Should You Study Actuarial Science?

If you are in two minds about studying actuarial science in college, or if you are not certain about continuing pursuing this profession, this blog is for you! You will learn who should study actuarial science, why should you study it, how to study it, and where to study it. First and foremost, I will start out by giving you an introduction to actuarial science.

What is Actuarial Science?

Actuarial science is the discipline that applies mathematical and statistical methods to assess risk in the insurance and finance industries. It includes a number of interrelating subjects, including probability, mathematics, statistics, finance, economics, and computer programming. Historically, actuarial science used deterministic models in the construction of tables and premiums.

One Crucial Point!

Studying actuarial science cannot make you an actuary, only passing all actuarial professional exams does. Actuarial science is just a course in college to prepare you to sit for all the professional paper.

Who Should Study It?

As you explore this page, you will learn about who should study actuarial science and know whether you are suitable for this course. Generally, a person who has the following characteristics is ideal for this course.

1. Likes Number

Actuarial Science is a very comprehensive course in the way that it covers Mathematics, Finance, Economics, Accounting, Business Models, Computer Programming and Risk Management. As such, a high aptitude in Mathematics is highly required. To start up the course, you will first need to learn Calculus, Statistics, Probability, and Financial Mathematics at the early stage. Then you will need this fundamental Mathematical knowledge to solve complex actuarial problems. So if you do not like numbers or are not number sensitive, this course is definitely not for you.

2. Likes Programming

Being an actuary requires you to master several in-depth computer programming languages. This includes, but not limited to, Microsoft Excel, Microsoft Visual Basic, Microsoft Visual FoxPro, and most importantly, Prophet – an actuarial software designed to crunch a large database. You may have no idea about this software yet because you are not yet taught in college. This is normal. So don’t panic. You did not know how to walk when you were born, did you? The important thing is to have the desire to learn, then you will master it at your fingertips in no time. However, if you find yourself do not enjoy learning programming languages or writing codes, please spend your time studying other course.

3. Likes to Solve Complex Problems

Actuaries are experts who solve complex problems. There are many factors impacting an actuarial solution that even one assumption is inaccurate, it would affect the whole solution and result. Consequently, actuaries employ the actuarial control cycle – a problem-solving approach that applies equally well to the most broad and the focused actuarial problems. It is a model of actuarial practice in a wide range of fields and provides common grounding for all candidates. Through the control cycle, all actuarial work is categorized into three main functions: 1) Define the problem, 2) Design the solution, 3) Monitor the results. As a reward to this highly sought-after problem-solving skill, actuaries are paid extremely well. In fact, it is one of the highest paid professions. So if you like solving complex problems and taking challenges, the actuarial career can be your bread and butter.

The figure above shows the Actuarial Control Cycle Framework

4. Likes Sedentary Lifestyle

Most actuaries live a sedentary lifestyle. They mostly likely stay in the cubicle, facing the computer, crunching the data, or doing the programming work. It is less likely for an actuary to work outside of the office, except for actuarial consultants or reinsurance actuaries who need to go out to seek businesses. If you enjoy staying in the office doing analytical work, this course is one of your best choices with high financial rewards and benefits. On the other hand, if you are a gregarious person and enjoy meeting new people every day, you probably have to think twice when considering this course.

What is the Biggest Mistake to Study Actuarial Science?

Take a moment and think about the reasons you want to be an actuary. Could it be the money you can make? Could it be the sense of achievement you get when you solve a complex problem? Or could it be the fame that people look upon you as a professional?

If your primary motivation to be an actuary is to be a multimillionaire, then you have made the biggest mistake that most actuarial science students do! Yes, I am right in the face and tell you that being an actuary ALONE is hard to rake in millions! It is true that the salary of an actuary is pretty inviting, as it has been ranked for a couple of times as the most promising career in the United States. However, the truth is you can attain that attractive salary only when you have become a qualified actuary after a great amount of toil and study.

