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May 2, 2022

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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