuary’s point of view, he/she will simply shrug it off by saying that others are jealous. The lower mortals cannot even fathom to process the kind of data that they deal with on an everyday basis. That’s some attitude!
An Actuary looks into the future financial prospects of an insurance company. Actuaries use skills in mathematics, economics, computer science, finance, probability and statistics, and business to help businesses assess the risk of certain events occurring and to formulate policies that minimise the cost of that risk. For this reason, Actuaries are essential to the insurance and reinsurance industry, as staff employees or as consultants as well as to other businesses, including sponsors of pension plans and to the government. The Actuary’s certificate indicates a company’s ability to meet varying payments due at any time in future. He uses his professional skills to walk into the future and see how much income comes to the fund and how much expenses and benefit payments will go out of the fund of a company every year in future.
Following are some of the other areas that Actuaries are trained on:
Following are some of the other areas that Actuaries are trained on:
- Designing an insurance product and setting its price
- Selecting the right people for insurance products.
- Minimising the amount of losses for the company by reinsuring the company’s insurance policies with another insurer (called reinsurers)
- Maximising the profits for the company and thus protect the customers’ amounts kept with the insurance company for a number of years etc.
- Preparing on a given date a summary of the company’s liabilities (commitments)
- Determining the adequacy of the reserves.
- Certifying the solvency of the Insurance Company
The U.S. Department of Labour predicts the employment of actuaries is expected to grow faster than average for all occupations through 2014. In 2010, a study published by job search website CareerCast ranked actuary as the number one job. A similar study in 2006 included actuaries among the 25 best professions that it expects will be in great demand in the future. You will find many similar surveys and statistical reports applauding your decision of choosing Actuarial Science as a viable career option.
Both local and international options open up for Actuaries. Once you join a multinational organisation, oversees opportunities are ample. In some cases, employers offer the Actuary temporary assignments to work overseas with the idea that the person will either return to the country of origin after the term is over or sign up to stay for another year or two. In other cases, they have offered a full or permanent transfer to other countries.
Actuarial Science is about making sense of unimaginable amount of data and any country will jump at the opportunity of hiring these experts to help them to protect their investments.
Do you know that Edmond Halley who discovered the ‘Halley’s Comet’ was actually the pioneer of the profession of Actuarial Science?
The profession of Actuarial Science is consistently ranked as one of the most desirable in various studies over the years. Following are the various sectors in insurance in which an Actuary can find work:
Life, health, pensions, annuities, asset management, social welfare programmes, property casualty, general insurance and reinsurance
Actuaries are also involved in other areas of the financial services industry, and can be involved in managing corporate credit, company evaluations, and tool development.
If you think Actuarial Science is only about insurance, think again! Actuarial models are used to set criminal sentencing guidelines as well. Surprised!
Actuaries attempt to predict the chance of re-offending according to rating factors which include the type of crime, age, educational background and ethnicity of the offender. Another bizarre example is the use of actuarial models to assess the risk of sex offense recidivism
Did someone mention actuarial science involves repetitive work? It’s time to take back those words.
Besides assessing risks, Actuaries also design and maintain products and systems. They are involved in financial reporting of companies’ assets and liabilities. They communicate complex concepts to clients in a language simple enough to understand.
Some of the prominent companies which hire Actuaries are:
- HDFC STANDARD
- Bajaj Allianz
- Prudential
- ICICI
- ICICI Lombard
- Birla Sunlife
- IFFCO
- TOKIO
- Max New York
- Tata AIG
- Aviva Life
- Met Life
- SBI Life
- Om Kotak Mahendra
- ING Vysa
- Tata AIG
- Reliance
- Royal Sundram
Actuaries also work for:
- Colleges and universities
- Banks and investment firms
- Stock exchanges
- Public accounting firms
- Labour unions
- Rating bureaus
- Fraternal organisations
Actuaries sometimes give specialised evidence in court (for example in fraud cases) or work with the government to predict how much money will be needed to meet the nation's spending needs on services such as health, education and social care.
