actuarial lessons - wood carving
Actuarial Study, Learning, Misc, Productivity, Psychology

5 Actuarial Lessons From Carving Wood

My biggest goal in life right now is bringing my 3 kids up to be well rounded, healthy and happy adults.

It's the most important responsibility I'll ever have. 

As a parent, I want them to take onboard some hard earned wisdom and lessons from my 44 years of experience and to learn from my many mistakes.

Of course they will have to eventually find their own way, but I still think it's important for me to, where possible, soften the road ahead.

One of my greatest joys is family time spent together down in what we now call "ProActuary HQ."

It's a little secluded cabin set deep in the Northern Irish countryside. 

actuarial lessons - path

We go there to generally chill out.

To get away from the hustle and bustle and to spend lots of time outside, away from digital distractions (unless I'm there to work on ProActuary!).

This means doing random things. A stochastic approach to life. No set agenda. No timescales. No goals. Just whatever takes our fancy.

Usually this involves activities such as building huts, a stone BBQ or forest paths. Another day it could be painting rocks, planting trees or tending to our vegetable patch. 

The common theme is doing physical stuff that makes us feel grounded again. A perfect antidote to too many hours during the week spent indoors and staring at screens.

There’s something very satisfying about making physical things.

I think we don't do enough of it these days.

Wood is my favourite material.

Chopping, sawing and carving.

It’s very therapeutic.

Instead, most of us nowadays move numbers and words around on a screen, pressing buttons on a keyboard and solving problems using binary bits and pixels.

As actuaries, we are so used to computers, smartphones, technology and working with these tools day in day out. I sometimes wonder what the blacksmith, carpenter, or weaver from 200 years ago would think if they time travelled forward to 2022.

actuarial lessons - wood carving

It seems we increasingly live in a life of crazy technology and immediate everything - always being on, with an expected tempo of doing things as fast as possible.

I find doing real physical things like building and carving with wood, with slowness and deliberation, brings me balance.

Last weekend we opted to do some more wood carving.

Crafting a wooden spoon was the challenge of the day.

My son, Joshua, was keen to see the spoon making process from start to finish. This wasn't just an opportunity for some quality father-son bonding. It was also a chance for some of that 'fatherly wisdom' to be passed along! It turns out the lessons we learnt in our little afternoon of spoon carving, were applicable to life in general.

And even pertinent to actuaries....

Actuarial Lesson #1: Start With a Clear Vision

actuarial lessons - log split

Wooden spoon carving, step 1: Selecting your piece of wood. 

It's important to get this right.

Poisonous is clearly not good. Neither is too soft, too hard, too long or short.

As I explained to little Josh, you need to see the finished spoon in the branch before you even begin. It's all about being able to envision in your mind what you cannot yet see with your eyes.

There's magic in carving wood. I've found it calms the 'monkey mind' and enriches the soul through mindfulness, creativity and connection.

In fact carving wood is a lot like sculpting stone.

I saw the angel in the marble and carved until I set him free."

- Michelangelo

But, how does all this apply to actuaries?

Well, let's consider the actuarial student embarking on actuarial exams with an end goal of becoming a qualified actuary.

The trainee actuary is starting a long difficult journey that will likely test his/her mental fortitude to the extreme.

Beginning with the end in mind (passing all actuarial exams to become a qualified actuary), with a clear vision at the outset, is like creating a mental map to follow in the same way a builder follows a blueprint.

I like how Dr Stephen R. Covey thinks about this.

Things tend to go through two stages of creation. 

First there is the mental creation, then there is the second creation - the physical one. 

Having a clear vision puts the goal into focus and smoothens the road towards the physical creation through motivation, resilience and setting a strong foundation to begin with.

People are working harder than ever, but because they lack clarity and vision, they aren't getting very far. They, in essence, are pushing a rope with all their might."

- Dr Stephen R. Covey

Actuarial Lesson #2: Leverage

Give me a lever long enough and I shall move the world"

- Archimedes

Leverage is all about achieving more with less. We all have limited time and resources, so generally the more we can apply leverage to help us in our life, the better.

Tools are one of the best leverages available to us and, as I explained to my son, it was important that we began our little project with the right tools at hand. 

For us, this included a saw, an axe, a straight knife, a hook knife and some sand paper to finish off the spoon.

In the actuarial world we tend to think of leverage in terms of financial borrowing or gearing. But there are many different ways for actuaries to achieve leverage in life besides increased debt (which of course also increases risk).

Some leverages available to actuarial students include things such as:

  • Study tools such as a study calendar and the pomodoro technique.
  • Study techniques such as mind mapping and spaced repetition.
  • Technology to help (e.g. apps or software for mind mapping and flashcards).
  • The best actuarial study books and tutorials.
  • A supportive family, friends and employer.
  • A mentor to go to for advice.
  • A clear vision for motivation and focus.

