A career as an actuary can be incredibly fulfilling and interesting, but it’s not a career that many people have heard of before.
So what does an actuary do? An actuary is responsible for evaluating risk in an insurance company. You need a bachelor’s degree and to pass several professional exams in order to become fully qualified, but once you are you can make $150,000+ annually.
This is just the beginning of what you need to know about the career if you’re interested in becoming an actuary. If you’d like to know more about what an actuary does, the requirements to become one, and the salary expectations then keep reading. I’ll be giving much more in-depth information below.
What does an actuary do?
An actuary is someone that has specialized skills in evaluating risk. This means that they are able to use tons and tons of data in order to make predictions about events that will happen in the future, as well as the financial impact of those events.
Most commonly, these skills are applied to the insurance industry. Actuaries working in insurance use past insurance claim information, investment information and demographic data to estimate how much the insurance company will have to pay to policyholders in the future for any claims they make.
The insurance company needs to know this information so that it knows how much money it needs to save in order to pay its policyholders’ claims later and also so that they charge their policyholders an adequate amount for their insurance.
Without actuaries, an insurance company would probably go bankrupt! They’d have no way of knowing if the price (or premium) they were charging policyholders for their insurance coverage was enough to pay for the claims that the policyholders would make in the future.
Requirements to Become an Actuary
Actuaries need to have very specialized knowledge, so it’s not particularly easy to become one. However, if you’re extremely interested in the career then it can be an exciting journey.
The first requirement is that you have a bachelor’s degree. Employers are highly unlikely to hire anyone that doesn’t have this level of education, even if they’ve met all the other requirements that I’ll mention below.
The subject of your degree isn’t overly important. Actuaries come from a wide range of different educational backgrounds. However, there are some degrees that will be more beneficial in helping you pass actuarial exams and preparing for the type of work you’ll do as an actuary.
This post discusses the best majors for anyone considering the actuarial career path.
In order to become fully qualified as an actuary, there is a series of 7 or 10 professional exam that you have to pass.
Fortunately, even though the process of passing those exams takes many years (more on that later), you can start working in the actuarial field before you’ve passed them all. Most entry-level jobs require that the candidate has passed just 1, 2 or 3 exams. The rest would be taken while working.
Actuarial exams are known to be quite difficult, with pass rates being around 40% -50% for most of the exams. They’re heavily math based (especially the beginning ones), and require the candidates to have a good understanding of calculus, finance and probability in order to pass.
The later exams test the candidates understanding of insurance products and regulations, as well as the application of math, statistics, and other actuarial topics to the insurance industry.
For much more information about how actuarial exams work, this post has everything you need to know. The video below will also give you lots of details too.
Aside from a bachelor’s degree and exams, there are a few other things can be done to increase the likelihood of getting an actuarial job.
Technical skills – Knowing how to use Microsoft Excel will be extremely helpful on the job as most entry-level jobs require use of it on a daily basis. Coding languages such as VBA and/or SQL will also be beneficial for most jobs.
Related experience – Having prior experience in a job related to or involving insurance, data entry, finance, investments or underwriting is often well perceived by actuarial employers.
Courses and projects – There are several online and in-person courses and projects that need to be completed too. These tend to be easier and less time consuming than studying for an actuarial exam.
For more in-depth information on the steps you need to take to become an actuary, check out this post. In that post I discuss how to get started and the 8 steps you need to take to become fully qualified.
How long does it take to become an actuary?
For most people it takes between 5 and 10 years to become a fully qualified actuary.
However, like I mentioned above, it’s still possible to work without having all the certification exams passed. Much of the knowledge and many of the skills that fully qualified actuaries have are gained through their work experience.
The speed at which someone passes all the exams and completes the other requirements to become an actuary depends on many different factors. The biggest contributing factor is the rate at which they pass exams.
Actuarial exams are quite difficult and it’s very common to fail some of them once or twice along the way. If someone fails exams often, they’re likely going to take longer to become fully qualified.
If work, family, school and other priorities require a big time commitment, it also tends to take longer because there’s less time to dedicate to studying.
Actuary Salary Information
An actuary’s salary depends on many different factors including geographical location, experience, job title, and number of exams passed.
It’s common for a fully qualified actuary to have an annual salary of $150,000+. Fortunately, there is almost always an opportunity for advancement so salary can increase well beyond $150,000 if the actuary has sufficient experience and is willing to take on more responsibility.
Starting salary for someone in an entry-level actuarial position with 2-3 exams passed is typically somewhere between $50,000 and $70,000. Past experience, location and company will have a big impact on whether the initial salary is closer to the lower or upper end of this range.
In most insurance companies, salary increases automatically with each exam that is passed. This means that an actuary’s salary can grow quite quickly in the early years of their career.
How to Get Started as an Actuary
Getting started on the path to becoming an actuary is quite straightforward.
If you already have a Bachelor’s degree, then the next step is to start studying for your first actuarial exam (more about that below).
If you don’t have a degree already, you should continue working on getting that while at the same time studying for your first exam. It can be very difficult to study for actuarial exams at the same time as keeping up with schoolwork, so time management is a must in this situation.
First Actuarial Exam
If you’re planning to work in the U.S. or Canada then you should take exams administered by the Society of Actuaries.
There is a recommended order for actuarial exams. Exam P and FM should be your first two exams. It doesn’t matter which of them you take first, but most people find FM to be the easier of them. This post will help you decide on which exam would be best for you to start with.
Exam P tests your knowledge of probability. So this exam requires a very good understanding of calculus, including integration, differentiation, and limits.
Exam FM tests your knowledge of financial mathematics, so you’ll have to have a very good understanding of interest, bonds and loans to pass this exam.
Typically, exam candidates spend hundreds of hours studying for each exam. Prior knowledge of the exam topics and the studying approach used can have a big impact on how long it takes.
Fortunately, there are many different study materials that can be purchased that specifically teach the concepts tested on Exam P and FM.
Cost to Study for an Exam
Becoming an actuary is going to require some investment at the beginning. Fortunately, once you’re hired as an actuary, the company that you’re working for will probably pay for most or all of your exam costs. They may even give you some paid study time!
This post goes into all the details about the cost of actuarial exams. You can expect the cost of your first exam to be somewhere between $350 and $1000 depending on the study materials and personal support that you decide to get.
Sometimes getting started and studying for your first exam can feel a bit overwhelming. If you’d like guidance and support throughout your entire study period, I’d be happy to help you in the Study Strategy Program for Exam P and FM. Here are all the details.