You might be very good at calculations or risk analysis, but having a firm of your own demands much more than that. A common misconception is that actuaries are not good at their social skills. Do you know the difference between an introverted actuary and an extroverted actuary? An introverted actuary stares at his own feet during a conversation, while an extroverted one stares at the other person's feet. Ha.. Ha…Ha!
Jokes apart, in order to start a firm you have to be able to step of your comfort zone and view your professional role on a more global scale. You also have to be able to market yourself and your abilities by effective networking. Actuaries are accustomed to failure and more tolerant to risks but that’s not enough. One has to give up on a corporate life, a regular pay check, benefits, or a vacation at least till the company establishes a firm stronghold in the target market.
Unlike Medicine, Law or Architecture, Actuarial Science provides far lesser scope and opportunity to work independently. Besides, it is any day easier to assess confidential financial data of an organisation when you are a part of the same organisation rather than when you work as an outside consultant. Think of starting a firm only when you see a strong possibility of a partnership with a multinational corporate firm
The credentialing and examination procedure for becoming a fully qualified actuary can be intensely demanding. Consequently, the profession remains significantly unexplored throughout the world. As a result, actuaries are in high demand, and they are highly paid for the services they render. In the UK, where there are approximately 9,000 fully qualified actuaries, typical post-university starting salaries range between £25,300 and £35,000 and successful more experienced actuaries can earn well in excess of £100,000 a year. Actuaries are well compensated in US as well. Experienced fellows have the potential to earn from $150,000 to $250,000 annually, and many actuaries earn more than that. Compensation may vary significantly according to years of experience, industry, geographic region, and responsibilities. Interestingly, an actuary with a fellowship designation working as a financial manager in the banking industry could earn a higher salary than another fellow working in the health insurance industry.
Following is the remuneration overview in India:
Following is the remuneration overview in India:
| Experience in Years | Compensation per annum |
|---|---|
| 0 to 5 years | 2 to 6 lacs |
| 6 to 10 years | 6 to 11 lacs |
| 11 to 15 years | 11 to 20 lacs |
| 15 years | 20 lacs and above |
Actuarial Science is usually chosen by students who have had commerce subjects in their Class 12. You cannot take up traditional courses like engineering, medicine, arts, mass communication, tourism, hospitality, etc. simply because they are do not complement the study of Actuarial Science. You have to continue to study in the same direction. Besides if you already have invested 3 to 10 years in becoming an actuary, it’s not such a great idea to try your hand at any other profession
It is however possible that you might have second thoughts about continuing the course. You don’t have to pursue a course simply because you have started it. As an alternative to Actuarial Science, you can study the following courses:
- Charted Accountancy
- Company Secretary
- Chartered Financial Analyst
- BBA/MBA
Advantages:
- Work is intellectually challenging
- Excellent pay
- You will enjoy the respect of your peers
- You are sure to be one of the key players in the management team of the companies that will employ you.
Following are some of the disadvantages:
- Becoming an actuary can be a time taking and a tedious process.
- The work can be monotonous and repetitive.
- You might feel lonely and bored since it does not much encourage interaction with others.
- They say that an Actuary has fun only when no one is watching. Now that’s an exaggeration!
An actuary is someone who'd rather be completely wrong than approximately right. Following are some of the skill sets needed to be a successfully Actuary:
- Natural problem solving ability
- Capable of out of box thinking
- Practical Outlook
- An Aptitude for Mathematics
- In depth knowledge of Statistics & Commerce
If the idea of assessing data excites you, you have chosen the right profession. Beware; it is not an easy path to take. A few years in the industry and you might be saying this prayer:
Our model, which is nowhere. Guessing is your name. Your assumptions come, Your will be done in future as it was in the past. Give us this day our premium rates, and forgive us our lousy estimates, as we forgive those who supply us with crappy data. Lead us not into insolvencies, and deliver us from auditors. For yours is the #NAME?, #DIV/0!, and #VALUE!, forever and ever. Amen.
Got you!
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