At the very start of your actuarial study, or other actuarial and non-actuarial endeavours, I truly recommend you ask yourself what ways you can work smarter and achieve large impacts via small focused changes.

As a famous insurance tycoon once said:

Big doors swing on little hinges"

- Clement Stone

Actuarial Lesson #3: Learning Through Failure

Things were going well.

We were both very happy with the general shape, the handle proportions and how the carving was progressing. 

But then, just like life has a habit of doing to us, disaster struck!

As I carved carefully with my hook knife into the bowl, I didn't realise how deep I had gone and ended up going through the bottom creating a hole.

Owning a spoon with a hole is like having a motorbike with an ashtray - not ideal!

Josh was devastated. His vision of eating his cornflakes later that evening via a proudly carved new utensil had taken a major blow.

"Can't we fix it?" he asked.

"Unfortunately not, son." I replied.

"But it's okay. This spoon, with it's unfortunate hole, can be kept as a constant reminder of a very important lesson for life."

"What's that?" he wanted to know.

"I'm glad you asked"....

...Back to actuaries:

I'd love to say the road to actuarial qualification is paved with gold.

But it's not.

Instead, the road is typically paved with a lot of frustration, tears and probably some failure.

Everyone has a plan until they get punched in the mouth."

- Mike Tyson

But failure is often a gift in disguise. It teaches us lots of valuable lessons.

For example:

  • Failure builds character, particularly resilience.
  • Failure builds creativity. When we fail we intuitively analyse the situation in terms of what went wrong and why. This forces us to creatively evaluate how we can improve and hence builds our creative problem solving abilities. As actuaries are problem solvers at heart, this is an important attribute to develop.
  • Failure makes us wiser and stronger and ready to face the future, often with more compassion.

I also believe that experiencing failure not only reminds us that we are human (despite the actuary robot jokes!), but helps us to be able to take more appropriate risks in our lives and career.

I'm definitely not saying we should be reckless, but thinking about the risk and return relationship, if we are overly cautious, and afraid of risk, we can miss out on some big opportunities in life.

Failing and learning to be okay with it, teaches us to accept risk and failure as part of the journey and to be okay with undertaking "smart risks" where appropriate.

I agree with JK Rowling that one of the greatest risks in life can be not taking any risks at all:

It is impossible to live without failing at something, unless you live so cautiously that you might as well not have lived at all – in which case, you fail by default."

- JK Rowling

Actuarial Lesson #4: Margins of Safety

Carving wood, using a hook knife, is quite addictive in a strange way.

It's difficult work, but as you peel away the layers of wood and start to see the mental image emerge into the physical realm, it's difficult to stop.  

I succumbed to this addiction which ultimately led to the aforementioned tragedy of the unintended hole. Basically I wanted to get a nice deep spoon and I erred too close to the bottom edge as I feverishly scraped and carved.

As I explained to Joshua, what I should have done was given myself a better margin of safety.

Actuaries, of course, are well versed in margins. We operate in a world of comparing assets to liabilities and calculating the margin available under different sets of assumptions.

But margins of safety extend to other parts of an actuary's life. We need them to absorb errors and soak up the inevitable strokes of bad luck.

Some more actuarial examples:

  • When quoting a budget for a client, make some allowance for unexpected expenses.
  • When relaying a timescale for a senior actuarial manager, factor in a buffer. It's better to under promise and over deliver than over promising and under delivering.
  • When studying for an actuarial exam, aim to get through your notes a few days in advance.

Actuarial Lesson #5: Don't Forget to Celebrate!

So many people forget this part, but it's super important.

Celebrating and rewarding yourself for all your hard work is not only fun, but also key to building good habits, which are foundational to success in life.

BJ Fogg is a habit expert. Through his book, Tiny Habits, he teaches what he refers to as the ABC of habit formation.

Good habits, Fogg tells us, incorporate 3 important components: Anchor + Behavior + Celebration

He describes these as follows:

1. ANCHOR MOMENT
An existing routine (like brushing your teeth) or an event that happens (like a phone ringing). The Anchor Moment reminds you to do the new Tiny Behavior.

2. NEW TINY BEHAVIOR
A simple version of the new habit you want, such as flossing one tooth or doing two push-ups. You do the Tiny Behavior immediately after the Anchor Moment.

3. INSTANT CELEBRATION
Something you do to create positive emotions, such as saying, ‘I did a good job!’ You celebrate immediately after doing the new Tiny Behavior.”

Fogg goes on to emphasise the importance of the celebration aspect:

Celebration will one day be ranked alongside mindfulness and gratitude as daily practices that contribute most to our overall happiness and well-being. If you learn just one thing from my entire book, I hope it’s this: Celebrate your tiny successes. This one small shift in your life can have a massive impact even when you feel there is no way up or out of your situation. Celebration can be your lifeline.”

So as you move through your actuarial career, passing actuarial exams, qualifying as an actuary or getting an actuarial promotion, make sure to remember the importance of celebration.