Generally, being an actuary symbolizes you are an employee. Whom do you think will make more money, an employee or employer? Of course the latter! There is a limit to what an employee can earn because you are earning money to compensate for your time spent in the business. Is your time limited? Yes, it is! So is your income. On the contrary, the sky is the limit for an employer's income. He is leveraging other people’s time and resources to generate profit. So my take on this is, if your goal is to be extremely wealthy, study business! It is the easiest path to achieve your goal.
We are not saying that an actuary cannot make a lot of money. Yes, he absolutely can. It just requires much more financial intelligence to do that. And we suppose the actuary who is wealthy does not only have one source of income, but multiple!

However, if you are almost certain becoming an actuary, don’t fret. The good thing is you can still be in a business by establishing a consulting firm, or a software company, or even an insurance company. You are still open to possibilities; and the possibilities are only limited by your imagination. Unbelievable?! Yes, because you have not known yet that many insurance companies were actually started by actuaries.

What if I have high mathematic aptitude but dare not take risk building a business? What other choices do I have besides being an actuary?

If you like a secured life, getting a handsome monthly paycheck, we would recommend you to study Chartered Financial Analyst (CFA). The CFA is a qualification for finance and investment professionals, particularly in the fields of investment management and financial analysis of stocks, bonds and their derivative assets. The program focuses on portfolio management and financial analysis, and provides generalist knowledge of other areas of finance. Research showed that a CFA is more likely to achieve financial freedom than an actuary. You are always welcome to go to CFA Institute for more information. In addition, you are still open to many other options like Mathematician, Fund Manager, Certified Public Accountant (CPA) or Chartered Accountant (CA).

What if I still have no idea of what to study?

If you are not certain about what to study yet, don’t panic. We advise you not to first simply jump into the notion of becoming a professional yet. Why? Because by becoming professional, you are actually limiting your choices in life. You spend the whole amount of time studying one particular thing - your professional course. Once you come out from college, you have one golden path paved ahead for you into that professional field. Now with that degree, haven’t you realized that you have only one option to do with your career? What if you eventually find out in your senior year that you do not like the course because you simply jump into the idea of becoming the professional in the first place? It is a waste of time if you do not go into that industry but do something else instead. Now you probably notice the drawback of becoming a professional.

Should I change the course or career if I eventually find out that I do not like what I do?
Nonetheless, we still encourage you to change, even if you may feel it is a waste of time. But do what you believe is right. It is never too late to learn from your mistake, as long as you know to change.

Therefore, if you do no have an idea of what to study yet, what you can do now is to get into the college first without declaring your major. (While in some countries, e.g. Malaysia, students are not allowed to do this.) In the meantime, you have to delve into your inner self and ask yourself these questions. What do I love to do? What am I passionate about? What am I good at? How can I take them to my career path?

Why ask these questions?

“Because your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven’t found it yet, keep looking. Don’t settle. As with all matters of the heart, you will know when you find it.” - Steve Jobs (Apple, NeXT CEO)

This is a very powerful quote and would serve as your source of inspiration.

You see, life is not all about how much money you can make, but how fulfilled, happy and meaningful your life can be. If you love what you do, you will find life is as easy as you might think. As it was proved by countless lifestyle entrepreneurs, they all started by doing what they love and became a multimillionaire later on. Trust yourself! Profits certainly follow when you do what you love. You should be able to make a wise career decision when you find your passion and your strengths.

Your time is limited. Don't waste it living someone else's life. Don't be trapped by the dogma - which is living with the results of other people's thinking. Don't study or do a certain thing because people tell you that this is good. Don't let the noise of others' opinions drown out your own inner voice. And most importantly, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.

"All work and no play make Jack a dull boy." This is not entirely true because both work and play can exist at the time! When you love what you do, there is no work anymore!

Life is a bliss when you do what you love. Don't you think so?

The Actuarial Life

What is the life of an actuary? What do actuaries do as a living? Imagine you are an actuary would give you an idea of how your life looks like five years ahead as an actuarial executive. Now let us take you into your imagination.

Actuaries are excellent risk managers. They work in specialist areas of insurance, pensions, benefits, healthcare, investments and banking, or for any large organization where risk management plays an important role, or for a consultancy advising on all sorts of different projects. As such, the roles of actuaries are imperative in insurance and finance industry. This includes life insurance companies, general insurance companies, and reinsurance companies.

