Being An Actuary: Understanding An Unknown Business Profession (Part 1-3)

By Bunmi Ojo

What or who is an actuary?

An actuary is a business professional who analyzes the financial consequences of risk. Actuaries use mathematics, statistics, and financial theory to study uncertain future events, especially those of concern to insurance and pension programs. Actuaries could work for a wide range of companies, they include insurance companies, consulting firms, government, employee benefits departments of large corporations, hospitals, banks and investment firms, or, more generally, in businesses that need to manage financial risk. A career as an actuary is better described as a “business” career with a mathematical basis than as a “technical” mathematical career.

An actuary is not just for insurance.

Actuaries are the first professionals managing risk and modelling the financial impact based on the likelihood of future scenarios, having a deep understanding of the nature of risk and excel at putting a value on a risk, regardless of the industry. 

While risk exists in all industries, no other industry handles the financial impact of risk more than the insurance industry. They are traditionally specialized in life, health, property, and casualty insurance. For the insurance industry, they develop, price, and manage insurance products. They also are involved in defining and creating pension and retirement plans for organizations. And as the population ages, they are finding roles as financial planning advisors.

But these skills and talents are transferable to any industry that requires risk modelling and management, including:

  • Financial services, such as banking and investment management.
  • Transportation, such as shipping and air travel.
  • Energy, such as utilities, oil, and gas.
  • Environment, on issues such as climate change.

Actuaries are experts in:

  • Evaluating the likelihood of future events—using numbers, not crystal balls.
  • Designing creative ways to reduce the likelihood of undesirable events.
  • Decreasing the impact of undesirable events that do occur.
  • Being key players in managing team of companies that deal with risk. 

They are the leading professionals in finding ways to manage risk. It takes a combination of strong analytical skills, business knowledge, and understanding of human behaviour to manage today’s complex risks facing our society.

In a fast-changing world, with emerging risks and the need for more creative ways to tackle them, there are constant opportunities for personal and professional growth. An actuary is the analytical backbone of our society’s financial security programmes and they are the brains behind the financial safeguards in our personal lives, so we can go about our day without worrying too much about what the future may hold for us.

Being An Actuary: Understanding The Unknown Business Profession (Part 2)

By Bunmi Ojo

Risk Management function of an Actuary

With unbeatable analytical skills, they help organizations plan for the future and protect themselves from loss. By understanding the very nature of risk, they play a key role in the psychological, physical, and financial stability of society. With actuaries’ help, businesses can grow, retirees can invest with confidence, and people can enjoy peace of mind. 

How they carry out Risk Management Function 

Explaining what they do would not be complete without explaining risk.

Risk comes in many forms. Everybody and every organization faces risk. As experts in measuring and managing risk, we fill a significant need in our society. Our contribution to society’s psychological, physical and economic well-being is incredible. If risk management programs didn’t exist, our economy would not be able to flourish.

To illustrate, here are just a few of the problems we solve:

• We determine how much an insurance company should charge for auto insurance, taking into account many factors such as the car that is being insured and details about the driver.

• We develop life insurance products so that parents can enjoy adventurous recreational activities such as rock climbing while feeling secure that their children will be cared for in the event of an accident.

• We determine how much an insurance company should charge for homeowners insurance, considering a number of factors such as where the home is located.

• We determine how much an insurance company should charge businesses for the many different types of insurance that businesses need, such as liability insurance and business interruption insurance.

• We help companies establish their retirement plans.

• We assist banks in managing their assets and liabilities and develop ways to manage financial risk.

Risk is at the heart of the problems we solve.

Actuaries; the backbone of financial security. 

Insurance companies, financial planners, and many multinational corporations are hesitant to make certain moves without consulting the actuary first. That’s because the problems they solve provides a safeguard against catastrophe and this gives them the confidence to grow. And that benefits everyone. 

The future is uncertain and full of risk. Risk is the chance that an undesirable event will occur, but risk is also opportunity. 

Where Do they work ?

Anywhere risk is present.

The insurance industry can’t function without actuaries. We calculate their costs and determine the premiums for policyholders; and while we don’t forecast the weather, we can tell them how much they can expect to pay in claims after the next disaster. 

Private corporations rely on the actuary’s risk evaluation to frame their strategic management decisions. And because their judgment is highly valued, the career paths often lead to upper management and executive positions.

They are  also employed as consultants. Whether they are a part of a nationwide firm or an independent one-person practice, they help companies design pension and benefit plans, evaluate assets and liabilities, and stare down risk–all alongside top executives. 

Actuaries also work for the government too, helping manage its programs and overseeing public companies to ensure compliance with regulatory laws. 

They also work for:

• Colleges and universities 

• Banks and investment firms 

• Public accounting firms 

• Labor unions 

• Rating bureaus 

• Fraternal organizations

Being An Actuary: Understanding The Unknown Business Profession (Part 3)

By Bunmi Ojo

Frequently asked Questions 

  1. What courses should I study to become an actuary?To prepare for an actuarial career, you should take three semesters of calculus, two semesters of probability and statistics, two semesters of economics, one or two semesters of corporate finance, business communications and a well-rounded group of liberal arts courses.
  2. What degrees are appropriate to an actuarial career? Are jobs in the actuarial field limited solely to individuals with an actuarial science/math/statistics degree?Actuarial science, math, statistics, economics, business and finance degrees are all good training for an actuarial career. However, actuaries come from a variety of educational backgrounds. Actuaries may have majors in areas such as operations research, physics, engineering, and even fine arts. 
While majoring in actuarial science or math in college will benefit someone wanting to be an actuary, you are not required to major in these fields to be an actuary. It is the ability to pass actuarial exams that determines if one is eligible to enter the profession. 

  3. Does it help me to have a graduate degree?Not necessarily; most actuaries earn a bachelor’s degree, but do not pursue advanced degrees. However, you might consider a graduate degree in math or actuarial science if your undergraduate degree was in an unrelated field, or if you heard about the profession later in life. 

  4. What types of scholarship opportunities are available for those interested in pursuing an actuarial degree? There are a number of scholarship opportunities for students pursuing a career in actuarial science.

Career Outlook: Growing as an actuary.

The actuarial profession is perfect for individuals who enjoy challenges and problems solving. Those who develop a track-record of success will have many opportunities for growth and advancement. 

Most employers of actuaries award merit increases as you gain experience and pass the actuarial examinations. Most companies also offer cash bonuses, salary increases, and promotions for each professional designation achieved. 

Skills acquired by actuaries, especially the quantitative analysis of risk, are valued in the marketplace. As such, those who have the will to succeed can aspire to career advancement with an actuarial credential.

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