For me, that was the satisfaction of seeing the finished (second!) spoon and a cold beer by the evening fire. For Joshua, it was the most satisfying bowl of cornflakes he had ever had! 

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Actuarial Study, Future of The Profession

What to do with an Actuarial Science Degree?

“This is a guest article written by Amy Kelly. Amy can be found on LinkedIn here.”

Actuarial science. A specialised degree often thought to have the primary objective of preparing students for the actuarial profession. Whilst most graduates of a degree in actuarial science tend to continue along the actuarial route, this may not be best suited to everyone.

As an 18-year-old student, choosing a degree to study at university can be very daunting. This single decision has the power to determine your lifelong career path. However, at such a young age, can we really conclude that one specific profession is right for us? This leads to the main questions of this
essay…

  • Does an actuarial science degree present a career as an Actuary to be the ultimate end goal for its graduates?
  • Does it fail to highlight the endless possibilities presented to graduates given their exceptional skillset and intellect?

This essay will explore various routes available to actuarial science graduates. Yes, it may be true that many graduates choose to take the traditional path of undertaking the professional exams to qualify as an Actuary. These individuals can move forward, utilising skills learned from the actuarial science degree in numerous traditional actuarial roles as well as pushing the boundaries and moving into new areas of work.

Although targeted, the skills developed throughout an actuarial science degree are not specific to a career as an Actuary. There are many other stimulating career opportunities that I believe should also be encouraged to those with the skillset obtained from an actuarial science degree.

From Actuarial Science Degree to Qualified Actuary

Universities offering a degree in actuarial science can be found all over the world. Many of these universities have designed modules in accordance with the professional actuarial exams set by the Institute and Faculty of Actuaries (IFoA). To date, the IFoA have accredited 44 universities across the globe. This allows students at these universities to obtain a number of exemptions from the professional exams upon graduation.

The university one attends alongside the modules undertaken will determine the number of exemptions one can obtain. Students complete several (generally) maths-based modules each year, including subjects such as: pure maths, economics, finance, and statistics. As a graduate of a specific actuarial science degree, you will have a head start on the actuarial exams, hence continuing along this route may be seen to be the ‘easiest’ option. However, anyone that has gone through the process knows that it is far from easy.

Working through professional exams is exceptionally challenging. Student actuaries are required to study for these exams in their own time. Although most companies may grant study days for each exam, balancing exams with a demanding workload is not an easy job.

Under the new IFoA curriculum that began on 2 January 2019, students are required to take at least 13 professional exams.

To become an Associate member of the IFoA, students must complete all of the following exams, as shown below (Source: IFoA website):

‘Core Principle’ Exams

core principles exams

Actuarial and Business Exams

actuarial and business exams

Moving forward to become a Fellow member of the IFoA, students must complete:

Two ‘Specialised Principle’ Exams to Determine Career Direction

two specialised principle exams

One ‘Specialised Advanced’ Exam to Reach Fellowship

one specialised advanced exam

This is the general route taken by numerous actuarial science graduates aiming to become a qualified Actuary. Although this is a very common path taken, the way in which graduates follow this pathway may vary.

There are many different possible job prospects for student actuaries.

Traditional Actuarial Roles

The IFoA define actuaries as “problem solvers and strategic thinkers, who use their mathematical skills to help measure the probability and risk of future events.” They then “use these skills to predict the financial impact of these events on a business and their clients.”

The skills and qualities of an actuary are becoming increasingly sought out by different businesses and industries. As the world is developing more rapidly than ever, the need for companies to predict and manage risk is becoming ever more important. This is where actuaries come in. Conventionally, the main fields actuaries are associated with include pensions, consultancy and of course insurance! The insurance industry is a major employer of actuaries, historically employing more than any other industry.

Pensions

  • Actuaries in this field traditionally advise companies on how their pension schemes should be managed based on their employee structure. This includes advising on the calculation of their liabilities and advice on funding the liabilities as well as what assets to invest in.
  • Government agencies often employ actuaries to operate pension, retirement, and insurance programs.

Consulting

  • Consulting firms acquire actuaries to advise clients on financial decisions such as pension, retirement or other employee benefit schemes involving risk.
  • Consultants must be able to analyse the risk at hand and communicate their results efficiently and effectively to the client.
  • More client-based projects are involved, utilising the softer skills obtained from the actuarial science degree: communication and presentational skills.

Consulting offers a lot of variety and personal interaction with clients and colleagues. You can become an expert in your particular domain and move across different assignments making the day to day role a very exciting actuarial role. Consulting roles do tend to come with more pressure and longer hours however.

The Insurance Industry

  • Comprises of several areas including life, health, and general insurance.
  • Actuaries are employed to develop insurance products which they then price and monitor in all areas of the industry.

