What is actuarial science? (Don’t major in it!)
Actuarial science is becoming more and more popular among math-loving students looking for ways to use their skills after college. But, before you jump into it, here are ALL the details. At the end, I even talk about why I don’t recommend you major in it (even though I did).
So, first off, what is actuarial science?
Actuarial science is the field of study relating to the quantification of risk using math, probability and statistics. These highly specialized skills are primarily used in the insurance industry to ensure that insurance companies are financially stable now and for decades into the future.
Sound like something you may be interested in? Well, I’m sure you have lots of questions so I’ve answered some of the most common ones detail below. These questions and answers will help you further investigate the actuarial science field of study and whether it’s right for you.
What can you do with an actuarial science degree?
The primary objective of people that major in actuarial science is to become an actuary. An actuary is someone that typically works in an insurance company, and is a specialist in quantifying risk.
Actuaries use mathematical and statistical concepts in order to determine the likelihood of a certain events occurring in the future (and when they’ll occur), as well as the expected financial impact of those events.
Using this information, the actuary can calculate a reasonable amount of money that should be put aside now in order to ensure that enough money will be available later to pay for the event if and when it occurs in the future.
For example, when a person purchases a car insurance policy, that person expects the damage to their vehicle to be paid if and when they get into an accident in the future. In this example, the “event” that I referred to earlier is a car accident.
An actuary will be able to predict the likelihood of the car accident occurring each month into the future. He’ll also be able to predict how much damage will be done to the vehicle if an accident does occur. All using statistics!
So with this information, an actuary will be able to calculate an appropriate premium to charge the car insurance purchaser (aka the policy holder).
How hard is actuarial science?
Majoring in actuarial science is challenging. On a scale from 1-10 (1 being the easiest), I’d say it’s around a 7 or 8. It requires that you have fairly good math skills and that you really enjoy it.
I graduated in 2013 with a degree in actuarial science from the University of Waterloo. UW is known to have one of the best actuarial science programs in the world. I talk about my experience in the ActSci program in the video below.
In the video, I mention that what made the actuarial science major so much more difficult was the limited amount of time I had. I was taking a full-time course load, which is 5 courses at a time.
With weekly assignments in all 5 courses plus 2 midterms and a final exam in each of them, it was overwhelming. There was so much to do that I barely had time to complete assignments and study to the best of my ability.
Fortunately, during your first years in any math related program at UW they have teaching assistants that you can go to for help if you need it. Professors often held office hours too.
Can anybody become an actuary?
Technically the answer is yes. Anyone with sufficient math skills can become an actuary. But there are some requirements that you need to fulfill beforehand.
First, you need at least a bachelor’s degree. It doesn’t have to be in actuarial science or math, it just needs to be a degree. Employers are highly unlike to consider you for actuarial job positions without one. Here are some different majors that you could consider.
Second, you need to pass a series of 10 actuarial exams that will make you a certified (or fully qualified) actuary. These exams take most people between 5 and 10 years to pass. Some people never finish. But luckily you can start working in entry-level actuarial jobs before you’ve passed all the exams. Here’s more info on how actuarial exams work.
Third, you need technical skills. This includes decent knowledge in how to use Excel, as well as programming languages like VBA or Python. These skills can be learned on the job but employers are starting to prefer candidates to have them before being hired.
Becoming an actuary is a long-term process that takes many years even after school. Here’s a detailed explanation of the 8 steps you’d need to take in order to become a fully qualified actuary.
Is being an actuary a good career for you?
The decision to become an actuary should be taken very seriously. Becoming one is a much longer-term commitment than most careers due to the actuarial exams.
But there are many aspects of an actuarial career that you may love and will make it worth the commitment for you. Here are some of them:
- You get to use math, probability, and statistics all day long (every day).
- The salary of an actuary is pretty high, especially as you gain more experience (salary details here).
- The job is fairly low stress.
- It’s challenge work that will keep you thinking and problem solving daily.
As with any career, there are also some disadvantages to becoming an actuary. The biggest one, in my opinion, is the examination process.
Studying for actuarial exams takes thousands of hours over the course of several years. And, even with lots of studying it’s still common to fail some of them along the way. The pass rates for most of the exams is below 50%.
It’s especially difficult to balance studying for actuarial exams at the same time as you’re working or in school full-time.
The second disadvantage of becoming an actuary is the entry-level job market. It’s fairly saturated right now (in late 2018) which makes it difficult for some actuarial science graduates to get a job as an actuary even if they’ve passed 2-3 exams.
This doesn’t mean that it’s impossible to get a job or that you shouldn’t pursue it if it interests you, but just be prepared to work in a related position for a few years before you move into an actuarial position. Also, it would be smart to have a back up plan in case the actuarial route doesn’t end up working out for you.
Should you major in actuarial science?
Although I do encourage you to pursue a career as an actuary if it sounds like something you’d like, I do not recommend that you major in actuarial science.
This is a degree that is very specialized, and outside of the insurance industry most people don’t know what it is. So, if in the future you decide you don’t want to be an actuary, or you don’t like the work, or you can’t find an actuarial job then you’ll have to look for something else. Your ActSci degree may limit you in your job search.
Remember, you don’t need an actuarial science degree to be an actuary. You could major in statistics, economics, finance, or any of these instead. The actuarial exam study materials will teach you all the specific math that you need to know for exams.
The one benefit (that I can think of) in majoring for ActSci is that you do learn a lot of the exam material in your courses. But again, I don’t think that is worth the risk of specializing so much that you can’t get a job outside of the actuarial/insurance world.