The Math You Need... - Part 1: to become an Actuary
A description of a career as an actuary, the educational requirements, relationships to insurance and finance industries, types of actuarial opportunities and monetary expectations.
In a recent news article, employment as an actuary was listed as the top choice in a list of the four current professions at nearly zero percent unemployment; which means that virtually everyone who graduates with an Actuarial Science degree will find work as an actuary. For students who are now making choices about what to major in and what to pursue as a great career, with very good potential into the foreseeable future, it is a long term and very stable profession.
An actuary is a risk assessment specialist. They use the knowledge obtained from their training in mathematics, economics, finance, accounting, probability and statistics, among others fields, and experience, to determine the financial risk of certain events occurring. Historically, the need for actuarial skills came about naturally, because merchants needed ways of minimizing their losses in the events of delivering or receiving goods, often by sea. There might be concerns of loss at sea due to storms or pirates and on land, due to bandits, so intermediate companies came about to assume the risk of loss…for a fee. These early assurance companies used primitive actuarial techniques to weigh the risks and set the amount of the premium, or the amount that they would charge the merchant to assume that risk. If, in the event of loss at sea or land, the payout would destabilize the financial future of the insuring company, other insuring companies or reinsurance companies might step in to assume some of the risk, receive some of the premium and also pay a portion of the payout.
Even more fundamental than the English, German, Japanese or Chinese used as the medium of communication in classes and in textbooks, without the universal language of mathematics, science and technical knowledge would be extremely difficult to explain and to understand…just as it is really difficult to imagine what a sunset looks like, if you have never seen colors or shapes. Suffice it to say, math is the common language that lies beneath most of the today’s hottest and up and coming career fields.
If you want to pursue one of these fields, there are certain courses that everyone has to take. Your preparation begins long before college, with the Arithmetic, Algebra, Geometry and Trigonometry that you do well in, or at least can do well in, with a little help.
In college, you need the basic Calculus sequence in addition to Linear Algebra and Differential Equations. You will need some courses, usually offered by the Statistics department. Advanced Calculus and Abstract Algebra are optional courses and not required, though they will help you to improve your abstract thinking and reasoning skills.
Other course sequences that you will need are in Accounting, Finance, Management, in addition to Economics, Business and Computer Science. Since clear and concise written and verbal communication is essential in this field, one or two Communications courses would not hurt.
Many colleges and universities offer an Actuarial Science major, either through their Math departments or jointly through their Math and Statistics departments.
Though there is not universal agreement, many actuaries believe that the best preparation for a actuarial career is a major or concentration in mathematics, rather than in economics, finance or accounting, primarily because of the training and development of abstract structuring and analytical techniques.
It would be a big mistake to focus entirely on math, science or business. Leave some time to study other fields, such as History, Literature, Music and Art; in addition to physical activities, such as Martial Arts, Dance or Sports. You never know when the perspective obtained from time spent in these other fields will teach you something about life…or yourself. Whatever you choose, do it with passion, never just superficially, otherwise, you are wasting not only your time, but also that of the instructor and the dedicated students. Generally, just keep an open mind about learning new things. You can never know now what knowledge may be useful to you in the future.
Most actuaries work for insurance companies, a large portion work at independent consulting firms and the remainder work for the federal government, universities and other types of businesses. In addition to experience, salaries of actuaries are determined by the type of industry as well as by geographical location. Actuaries who work with insurance and employee benefits average over $120,000 and those working for the federal government, over $110,000. Actuaries who consult to business and legal fields average near $110,000 and those in insurance fields, about $100,000 annually.