Although these sectors are all diverse, the basic strategic methods and skills used will be similar, stemming from methods taught in the actuarial science degree. A few of the commonly used actuarial practices are highlighted below:

  • Valuation – involves calculations and modelling aimed to advise an insurance company on the amount of capital and reserve that should be held.
  • Product Development and Pricing – devising insurance products and an adjacent pricing strategy for that product.

This gives us an idea of a few traditional roles presented to actuarial science graduates today. These jobs apply the strategic thinking skills and actuarial techniques they have learned to the real world.

Modern Actuarial Roles

Many years ago, the duties of an actuary may have been largely confined to these select few career paths.

Fast forward to 2022 and we can see that modern actuaries have started to push the boundaries and show the world how powerful their knowledge and skills can be.

Industries which originally had no ‘need’ for actuarial intervention are beginning to see the positive impact that predicting financial risk may have on their success. Not only are they involved in prediction of financial risk for insurance, but actuaries are also beginning to lend their expertise to other areas of prediction such as: Investment, Technology, and Climate Change.

The world as we know it is ever changing. Luckily for actuaries, changes in the world bring about new risks and with them new actuarial opportunities. As different fields begin to recognise the value of risk assessment in this new volatile, uncertain and complex world, the employment opportunities for actuaries become endless. Actuaries are more in demand than they have ever been before, leading to boundless global opportunities for actuarial science graduates.

Climate Change

Climate change is an obvious ongoing change that we are confronted with as an entire population.

From the risk of extreme weather to global warming and a rise in sea levels, this phenomenon has already made a huge impact on earth.

Actuaries have a social responsibility to use their expertise in quantifying risk and managing forecasts to provide high quality advice to the ultimate decision makers within our governments.

The International Actuarial Association (IAA) are a globally recognised organisation which aim to progress the development of the actuarial profession. In September 2009, The IAA set up the ‘Resources and Environment Working Group’ (REWG) to help combat climate change.

This group have been involved in ongoing projects such as:

  • Carbon pricing,
  • Flood risks,
  • Insuring vulnerable populations,
  • Government budgetary impact.

Investment

Actuaries are becoming increasingly involved in the world of Investment.

Investment management consist of investing client money in the stock market with the aim of making a target profit for a set level of risk. This involves trading in a selection of ‘safe’ and ‘risky’ stocks.

Choosing the correct portfolio of assets for the clients’ needs is a tricky job, traditionally executed by the investment manager.

However, actuaries have more and more often found themselves lending their analytical skills and profound understanding of asset interaction to the field of investment management.

Technology

As our world evolves, becoming ever more data-driven, the rapid technological advances we face are infinite.

Autonomous cars for example. An idea that in the past, seemed somewhat a gadget of science-fiction has been realised in today’s world. Although becoming more credible, there are many risks and ethical issues related to this new technology which must be measured before becoming publicly available. This is where companies such as Tesla require actuaries to assess and manage the risk of their products.

Actuaries face a new problem…

The shift of liability from person to product.

Actuaries will be required to adapt their risk profiling calculations in future to allow for this problem. The calculations of insurance premiums will also be affected whilst a car is driving in autonomous mode.

Insurance premiums may no longer be calculated based on the individual characteristics of the driver, alternatively based on the technology behind the vehicle itself. Although this concept is still a grey area, actuaries have an opportunity to play a key role in developing a solution to this problem.

Non- Actuarial Career Paths

Each career path mentioned so far stems from the actuarial profession. At the beginning of this essay, it was mentioned that actuarial science was the main route chosen by actuarial science graduates. I have highlighted how this ‘one route’ can open many diverse opportunities which may interest graduates.

However, there may still be many who find themselves uninterested in any of these actuarial career prospects.

After completing an intellectually demanding degree such as actuarial science, one may find themselves wanting to take a break from exams. Perhaps they wish to use their new skills in an alternative, equally stimulating profession. Although the degree itself may be specialised, the skills that students learn can be utilised and adapted in almost any profession.

A few career prospects compatible with someone graduating from an actuarial science degree have been discussed below.

Financial Analyst

As previously mentioned, actuaries have started moving into the world of investment management.

An actuarial science degree provides students with basic knowledge of the stock market and the interaction of assets and derivatives. This field is not commonly emphasised; however, some graduates may wish to focus on the financial information rather than the risks involved. A financial analyst is similar to an actuary in that they analyse data guiding businesses and individuals to make the best decisions for them.

The main differences are:

  • Actuaries deal with risk making decisions whereas financial analyst’s deal with the financial data.
  • The qualification route differs - financial analysts work towards becoming a ‘Certified Financial Analyst’.

This route may be preferred by graduates who are more financially orientated. However, for those seeking a rest from exams, this may not be the desired direction for you!

Data Scientist

Although an actuarial science graduate can be employed to a multitude of professions, their analytical skills and ability to solve complex technical problems have recently been well matched to the modern role of a Data Scientist.

Data scientists use large datasets, often developing their own programs and algorithms to find trends and come up with innovative solutions across all industries. Making use of both qualitative and quantitative data, data scientists tend to use more modern and imaginative methods of analysis than the traditional methods employed by actuaries.

