How Actuarial Exams Work
If you want to become an actuary you’re going to have to go through the actuarial exam process. So knowing how it works is critical.
To put it very simply, the actuarial exams are a series of 10 exams with multiple choice and written answer type questions. The exams are timed for 2.5 to 5 hours depending on the exam and the series takes most people between 7 and 10 years to complete.
But if you’re serious about the career you probably want a more in-depth explanation of how the exams work, so I’ll provide more detail below. Here’s an overview of everything I’m going to talk about so you can skip to the parts you’re interested in.
- What are actuarial exams?
- Exam Progression
- Exam Format
- Grading System
- Exam Frequency
- Exam Difficulty and Failing
- Writing Exams While Working
- When to Start Writing
- Governing Bodies
- Cost of Exams
- Never Obtaining Associateship or Fellowship
- Non-Exam Requirements
What are Actuarial Exams?
In order to become a fully qualified actuary (here are details about what an actuary is) you have to pass a series of professional examinations that are written outside of any college or university course.
The exams teach and test aspiring actuaries on their mathematical ability as well as their understanding of insurance and how it works. The inner workings of insurance are very complex and require years of education.
There are millions of policy holders that are relying on actuaries to make financially sound decisions that will ensure their insurance benefits are available when they need them. There are also lots of regulatory restrictions on insurance in order to ensure it’s integrity. Actuaries play a vital role in making sure those regulations are met. Because of this it’s important that actuaries go through a rigorous examination process.
There are two ‘levels’ of actuaries. The first level is called an associate and the second is called a fellow. You have to first become an associate and then you can become a fellow.
In order to become an associate level actuary you’d have to pass all the preliminary exams as well as meet some other requirements which I’ll talk about below.
As of May 2022, there are 7 preliminary exams (including take-home exam ATPA) that cover topics like probability, time value of money, statistics and much more.
Changes to the exam system don’t happen often, but over the course of 2022, Exam IFM will be phased out and replaced with Exam ATPA, a take-home assessment. You can see a list of all the exams you’d need to take for each route (including the 2022 changes) right here.
Once you reach associateship, you’ll need to pass 3 additional exams in order to become a fellow. These three exams are referred to as ‘fellowship level exams’.
Format of Exams
Actuarial exam format changes depending on whether you’re writing preliminary exams or fellowship level exams.
Most of the preliminary exams are multiple choice. You get 5 options to choose from and only one is correct.
Fortunately you don’t get penalized for wrong answers like you do on some other professional examinations so it’s in your best interest to answer every question even if you’re not confident in your answer.
The preliminary exams are approximately 2.5-3.5 hours long and are typically done on a computer in a test center. Since the exams are heavily math based you get a paper, pencil and calculator to work out your answers.
Actuarial exams are closed book exams with only a few formulas provided on exam day.
There is one preliminary exam that has a combination of both multiple choice and written answer questions. Because of the written answer component, this exam is a paper and pencil only exam. It cannot be done on a computer.
Another one of the preliminary exams is designed to test your technical skills. This exam is more like a timed 5 hour project rather than an exam. You get access to a computer (without internet connection) and a few different software programs. This is one of the new exams just added.
Preliminary exam exemptions
In Canada it’s possible to apply for an exemption on some preliminary exams. To do this you have to get high enough grades in certain college or university courses that cover the same material that the exams cover.
You can learn more about Canadian exemptions here. In late 2022, this will be possible in the U.S. if you attend a SOA Center of Actuarial Excellence accredited school. Check out the SOA website if you want to learn more about that!
Fellowship level exams
These exams are 100% written answer and are anywhere from 2.5 to 5.5 hours long.
While the preliminary exams focus on testing mathematical ability and technical skills, the fellowship exams test you on all the niddy-griddy details about insurance, risk, and regulations that influence the insurance industry. Each actuary will write fellowship exams depending on their area of expertise. One could specialize in life insurance, enterprise risk management, finance and investment, retirement, group benefits or property and casualty insurance. These are called “exam tracks”.
