The insurance industry relies on actuaries – the brainy pros who access the financial cost associated with risk. Actuaries are also astute number crunchers, statistical whizzes. They analyze the cost that uncertainty invites, and help develop policies accordingly.
Actuaries are an asset in the financial sector for many reasons-racking up impressive figures from various careers not just in insurance. They provide data to help evaluate risks while developing policies for businesses and organizations, state and federal governments as well as others within their area of expertise like those working in environmental engineering or cancer research.
How to Find Work as Actuarial Consultant
Independent actuaries have a variety of responsibilities including providing statistical information and analysis about risk management through conducting analyses; evaluating the financial value of insurance risks and estimating loss, as well as developing risk management strategies; and exploring issues related to laws and regulations.
In this article I explain why would you want to work as independent actuary, which skills you need to have to break in and how to get them.
What actuaries do?
Actuaries are financial professionals who assess the risk, for example to determine premiums or adequacy of statutory reserves. They use a variety of sources, such as surveys or records from previous years, to determine how likely you are to die or experience claim and the amount of money that would need to be invested in order to cover your future payments if you do die or to settle your claims.
Actuaries can work in different insurance areas like:
- Life Insurance
- Property and Casualty
- Health or
- Pension Trusts or Schemes.
Actuaries that focus on determination of premium, say auto insurance rates, are called pricing actuaries. Those who calculate of value of reserves are called reserving actuaries. Some actuaries are developing products, for example determine coverage for liability insurance or benefits for policies. Actuaries can also fill position of risk managers. They can also develop capital models that shows adequacy of insurance capital and relation between assets and liabilities. These are capital modeling actuaries. Some are calculating most optimal reinsurance of policies. Insurance professionals that work with corporate customers, usually through insurance broker, are called underwriters.
Besides these ‘classical’ roles, actuaries can also fit other positions like:
- IFRS 17, Financial Statements Reporting
- Software Development, Consulting Services
- Project Management
- Capital Budgeting, Development and revision of Business Plan, Dividend Policy
- Derivative Trading
- Marketing, Mailing List Outreach, etc.
Is it hard to be an actuary?
Actually yes, it is. You need to have good analytical skills in order to do a good job like this one. You also need some mathematical and computational knowledge or at least understanding of the mathematics for insurance pricing and reserving. You also need understanding of macro economics to understand impact of environment. Actuarial exams are tough.
How to Become Certified Actuary?
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It is not easy to become actuarial certified. First, you need to have university degree in mathematics, economics, statistics or finance. When you graduate from university, you might want to take some actuarial exams from actuarial societies like:
Casualty Actuarial Society and Society of Actuaries are US based societies, while Institute of Actuaries is UK based. They all support remote studying. There are a lot of students from China, Russia, India and elsewhere currently studying hard to obtain the certification.
Actuarial firms and insurance companies are keen to employ actuarial students. They tend to cover tuition costs and offer free study days. ActEd is UK based company that specialize in study materials and tutors. If you study at the Institute, their products (e.g. Study Pack) are highly recommended.
How Actuaries Maintain Independence and Integrity
Actuaries basically provide information that is used to make decisions in the financial industry. In order to maintain their independence and integrity, actuaries need to follow the Actuaries Code published by Actuarial Profession. The following is a list of important principles that actuaries should follow:
- Actuaries must be competent professionals who are able to perform their professional duties in accordance with the highest standards of their profession.
- They must work independently with integrity and without conflict of interest in any advice they give.
- They must not accept any gift, favor or other consideration that could reasonably be seen as compromising their personal judgement or professional objectivity.
- They should at all times conduct themselves in a way consistent with the best interests of all those whose interests they have agreed, whether expressly or impliedly, to represent.
- They should make judgments and take decisions solely on the merits of the cases and their professional competence.
- They who give actuarial advice must act independently and avoid conflicts of interest.
- They must not use confidential information obtained in connection with the giving of actuarial advice for any purpose other than providing that advice
What Type of Actuaries Get Paid the Most?
Extras can either be employed or taking work as independent contractors. Salary of company actuaries depends on the certification status. Young students earn $50,000 a year. With each exam passed their salary advance. With four passed exams they earn almost $70,000 a year. Associate actuaries can earn from $100,000 per year up to $150,000 per year for 15 years of experience. Fellow actuaries can earn $200,000 per year and more. Especially if the act as chief actuary.
Extras can also work as independent contractors. Some call them virtual actuaries. New projects like capital modelling or IFRS17 demand a lot of actuaries. Companies are keen to hire contractors because they don’t want to deal with excessive staff once project is complete. Part qualified contractors may earn between $500 and $1000 dollars per day. Fellow independent consulting actuary can earn more than $1000 per day.
What Makes a Great Actuary?
Actuary should be able to work under pressure. Before engagement it must communicate amounts of time required to complete the task. He/She needs to agree and scope of the project and list of documents to be produced.
He/She needs to ensure actuarial independence in order to produce independent actuarial opinion. He/She needs to respect confidentiality agreements.
Actuary needs to have sufficient knowledge and previous experience to use appropriate assumption basis and sound financial assumptions. He/She needs to document them and have clear communication with the customer. He/She needs to have experience of working with clients.
When providing actuarial services, they should follow actuarial standards. Communication with customers is crucial, as some concept may be difficult to understand, but have real economic implications for their companies and their policyholders. For example, customers need to understand uncertainty regarding actuarial valuations and impact of actuarial assumptions.
How to Break in Independent Actuary Position?
In order to get position as freelancing contractor you need to have skills that are in high demand like:
- Implementation of IFRS17
- Implementation of Solvency II
- Capital modelling software like Prophet
- Project management skills
- Reserving skills, knowledge of RESQ
You also need to be flexible. Be ready to work on different locations, different countries, perhaps even a different continent. But be assured, the plenty of challenges, plenty of rewards and you will definitely not be bored.