Data science is in many ways like actuarial science. However there a few key differences which may make this career more attractive to some Actuarial Science graduates.

  • Data scientists employ a more informal nature of learning. There are no set professional exams.
  • They are however subject to ongoing learning e.g. via ‘Massive Open Online courses’ and developing a portfolio of models is common practice.
  • Predictive analytics and modelling are the focus of data science. There is less emphasis on risk modelling.
  • Although actuary is beginning to branch into non-traditional fields, data scientists are a relatively new career option, and their skills are already being utilised in a wide variety of industries.

As many of the skills required of an actuary and a data scientist overlap, this could be a perfect position for an actuarial science graduate. Possibly offering a broader set of opportunities.

Concluding Point

It is easy to say that actuarial science is a career specific degree. However, I believe that someone with this opinion has not done their research!

On a closer look, we see that this degree provides students with a skillset which can be adapted to an endless number of innovative and stimulating careers.

Yes, the prospect of following the traditional path to become a qualified Actuary is most certainly a front- line contender, nevertheless it is by far the only career path presented.

The world as we know it is advancing every day and risk is becoming ever more prevalent and complex and so actuarial science graduates are in demand globally, now more than ever!

So, if you are an actuarial science graduate, do not let anyone else forecast your future. The distribution of opportunities available to you is perpetual. Lucky for you, it is your job to predict the outcome!

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Actuarial Study, Future of The Profession

Why Should you Choose a Career as an Actuary?

“This is a guest article written by Michael Preston. Michael can be found on LinkedIn here.”

Are you considering a career as a an actuary? Actuaries are the backbone of modern-day insurance and pension industries. We are the fortune tellers of the financial sector. We use every aspect of data to look for innovative ways to solve problems. Actuarial Science is a profession that is expanding with the rising influence of technology (as seen via InsurTech) and with actuaries taking big strides into learning the importance of data science.

This article provides insight into the actuarial profession, the challenges you will face as an actuary and ultimately why you should choose to become an actuary. We also delve into what the future holds for an actuary by analysing the emergence of data science and the rapid evolution of technology. This essay concludes with answering important questions about the actuarial profession and whether the profession will be sustainable and secure going into the future.

An Exciting Challenge

It is no secret that you need high intelligence, initiative, and motivation to succeed in studying actuarial science and having a successful actuarial career..

You need to have a hunger to learn new concepts and ideas. However, the common misconception with actuarial science is if you are a number cruncher you will succeed. To quote wealth management executive Nicolette Rubinsztein:

“The best actuaries are the ones that through their engaging personalities and communication skills are able to take the brilliance from their spreadsheet and share it with a wider audience”.

A big hurdle for mathematical students set on an actuarial career path is learning how to be a good communicator. Analysing your results to determine what they mean and to be able to convey these results in a manner which is both coherent and comprehendible is a key aspect of an actuary’s job.

Perhaps the biggest challenge of becoming an actuary are the actuarial exams. Qualifying as an actuary is a marathon not a sprint. It is about taking the time to learn and understand complex concepts. While challenging, it is a hugely rewarding journey. You will gain a vast amount of knowledge that will help advance your practical skills in the workplace to an exceptional level.

You are also given the opportunity to specialise in a field of your choice. I have highlighted below the Specialist subjects that can be taken by actuarial students studying under the Institute and Faculty of Actuaries (the UK professional body):

  • Health and Care (SA1)
  • Life Insurance (SA2) 
  • General Insurance (SA3)
  • Pensions and Other Benefits (SA4)
  • Investment and Finance (SA7)
Pathway to becoming a qualified actuary

Figure 1: Pathway to becoming a qualified actuary (Source actuaries.org,uk)

Endless Opportunities

There are various routes one can take when studying to become an actuary. The freedom of choice is an attractive element of the actuarial path.

The Pensions Actuary

The actuarial career of a pensions actuary involves several responsibilities that help pension schemes meet the needs of the trustees and members. They provide advice to their clients on the extent of their liabilities, the most suitable investment strategy of the scheme, risks associated with the scheme and overall pension  scheme advice  (e.g. scheme design, compliance with regulation etc).

There is no doubt that the pensions industry is facing challenges with volatile markets causing uncertainty in pension costs and the increases in longevity. To help defuse this, we are seeing employers accelerating the need for consulting qualities in their employees to help advise members in making difficult decisions caused by these uncertainties.

Actuarial Consulting provides an interesting career choice. As an actuarial consultant, you will be doing a greater variety of work and learn quickly. It also gives you the opportunity to meet face to face with clients and network with more senior representatives in the company.

The Life Insurance Actuary

The actuarial career of the life insurance actuary is a stimulating career choice as you will be designing pricing models and creating intricate stochastic models that show how changes in economic conditions can affect links between assets and long-tailed liabilities.