What is a life insurance company?

A life insurance company is an insurance company that sells life and annuity insurance products that pay a designated beneficiary a sum of money upon the occurrence of the insured individual's or individuals' death or other event, such as terminal illness or critical illness.

What is a general insurance company?

A general insurance company is an insurance company that sells general insurance or non-life insurance policies, including automobile and homeowners’ policies. The policies provide payments depending on the loss from a particular financial event. General insurance typically comprises any insurance that is not determined to be life insurance.

What is a reinsurance company?

A reinsurance company is a company that insures insurance companies’ insurance policies to minimize the insurers’ risk by transferring it to the reinsurer. 

Roles of An Actuary

To simplify things, some of the main roles of actuaries in insurance companies are to calculate the premium for the insurance products, and determine whether the insurance company is financially solvent. In contrast, the roles of actuaries in the finance industry are in the field of risk management and assets liabilities management. They help in assessing all possible risks and manage them before the problems surface.

As an employee, an actuary works traditional working hour, which is from 9-5. However, actuaries are often required to work overtime in some aggressive companies, especially when they are to meet deadlines. As such, life of an actuary can be thrilling or stressful, depending on how you perceive it. Some who enjoy an easy and leisured lifestyle would forfeit the actuarial career and be a professor instead, for an instance. Life of an actuary can also be mundane or exciting, depending on the position you hold and the team you are in. Let us articulate the roles further by taking an insurance company as an example.

There are two major teams in the Actuarial Department of an insurance company, which are the Pricing Team and the Valuation Team. However, there has been an emerging Assets and Liabilities Management Team in some insurance companies recently. But we will only focus on the Pricing and Valuation Teams for this moment.

The Pricing team’s tasks are more challenging and exciting because the demand of an insurance product can change because of the forces of the market. So the pricing projects are always different and novel. The pricing actuaries price the products and negotiate with the marketing department to see if the price is acceptable by the market. To give you a better idea, the price of the product is the insurance premium that your parents pay. The pricing actuarial executives and marketing executives then go along to modify the assumptions made (e.g. assumption on mortality rate) to adjust the price until the both parties are satisfied with the price proposed. The process can be a little bit long, but if you are the kind of person who likes to take on new challenges each day, we are sure you will have fun in it!

On the other hand, the Valuation Team’s tasks are more tedious because they are doing the monitoring work. They monitor the results of the insurance products which are already in the market to evaluate their performances and justify the assumptions made. If they notice any poor performance products, they will look into the assumptions and devise better ones. This monitoring process is continual because actuarial solutions are shaped by the ongoing external forces of the market, such as government policies, foreign trade policies, the business environment and the global economy. In addition, the Valuation Team needs to prepare a monthly report to the government regulator. If you are the kind of person who likes to follow a certain set of rules or procedures and repeat the same process each month, this is the right team for you!

In a nutshell, actuaries are problem solvers, in tune with what is happening in business through their interpretation of statistical data and knowledge of social and economic systems. They combine good business sense with safeguarding the public's financial interests, upholding the highest professional standards. They play an influential role in the society. The unique skills of actuaries are behind many high-level strategic decisions made by large companies and governments, and can have a positive impact on legislation, businesses and individuals.


Now that you have a general idea of how an actuary’s life looks like. The question you may have now is how to be an actuary. Next, the “Actuarial Exams” part will reveal to you the path to be a qualified actuary!

The Actuarial Exams

On this page, you will learn the way to become a qualified actuary, whom we call Fellow.

The title of Fellow varies from country to country. For example:

1. Fellow of Society of Actuaries (FSA) - USA
2. Fellow of Casualty Actuarial Society (FCAS) – USA
3. Fellow of Institute of Actuaries (FIA) – UK
4. Fellow of Faculty of Actuaries (FFA) – UK
5. Fellow of the Institute of Actuaries of Australia (FIAA) – Australia
6. Fellow of the Canadian Institute of Actuaries (FCIA) – Canada
7. Fellow of Society of Actuaries in Ireland (FSAI) – Ireland
8. Fellow of the Actuarial Society of South Africa (FASSA) – South Africa
9. Fellow of the Actuarial Societies of India (FASI) – India

Anyone can be an actuary! Yes, ANYONE! It is not only limited to actuarial science degree seeking students. Whether you are pursuing a chemistry or a pharmacy degree, you can still become an actuary by taking the actuarial professional paper. Now let us bring you to the path of becoming an actuary.