These exams often cover thousands of pages of reading. They are known to be much more difficult than the preliminary exams due to the wide range of questions they can ask. It’s very difficult, actually maybe impossible, to know everything for an FSA exam so usually prioritization is a key skill when studying.
Actuarial exams are scored on a scale from 0 to 10. One needs to get get a score of 6 or higher in order to pass.
Getting a 6 doesn’t necessarily require that you get 60% of the questions right. Actually, scoring a 6 just means that you were between 100% and 110% of the passing grade.
The passing grade is determined differently depending on whether it’s a multiple choice test (like many of the preliminary exams) or if it’s a written-answer exam (like the fellowship level exams). Something unique about actuarial exams is that the passing grade is set (in most cases) after everyone has written the exam. This allows the grade to be adjusted for the difficulty level of the exam.
Multiple choice exams are fairly easy to grade. The answer is either right or wrong. But for written-answer exams the grading process takes much longer and is a bit more subjective.
Graders for written-answer exams are given guidelines on what the exam candidate has to mention in the written response in order to get points. Partial marks are allowed, meaning that a candidate doesn’t have to meet all the guidelines provided in order to get some marks. Typically questions on these exams are worth 5-15 marks each (out of 100).
For a more detailed description of how the first preliminary exam (Exam P) is scored, read this post.
Since exams are taken in test centers there are only certain times of the year when exams can be written.
There isn’t a required order to take actuarial exams, but it makes most sense to start with the easier ones and move onto the more difficult ones. There’s more info about exam order here if you’re interested.
The earlier the exam is in the recommended exam order, the more often it’s offered to write. The first couple are offered every 2 months while the fellowship level exams are offered only 2 times per year.
Exam Difficulty and Failing Exams
Actuarial exams are known to be very hard, especially the fellowship level exams. It’s very common to spend hundreds of hours studying for each exam over several months.
Most people don’t get through all the exams without failing at least 1 or 2 along the way. And keep in mind there are a lot of very smart people writing these exams.
Although failing can feel very demotivating, there aren’t many other consequences. Upon failing you can write the exam again the next time it’s offered (aka the next sitting).
To give you an example of the pass rates for actuarial exams, see below:
- Exam P (March 2022) – 41% passed – Preliminary exam
- Exam FM (February 2022) – 47% passed – Preliminary exam
- Life Product Management (May 2021) – 41% – Fellowship level exam
- Design and Pricing (May 2021) – 48% – Fellowship level exam
Remember, these pass rates include some people that are writing their second, third, or more attempt at the exam. So the percentage of people passing on their first attempt is extremely low. Luckily, if you’re planning to write Exam P soon, you can get personalized help from me here so that you can exponentially increase your odds of passing the first time.
Working While Writing Exams
Since the exam process takes such a long time to complete, it’s common to start working in an actuarial role before you’ve passed all the exams.
It’s normal for a company to hire someone that just has 2 or 3 exams passed.
Fortunately employers offer many benefits in the exam process. They often fund an ‘actuarial program’ that pays for exam fees, study material and even allows some paid study time. However the amount of paid study time is usually much less than is required to pass so most of your study hours will be unpaid.
Furthermore, you can also expect salary raises upon passing each exam. Some companies even pay a bonus if you pass on the first attempt at your exam.
Salary raises are unique to each company and will usually increase as the exams get more and more difficult. That means that for an early exam you may get a $1500 raise whereas you may get a $5000 raise for passing a fellowship level exam.
Some employers require that you pass an actuarial exam every 1.5-2 years in order to continue in the actuarial program. If you don’t meet the requirements and get removed from the program you’ll no longer get exam expenses and study time paid for, and on some companies you’ll lose your job.
When to Start Writing Exams
Ideally you should start writing Actuarial exams in your second year of college or university. By this time you’d have some background knowledge in the topics that are tested on the earlier exams and you’d be able to learn the rest through study materials.