We are seeing the life insurance sector technologically advancing in many ways. Life actuaries want to spend more time on the analytics of data rather than the farming and processing of it. We are seeing increased focus on wearable technology such as fitness trackers which brings in a considerable amount of data without the need for human interaction. On the analytical side we are seeing an increased amount of machine learning and predictive analysis to identify likely future relationships and trends.

One could argue that perhaps the need for human actuaries will diminish as the level of machine learning advances.

Moore’s law states that the speed and capability of computers is doubling every two years. So, what does that mean for us?

Do not be frightened!

The role of the actuary in life insurance looks set to change over the coming years with AI perhaps taking more responsibility on the data analytic side. However, humans will still be required to make morally tough situations where AI cannot. The life insurance actuary has an exciting and daring journey ahead and I believe the advancement of AI will only lead to higher quality of actuarial products and services and allow actuaries to move into higher value activities such as getting more involved with strategic decision making within the company.

The General Insurance Actuary

The general insurance actuary has similar tasks to the life insurance actuary, however as a general insurance actuary the products are based on the contingency of events such as theft, fire and flood to property and liability rather than paying out on death. You will be applying your extensive knowledge on stochastic modelling to derive estimate premiums based on a range of economical and social factors. You will also be involved in solvency modelling and reserving calculations to assess how much companies need to set aside to meet future needs and to ensure they can fulfil their financial obligations.

The appealing feature of general insurance is perhaps the variety of work. You would be surprised at how many fields and opportunities are out there. From home and motor insurance to insuring professional athletes against injury. While it would be a rarity to see an actuary in the latter you can see my point, the immense variety of projects that you will work on will keep you driven to succeed.

The Worldwide Actuary

If you are looking for a change of scenery, then becoming an actuary is the way to go. Asia, Australia, Canada, South Africa, and USA are just a few locations which have Institute and Faculty of Actuaries (IFoA) members. With its membership spanning 120 countries and 66% outside of the UK, there are endless avenues to explore. Young people are increasingly recognising the opening that becoming an actuary provides to explore the world with 43% of members from the IFoA aged under 30. The training and support you receive from the IFoA will provide you with an internationally recognised qualification that unlocks global opportunities that very few careers can provide in the modern day.

ifoa members around the world

The Future Will Be Different but Promising

Before anyone starts any career path, they want to know what the future of their chosen profession beholds. Will their vocation dwindle out and become obsolete? Will I have an exciting and rewarding long term career ahead of me? Before answering this, consider that we are seeing some professions, such as travel agents, that have not been able to adapt to the technological evolution of the 21st century.

But what about actuaries and the actuarial career path? Will they die out or will they thrive? What hurdles do they need to overcome?

The Emergence of Data Science

Traditionally, actuaries have taken historical financial data and applied methods taken from finance, mathematics, and economics to interpret data. This data often comes from pre-developed software that has been tried and tested. However, in a modern-day where there is a persistent hunger to extract more data from more sources to provide better analysis, perhaps actuaries need to bring forward more innovative methods to extract data. This desire that industries must constantly improve their predictions is what will steer actuaries towards the need to learn data science.

Data science is difficult to define as it is a practice that is continuously evolving and covers many professional fields.

Essentially, it uses scientific methods and algorithms to help analyse data that is considered unstructured. Using this unstructured data allows insurers to create more personalised analysis of individuals based on actual data from the individual rather than estimates.

Some examples of data science practices:

  • Car sensors – analyse the distance driven, where they are driving etc. Used in motor insurance premiums. For example Metromile's business model is based on "pay-per-mile" telematics.
  • Fitness watches – can be used to monitor an individual’s daily activity, heart rate etc. Used in health and life insurance. For example, Vitality use wearables to help price their insurance products and reward and engage with policyholders.

Actuaries will need to learn these methods of extracting unstructured data and how to analyse it to produce dynamic risk management. Actuaries will then be able to produce premiums which are more accurate and dynamic.

Does this mean that data scientists will replace actuaries? The short answer, no. It is true that we will see data scientists grow in stature over the coming decades, but data scientists have not specialised in economics or finance. This is what separates actuaries from data scientists, an actuary’s speciality is being able to advise and guide their clients on how to manage risk using their expertise. Data scientists are too widespread across many sectors to replace actuaries. We will likely see a merge between the two professions in the future with actuaries being heavily encouraged to familiarise themselves with data science.

Technology, Ally or Foe?

A growing concern is the uncertain influence technology will have on actuarial job security. We mentioned Moore’s law earlier which stated how fast technology and AI are advancing. A scary thought is AI could replace humans in several fields, not just actuary. Elon Musk added to this escalating fear by stating AI could overtake human intelligence as early as 2035. However, is this growing concern justifiable?

AI can use wearable technology and the internet of things to extract and analyse data. What is stopping this technology from replacing actuaries all together?