Before you can become a Fellow, you need to pass several professional preliminary examinations to become an Associate. An Associate is someone who has demonstrated knowledge of the fundamental concepts and techniques for modeling and managing risk, and also learned the basic methods of applying those concepts and techniques to common problems involving uncertain future events, especially those with financial implications.

Subsequently, you choose the track you want to specialize in, be it the life insurance, pensions and retirement benefits, healthcare, investments, finance/ERM or property and casualty track. You then sit for the examinations and complete the modules and become qualified - Fellow. A Fellow has an in-depth knowledge of the application of appropriate techniques to a specific area of actuarial practice. You are only called an actuary after you become a Fellow.

To sum up, the flow looks like this: Student --> Associate --> Fellow (Actuary)

It may seem simple and easy, but the process to becoming an actuary is normally not short. Some may take 5 years, while some may take up to 20 years. Our advice on this is to start taking the paper and complete as many as you can while you are in college. The reality is once you get out to work, you have less time to study the material. Just imagine, you are just off from work and after dinner you have to get yourself to study again at night to prepare for the exam. No TV, no clubbing, no social activities. How dull and tiring your life would be! Although most insurance companies do give you study leave prior to your exam, it is often not enough if you do not have a good time management. The situation turns even intense after you have your own family, let alone having kids. Many married actuarial Associates actually give up being an actuary because they have too many commitments in life than to focus on the exams.

The issue is not about how cruel the reality is, but how you go through all the adversity to achieve your goal. Take a moment and think about all the potential financial rewards and benefits you will harvest when you succeed. Do you find yourself having fun in it? Do you feel the sense of achievement? Do you find yourself embracing all the financial rewards and recognition? You must be very excited to see yourself succeed! It would serve as your tremendous source of motivation to move forward. All in all, having a good time management and discipline are crucial to being an actuary. Most importantly, the secrets are SPEED and DETERMINATION! If you were to succeed, you have to do what it takes!

Now you know the reality of the path to be an actuary. Coming back to the topic, you have two main important things to consider when deciding to be an actuary.

1. Which track to choose?
2. Which professional body examinations to take?

Once you have determined the track that suits you the most, you can start to consider which professional body examinations to take. There are four main world recognized professional body examinations. Their contents are almost similar and the icing on the cake is the professional bodies allow you to transfer the accredited credential from one body to another. The number of examinations varies according to the bodies. Please click on the link below to obtain more information about their exams.

1. Societies of Actuaries (SOA) - USA
2. Casualty Actuarial Society (CAS) - USA
3. The Institute and Faculty of Actuaries (merger of the Institute of Actuaries and the Faculty of Actuaries on August 1, 2010) – UK
4. The Institute of Actuaries of Australia – Australia

Can I specialize in more than one track?

Yes, you can!

Are actuarial professional exams easy to pass?

It depends. If you have enough preparation and study the right material, you will certainly pass with flying colors. Incidentally, bear in mind to check the exam syllabus on their website before you prepare for the exam to make sure you study the right material. The syllabus changes from time to time to ensure the quality of the exam.

How to qualify in less than 5 years?

If you endeavor to pass 2 exams or complete 2 modules a year, you will certainly be qualified in less than 5 years. Otherwise, try your best to finish all preliminary examinations while you are in college. If you do, you are halfway toward the end! Keep it up!

CERA

A couple of years ago, there was a new profession emerged in the actuarial field named Chartered Enterprise Risk Analyst (CERA). This professional is an expert in Enterprise Risk Management (ERM). Its credential equivalency is on a par with an Associate. Its role in the business world becomes more prevalent and critical especially after the Subprime Crisis 2008. You may find more information about CERA at SOA web page.

After you have passed all the professional examinations and fulfilled all the requirements, CONGRATULATIONS! You are now a Fellow!!! You can now reap all the financial rewards and benefits you deserve.