The Math You Need... - Part 1: to become an Actuary

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.
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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.

[@njclondon2009]

my advice... forget the actuary degree. do a degree in maths or physics if you're good at numbers, you'll study the work of some of the finest minds that ever lived and you'll never get the opportunity again. you'll easily find a job, then the company will support your studies thereafter.

[@incitemylife]

Great info! Excel is also a really important skill to know as well as programming and knowledge of using statistical software and databases. There's a ton of stuff, but the career is very rewarding and well worth the effort.

[@mathdbase]

MrGMXander Based on your question, I did a bit of research recently and it seems that the prospects for a career as an actuary are still very good in the U.S. Insurance companies in particular, seem to have the greatest demand and because the qualification process is so difficult and time-consuming (takes about ten years to fully qualify, on average), competition for the few available jobs stays low. Though the number of available positions in total is pretty small, as with any position, there is attrition, as older people retire or others move on to other kinds of work.

[@mathdbase]

Good luck!

[@MileeWilson]

Loving all the information... #Imadetherightchoice

[@mathdbase]

+Ly Nn: I doubt that it is really necessary that you be "naturally mathematically inclined" to pursue a career as an actuary, but you would have to be very dedicated and highly motivated over a long period of time (a decade or more). Given that to become a fully qualified actuary, you would have to take ten qualifying examinations (at last count) and only the first three or so are Calculus-based probability and statistics, the rest are insurance and finance, which are considered to be the most difficult ones. Typically, those exams take a decade or more to complete, during which time you will have to spend a considerable amount of time studying.

[@mathdbase]

Yes, but even after graduating with a math-finance degree, to become a fully-qualified actuary, there are about ten national exams to prepare for and take, which are not so easy. You can find out everything about it at soa.org.

[@mathdbase]

+Joe Scioli There are probably many other majors that would be much better suited to sports management than actuarial science. I would suggest that you do an internet search to find the names of some sports management organizations, perhaps near you, and ask people there for advice on what would be the best route(s) for you to take to work in that field.

[@mathdbase]

I am not sure about the current specifics, but it used to be that the first two or three exams were Calculus-based probability and statistics, then the rest were insurance and finance, which were the most difficult ones.

[@duhboss1]

"not so easy" is a bit of an understatement.

[@mathdbase]

+Mi-lee Wilson Thank you for the feedback.

[@mathdbase]

Only at the beginning. Actuarial studies require a few courses in Probability-Statistics, but then focuses more on insurance and/or other fields, depending on the specialization.

[@mathdbase]

A comment by MikeDunn was accidentally removed, it read: So, Mathematics with a Finance concentration would be a good major for becoming an actuary?

[@mathdbase]

Based on your use of English, it seems that you may be from GB. The information given in this anicast was for requirements in the USA only. That having been said, lots of people have completely changed their careers at 30. I would suggest going to a university math/statistics department and getting some advice there on how to proceed.

[@MrGMXander]

Very enlightening video! I was hoping you can answer a few questions for me? It is now 2014, a few years since the creation date of the video, are actuaries still as in demand or are they declining? And I am assuming that most jobs are in large metropolitan areas? Can you elaborate on how abstract algebra is beneficial and what is adv calculus? Is there any other pure math courses that should be taken to supplement the applied ones?

[@mathdbase]

+anjali nair What kind(s) of derivatives would you like to learn about (algebraic, trigonometric, exponential, differentiation techniques)?

[@andrewjohnson8919]

Ok then I am planning on studying for about 2 hours until January. I am hoping this will help me pass the first time

[@anjalinair8421]

can u please upload a video for learning derivatives an calculus

[@kevindiaz2395]

I am really interested in being and actuary. I was wondering if any company would allow a high school junior to shadow/internship for a short period of time? Just as a quick exposure experience?

[@blacktide50]

I have more of an interest in becoming a statistician. Are actuarial studies similar to that of statistics?

[@mathdbase]

Mr. Sharma, it would be best if you contacted soa.org directly to get the best information on how to proceed.

[@M23jnba]

I'm interested in pursuing a career as an actuary. But many articles and forums has said how difficult the exams are especially after 1st &2nd exam. Should I maybe major in accounting and minor in actuarial science just in case i don't succeed in exam then I could become a CPA? What's your thoughts/suggestions on that? I would hate to major in actuarial science and fail then have to go back to school for extra years cause the financially it could be a waste.

[@mathdbase]

Becoming a fully qualified actuary is a very long process. Most people don't pass the exams the first time. It could actually be ten years or more before a person finishes them all (like getting a PhD). I can't tell you what you should do, but I knew people who took lesser jobs in large insurance companies or worked in other aspects of finance while they were in the process of taking the exams. If you want to get your "real" career started quickly, maybe you should consider something different.

[@andrewjohnson8919]

I have been out of school for a year, but I received my mathematics degree, how hard will be it pass these tests. I just got some materials and I will test in january

[@mathdbase]

+Kevin Diaz: Trying talking with your school counselors to see if you can get an introduction at an insurance or financial services company, or two in your area. Perhaps you will be able to find someone who is willing to give you a try and mentor you.