The truth is there are too many rules and regulations in place for this to happen. Human intervention is required to stop any abuse of data.

Despite these barriers for AI, change is still coming for the actuarial profession. What changes exactly? Well, its hard to say. Certainly, the human side of being an actuary in terms of advising clients etc will still be required. Looking back, we can see actuaries have adapted successfully before, by going from pen and paper to computers. Actuaries are too smart to be replaced by technology. We can see from the past, that actuaries are experts at harnessing technological aid to their advantage. To quote James Lynch, CAS Board of Directors, “Actuaries will have to become experts at system analysis, reaching conclusions from understanding systems of models with complex interdependencies”.

Uncertainty will always cause unrest; I believe actuaries will use technological advancements to their benefit and the profession of an actuary will prosper in the future.

The Elephant in the Room

It is no secret that one of the biggest incentives of becoming an actuary is the lucrative salary associated with the job.

Actuarial Science is one of the most rewarding professions out there with a highly competitive salary and bonuses throughout your career.

actuaries salaries

Actuaries have one of the highest graduate salaries of any graduate roles. Also, 82% of actuaries receive bonuses that encourage high performance levels in work and exams.

While salary should never be your main incentive to pursuing a career it certainly cannot be ignored. This along with very strong job security will provide a sustainable and beneficial job for life.

Closing Thoughts

Becoming an actuary is a career that provides an intellectual challenge every day. No day is ever the same. The profession provides training of the highest standards and a clear route on how to become fully qualified. The freedom of choice regarding career path is immense. Some actuaries also decide to go down non-traditional paths such as into Banking or Environmental Finance.

With regards to the future of actuarial science, actuaries will undoubtedly have to adapt in the future. Whether that is learning and applying data science practices or utilizing greater technology.

It is possible that data science techniques will come under ethical scrutiny. The increasing rise in data farming over the last fifteen years with the introduction of social media and smart phones also brings a growing cry for stricter privacy laws. Simply put, where will we draw the line?

Only time will tell but the actuarial profession is in an excellent place now and provides a valuable journey with challenging but rewarding moments. Reaping the rewards and resources of this journey will enhance your intellect and bring your professionalism to new heights.

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future choices of an actuary
Actuarial Study, Future of The Profession

Do Actuaries Have a Future?

“This is a guest article written by Caolan McCarron. Caolan can be found on LinkedIn here.”

Thousands of pounds, hundreds of hours spent studying and numerous exams…all for an Actuarial Science degree. So, finding the answer to the question "Do actuaries have a future?" is something I am highly invested in. As I am sure, are you.

It is impossible to predict, with utmost certainty, what the future holds for us as actuarial professionals. Six months? One year? Five years? Who knows?

But something we like to do, something built into our makeup, is just that. To predict, to forecast, to estimate.

In this piece, I envisage what the future could look like. Will the roles of actuaries be like those present today? Or will the profession be forced to adapt and adjust to new challenges ahead?

Currently, 13,000 fellows of the Institute and Faculty of Actuaries work in various sectors in the UK. As we would expect, and visible in the adjacent pie chart, most actuaries work in life insurance, general insurance and pensions.

Healthcare, investments, and other sectors such as government, banking, and risk management complete the field, with those working in consulting firms potentially working across all industries. The demand for actuaries in these non-traditional areas is growing, with actuaries using their transferrable skillset to provide critical insights and analysis.

pie chart where sector actuaries work

A typical actuary's day-to-day responsibilities include reserving, product pricing, pension plan assessment, and offering general actuarial advice to businesses. Although a solid background in actuarial knowledge is required for these jobs, many actuaries would agree that parts of the job are repetitive and could be streamlined.

With advancements in technology, these repetitive tasks and procedures are being automated more frequently, and this trend is likely to continue in the future. This will allow actuaries to concentrate on higher-value work, such as analysing and interpreting results and providing actionable feedback to clients, rather than spending time performing routine tasks. Actuaries will therefore have a more meaningful and significant impact within the workplace in the future, rather than "crunching the numbers."

Artificial intelligence and machine learning are also rapidly emerging. By allowing humans and machines to work side-by-side, these innovations are likely to redefine the actuary's role. Interestingly, 17 percent of global executives polled by Deloitte say they are prepared to handle a workforce that includes humans, robots, and AI. Will this percentage rise in the coming years? It is something to keep a close eye on…

Actuaries must evolve and take on new dynamic roles as the old ones become outdated. As a new world of work emerges, I expect that the current job description of an actuary will look very different in future years.  Actuaries will need to adopt a "growth mindset" and continue learning and adapting to keep up with the changing times. With the best prospects likely to be beyond the conventional actuarial sector, innovation and adaptability will be key to success as a future actuary.

Additionally, as actuaries move into these other areas and possibly into more client-facing roles, the use of softer skills such as effective communication skills will become more important. With technology taking care of more of the "behind-the-scenes" work, the ability to share ideas with a non-technical audience will become more sought after and highly valued.