But some people discover the actuarial career path later in their education or later in life once they’ve already started working. In that case it’s best to start writing actuarial exams right away. This post talks all about what you should expect when looking to become an actuary at age 30, 40, or 50.
In the U.S. many people graduate with 2-3 exams passed. In Canada having 4-5 exams passed upon graduation is common.
There are two primary actuarial bodies that govern the exam process. The body that applies to you will depend on whether you decide to be a life actuary or a P&C actuary. Each has their own set of requirements in order to become an associate or fellow.
In order to become a P&C actuary in Canada or the U.S you’d write exams administered by the Casualty Actuarial Society (CAS). Although many of the same mathematical concepts apply to all types of insurance the CAS exams focus on the application of those concepts from a P&C point of view. That means that context of the exam questions will be around auto insurance and house insurance.
If you decide to become a life or health actuary in Canada or the U.S. then the exams you write will be administered by the Society of Actuaries (SOA). The context of these exam questions will be based around life and health insurance related concepts.
You can learn more about the differences between the SOA and the CAS here but you don’t need to decide which route you’ll go yet. You decide that after your second exam.
Cost of Actuarial Exams
There are lots of costs that are incurred in order to pass each exam. Fortunately you’ll likely only have to pay for the first 2 or 3 exams because your employer will start paying once you get hired.
The first couple exams are currently $250 (USD) to write, but the bigger expense is for study materials and guidance. Those can add anywhere from $100 to $1000 to the cost of writing an exam.
The later fellowship level exams are over $1000 (USD) to write and study materials for these exams are usually about $300 (USD) for the bare minimum. More inclusive study materials can reach costs of up to $1500 (USD). Fortunately if you’re writing these exams an employer will be paying the costs.
This post goes into all the details about exam costs that you can expect, including the cost of all your study materials.
Never Obtaining Associateship or Fellowship
Some people start writing actuarial exams and then, at some point along the way, decide to stop for various reasons.
The majority of employers do encourage or require that you continue writing actuarial exams in order to stay in an actuarial role. So stopping can jeopardize your job.
If you decide to stop writing exams before you reach associateship (passing all the preliminary exams) then it’s very unlikely that you’ll be able to work as an actuary at all.
The only chance of this happening would be the company that you were working for at the time of making this decision would allow you to continue working there.
If you decide to stop writing exams once you’ve obtained associateship then its it’s much more likely that you’ll be able to continue working in an actuarial position. These types of people are often referred to as “career associates” since they’ve decided not to pursue a level beyond associateship.
Some employers would gladly hire career associates, while others may look specifically for applicants that plan to continue writing exams.
Other Non-Exam Requirements
Passing actuarial exams is definitely the most difficult part of becoming an actuary. But passing them isn’t the only requirement for becoming an associate or fellow.
Other requirements for associateship
To obtain associateship, there is a series of 8 online modules that need to be passed. These are called the FAP modules.
Each module is similar to an online course with an assignment at the end. It takes approximately 10 hours to complete a module.
Also, there is an in-person professionalism course that you need to attend. This is a one day course that teaches about actuarial standards of practice. This goes into ethics and professional behavior.
Lastly, there are 3 VEE credits that need to be obtained. These credits just ensure that you have some background knowledge of Economics, Corporate Finance, and Applied Statistical Methods.
Most people get these credits by achieving high enough grades in certain college or university courses (more about that here on the SOA website). But you can also get them by taking online courses with an exam at the end.
Other requirements for fellowship
For fellowship, there are 3 additional modules with assignments that need to be completed. Each module takes somewhere between 10-15 hours to complete.
Furthermore, you need to complete a project that demonstrates your ability to make decisions from an actuarial standpoint.
Lastly, you have to attend a conference where you’ll do a short presentation in front of a small group of actuarial peers. The presentation topic can be anything related to an actuarial role, such as a recent work project.
So, that’s the actuarial exam system in detail! The exam process takes years to get through, but the end result is a fulfilling career with daily challenges and excellent growth opportunity.