[@bernvall]

I am currently in my fourth and final year of my double honours degree in Mathematics and Physics at university and I was thinking of going into actuarial science after. I've studied subjects like adv calculus, geometry, graph theory, combinations, linear algebra, real and functional analysis such as Hilbert and metric spaces. Will these subjects help me understand concepts in actuarial science? The problem is that in these 4 years I've never done any financial mathematics, finance, accounting, optimizations, linear programming and ive only done very basic statistics. Would this be a problem if I want to pursue this career? Thanks

[@mathdbase]

It would seem that you have gone considerably beyond the "pure mathematics" required to become an actuary. Most if not all of the mathematics and Probability and Statistics specific to actuarial science you can learn on your own, they are certainly much less challenging than Functional Analysis. If your university has an actuarial science concentration, I would suggest speaking with an adviser about picking up any of the more specialized courses, such as Operations Research. If your university doesn't have that concentration, perhaps another in your city does. It may be worth an extra year to you, just focusing on those courses,

[@jamesgodfrey1729]

bernvall I was in the same boat as you, had a degree in Mathematics but had no clue about financial jargon besides p = e^rt. I went to soa.org and just started trying practice problems, looking up the definitions of terms I didn't understand along the way, and learning by force. I would recommend strengthening your statistics and you'll be fine. For example I looked at an equation and went huh where is this even coming from(a angle n cross i)???... Oh it's just a geometric series I can work with to get what I need. Basically all you need is a strong understanding of the terminology, how to set up the problems (which you're clearly smart enough to figure out), and strengthening of your Probs & Stats.

[@DannyKakol]

Very informative presentation! I am in a dilemma to choose between an degree in Applied Statistics and another in Probability. Could you advise which choice would be more useful to an actuary?

[@mathdbase]

Danny Kakol It is usually the case that the two fields are combined. Can you discuss doing a combined (or dual) major with the administrators of your department? If not, wouldn't it be possible to major in one and then take the courses of the other as electives?

[@DannyKakol]

Thanks for your advice. I don't have the choice of combining them. I will text as many courses as possible in the two areas.

[@mathdbase]

Welcome. I wish you well in your career pursuits.

[@bcZ6lmn8opqr]

Because I am not naturally mathematically, inclined would it still be a good decision to pursue a career as an actuary?

[@tisel10]

I'm starting my first year of university in the fall majoring in Actuarial Science. I have done 95% of the math courses outlined but I have no experience in Finance, how big of a problem will this be?

[@mathdbase]

Tisel Patterson It doesn't have to be a problem at all, since university is usually where Finance is studied. Contact a professor or adviser at your school to help you to chart a path to reach your goals.

[@arkinbangs9172]

my name is Kevin and I am a 1st year at Delhi university with maths honours. but I have not study accounts nor did I study economics so can I still go for an actuary. plse help I really need your help in deciding what to do? also do I need to give any exams or other things

[@mathdbase]

I would suggest that you speak with advisors in your department, they should be able to help you.

[@harshitsharma3765]

heyi i am taking these papers from india. but now i want to shift to USA in SOA society. Can you help me on its procedure what is it?? And what will be the requirements for me as i will be out of nation student??

[@magicmike1122]

Could you become an Actuary with just a B.A. and M.A. in Mathematics? Or do you need to major in Actuarial Science?

[@mathdbase]

magicmike1122 It's not necessary to major in Actuarial Science, it's just helpful. Taking courses in Operations Research and completing at least one exam while still in college would give you a big jump on what has to be done.

[@namanmittal9403]

hello sir, i m student of class 12 with non medical stream.can i go for acturials.if yes then what are the fields where i m needed to be strong.what the educational recomndation for being a actury.

[@mathdbase]

+NAMAN MITTAL You are in high school, you can still follow the recommended math courses, or equivalents and then pursue an actuarial-related concentration when you go to college. I would suggest speaking with an advisor at your school and/or a college/university near you for advice that is more specific to your country.

[@Mika54321]

hello, I'm 23 and in college for my accounting degree, I have 3 years of accounting experience and just got my license as an insurance agent for a life insurance company. I would like to ask you, do you think I'm on the right track? Or should I take any other classes and search for the proper job to become an actuary in the life insurance field before completing my exams to get certified? thank you so much! 😊

[@gisellechaparro8132]

Can you major in accounting, and minor in Actuarial Science, and still have a good chance with a lot of studying to pass the preliminary exams?

[@mathdbase]

That is a good combination major for this. I would suggest contacting advisors in your departments to get specific pointers to pass the exams.

[@josephgreenwood6322]

I am going to major in math with an option in statistics and minor in computer science and economics. Should I have minors in something else other than what I mentioned to better prepare me for the exams?

[@mathdbase]

Joseph Greenwood The first exams are primarily math-based. I would suggest finding a faculty adviser in the math/statistics department who can shepherd you through the process.

[@joescioli6726]

I am a junior in high school, who takes Honors Pre-Calculus, and is wondering if Actuarial Science would be a good way to work within the sports management business. I will be taking AP Economics, Statistics, Calculus, Psychology, and Accounting next year. I have had the dream a general manager for a sports organization (specifically baseball, but any sport is beyond exceptional) for years now, and have been wondering if this profession would help me further continue this dream. Thank you for reading, and any reply would be greatly appreciated.

[@amritakaurmatharu]

i just completed my graduation in BMS(Bach. In Management Studies) and m kind of interested in maths and problem solving. Can i proceed further with my passed out qualification.

[@mathdbase]

Amrita Kaur Matharu First find out if your college or university has an actuarial program (probably in the math/statistics department). If yes, speak with an adviser on the faculty to guide you specifically with next steps, such as courses you may have to take, how to arrange to take the first actuarial exams and internships that may be available in that field in your area. If not, look for a college or university in your area that does have an actuarial program and try the same things. In any case, you can go to the Society of Actuaries website: soa.org, to get information on next steps that you can pursue.

[@karenmcintyre4154]

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