Throughout 2020, the companies Actuartech and Montoux undertook a research study called 'The Evolving Role of the Actuary'.

In this study, they addressed two main questions:

  1. How has the actuary's role evolved in recent years in response to new circumstances?
  2. How will actuary's roles change in the future?
the evolving role of the actuary

The preliminary study produced interesting results and provided an insight into what the role of actuaries could look like in the future. Participants in the study included actuaries from all over the world. Respondents predicted that in the future conventional roles would focus on integrating data science, especially in areas such as risk management, big data analysis, and experience analysis. Respondents also expected that actuaries would branch out into non-traditional areas such as insurtech, technology design and growth, and climate change analysis.

One of the non-traditional areas mentioned is insurtech. Insurtech is revolutionising how insurance risk is managed, as companies are rethinking how insurance is delivered and premiums calculated. Insurtech companies offer customised policies, use devices such as smartphones to dynamically price premiums and are constantly developing new products to bring to market. Insurtech could lead to a massive shift in the insurance industry and the actuary's role in the coming years.

A changing world that includes driverless vehicles, quantum computing, blockchain, and space exploration will continue to alter the insurance industry. Each new technological development will impact insurance, mortality, and even pensions in their own way. As a result, actuaries will need to constantly evolve to develop new, creative solutions to issues that arise.

driverless vehicle

Take driverless vehicles, for example. Companies will encounter various issues as they become more feasible, including risk evaluation, risk management, and liability. Just think how difficult it could be for insurers to assign liability in the event of an accident involving a driverless vehicle. Does fault lie with the driver (if the car isn't completely automated), the carmaker, or the supplier of the software systems that enable automation?

Actuaries, therefore, are an excellent choice for analysing and managing these problems when they arise.

Other emerging threats and problems, such as climate change, population ageing, economic crises, pandemics and conflicts, will cause the insurance industry to change even further. Actuaries will play a very significant role in these areas in the future.

Take COVID-19 as an example. Inevitably it has and will continue to change the insurance industry. It will almost certainly result in a greater focus on introducing emerging technology and an overhaul of insurance models and policy terms and conditions.

I believe actuaries will be at the forefront of designing and creating new products, models and policies to help mitigate the risks mentioned. As a result, continuous professional development will be critical to become proficient in these new areas so that actuaries can lead the way in providing advice and guidance.

While thinking of the never-ending possibilities that a fast-changing world will bring for actuaries, I can't help but think of the increased risk of disaster that accompanies such advancements and reliance on technology. The following example reinforces this.

In January 1986, NASA launched the Space Shuttle Challenger. The shuttle disintegrated 73 seconds after takeoff. NASA's model determined the likelihood of such a disaster to be 1/100,000, corresponding to a VAR of 99.999 per cent. However, since the engineers had concerns about the impact of the cold on O-ring seals, they measured the likelihood at 1/200, or a VAR of 99.5 per cent, using more intuitive tests. The O-rings had been designated as a "critical 1" part, meaning that if they didn't work correctly, the spacecraft and its crew would be jeopardised.

This extreme example highlights how important expert opinions are and that overreliance on models without human intervention could be disastrous. In my opinion, it is a strong argument against those who say "the job of an actuary will become redundant, and technology will take over". I anticipate that as technology advances, actuaries' roles will become much more critical in calculating the costs of new, emerging risks and developing, pricing, and evaluating a wide range of insurance products.

According to the US Bureau of Labour Statistics, actuaries' employment is expected to increase 18 percent from 2019 to 2029, further contradicting the idea that technology is here to take over.

Additionally, the paper, "21 steps for teaching mathematics," which was sent to the French Minister of Education in February 2018, further indicates the need for actuarial services in the future. The report states: "Artificial intelligence, modelling, digital simulation, process optimisation and massive data processing are pervading our world. They make use of fundamental and applied mathematics that require a high level of expertise."

Actuarial degree programmes have often emphasised high-level theoretical mathematics while still emphasising their applications. This puts actuaries in pole position to solve technical mathematical problems that arise in the future, with a particular focus on how to apply and implement real-world solutions.

So, to conclude. In my opinion…

Will actuaries have a future? Yes.

Will it look very different from right now? I think so.

As Frank Redington, a British actuary best known for his development of Immunisation Theory, once said, "An actuary who is only an actuary is not an actuary."

So…Learn. Adapt. Grow. Evolve.

Continuous professional development will put you in a solid position to thrive in the fast-paced world we live in and allow you to keep up with the ever-changing technology. The future provides many exciting, non-traditional challenges for actuaries, so embrace it. Dive in. Let us make the world a better place—a place where we use our unique skill set to manage and mitigate the new risks that appear.

I believe that actuaries who continue to upskill, learn, and adapt have a long and successful future in this world.

A more important question, in my opinion, and one that deserves your consideration, is...

Do you have a future as an actuary?

night vision glasses
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