What in the world is an "actuary"? A guide for students
Frances Chan
Actuarial science is one of the highest-ranked careers in business. But what does it entail? And would it be a good fit for you?
To demystify this career path, we've dug deep, gathering insights from actuaries online and tapping into the wisdom of Lowell B., an actuary with 25 years of experience.
✨ "Actuary" defined
❓Why do actuaries exist?
🌈 What are the different types of actuaries?
🆚 Actuaries vs. underwriters: What's the difference?
2. Is actuarial science for me?
🧑💼 What actuaries do day-to-day
👍 Best parts of being an actuary
👎 Worst parts of being an actuary
⚖️ Work-life balance
🌱 Learning & development
💵 Pay
📈 Career progression
🔀 Exit options
3. Where can I find internships?
Part 1. What's an actuary?
✨ "Actuary" defined
You know how everyone has insurance, right? Whether it's for your car, your health, or your home, insurance is all about managing the "what ifs" in life. What if I get into a car accident? What if I get sick and need expensive treatment?
Actuaries are the brains behind figuring out how much you should pay for that insurance. They crunch the numbers on how likely it is for that "what if" to happen and how much it would cost if it did. Then, they use that info to help insurance companies decide on the premiums that we all pay.
❓Why do actuaries exist?
Actuaries are what allow us all to have some sort of safety net in the first place.
Let's face it. Organizations like insurance companies, pension funds, and even the Social Security Administration aren't charities. They provide society with a safety net but need to do this sustainably (i.e. without going bankrupt).
This means they need to be incredibly savvy about the future. They need to know, with a reasonable degree of accuracy, how likely it is that they'll have to pay out claims and how much those claims will cost.
This is where actuaries shine.
- By analyzing historical data and current trends, actuaries estimate the likelihood of future events and their financial impact.
- Their work allows these organizations to set premiums that are fair (so you're not overpaying for insurance) and to keep enough money on hand to cover claims.
- They also ensure that pension funds will be able to provide for people in their retirement years.
Without actuaries, these financial institutions would be navigating blind, making guesses about the future.
🌈 What are the different types of actuaries?
Just as doctors specialize in different areas of medicine (the heart is different from the brain!), actuaries also specialize in different types of insurance.
The risks that people and companies face – from getting sick and having an accident to living longer than expected and dealing with natural disasters – are all different from each other. So actuaries need to become experts in specific areas to make the most accurate calculations.
Let's explore the different specializations and get a glimpse into the roles and responsibilities within each niche.
- Life insurance
- Health insurance
- Property & casualty insurance
- Pension & retirement insurance
- Annuities
- [Side note] Actuarial consultants
#1 Life insurance
What it is: Life insurance is a contract between you and an insurance company. You pay premiums regularly, and they promise to give money to your family or designated beneficiaries when you pass away. It's a way to provide for your loved ones even after you're gone.
Actuaries' role: Life insurance actuaries help design the structure of these contracts. They figure out how much you need to pay so the company can afford to keep its promise in the future. They also ensure there's enough money saved (reserves) for when it's needed and create various plans to meet different people's needs, taking into account how long people might live or the chances of passing away early.
#2 Health insurance
What it is: Health insurance helps cover the cost of medical care. It's a safety net that helps you afford doctor visits, hospital stays, medications, and other health-related expenses.
Actuaries' role: Health insurance actuaries figure out the cost of this safety net. They analyze health care costs, understand trends in illness and treatments, and use that information to predict future expenses. Their calculations help determine the price of health insurance policies, ensuring they cover the necessary services without being too expensive for customers.
There's insurance for hospitalization, insurance for specific diseases (like cancer), long-term care insurance, short-term care insurance ... among others!
– Lowell the actuary
#3 Property & casualty insurance (P&C)
What it is: Property insurance helps protect the stuff you own (like your house or car) from damage or theft. Casualty insurance is about covering your back if you're responsible for harm to others or their property. Together, they’re about safeguarding your assets and financial well-being.
Actuaries' role: P&C insurance actuaries work out what coverage is needed and how much it should cost. They calculate insurance premiums based on the likelihood of theft, accidents, or natural disasters. They also make sure there's enough money set aside (reserves) to pay for these potential damages or liabilities, crafting policies that balance risk and protection.
Here's how one P&C actuary describes her work.
I come up with prices for car and home insurance, which means that I come up with the algorithm that then gets taken and put into the system.
If the broker or the sales agent wants to quote an insurance price for a customer, they would say, 'You know, this person is a 26-year-old male living in this neighborhood with this type of car. What premium should they get?' They'll put that in the system. The system will use the algorithm that me and my team came up with, and then they will take that and it will generate a premium.
#4 Pension & retirement planning
What it is: This type of planning involves setting aside money now to ensure you have an income when you retire. Pension plans are a common way to save for retirement, providing monthly payments to retirees.
Actuaries' role: Pension actuaries assess how much money needs to be saved and how it should be invested to ensure there’s enough to pay out pensions for years to come. They monitor the financial health of pension plans, strategize to keep them funded, and ensure they comply with legal requirements, all to secure a steady income for retirees.
#5 Annuities
What it is: Think of an annuity like a reverse piggy bank. Instead of putting money in to save for later, you give a big chunk of money to an insurance company, and they promise to pay you back in smaller pieces over time. It's a popular way to make sure you have money coming in when you retire.
Actuaries' role: Insurance companies will pay you regularly as long as you live, so actuaries need to figure out how much the company should pay you each time (based on average life expectancy) and how much money they can make from investing the money you gave them. Actuaries also come up with different types of annuities to fit different needs, like ones that keep up with inflation or continue paying your spouse if you pass away first.
[Side note] Actuarial consultants
As an actuary, you have the choice of:
- Working in-house for an insurance company.
- Working at a professional services firm as a consultant, where you may have to work for multiple clients at the same time on top of the company you work for.
As an actuarial consultant, you might help insurance companies develop new products.
As an actuarial consultant, you might help insurance companies develop a new type of product they have never sold before.
For example, maybe a company has always sold only life insurance, but now wants to sell a product that combines the features of life and health insurance. But they have no expertise about how to go about developing this kind of product.
They're going to go find consultants that have expertise in that field and hire them do the work or check the work that they did.
– Lowell the actuary
Or you might help an insurance provider double-check the work of their in-house actuaries.
As a health and benefits consulting actuary, you're an intermediary between a company that wants to offer benefits to their employees and the insurance company that will underwrite the benefits.
So, what happens is, every year at renewal, the insurance company sends the consulting company the data, and then you can validate their analysis. The insurance company will say they want to charge them X dollars based on XYZ assumption, and then you'll review the assumptions and say, "I agree," or "I disagree."
🆚 Actuaries vs. underwriters: What's the difference?
If you're applying for insurance, an underwriter is someone who'll look at your application and reach out if they have any questions or notice any red flags.
For life insurance, for example, an underwriter will evaluate your health. It's up to them to order the medical records from your health insurer, call your doctor about any questions about those records, get a history of your prescriptions, etc. If you have a history of heart disease or stroke for example, companies are going to have to charge higher premiums because of that.
Actuaries are more behind-the-scenes to clients – I don't think I've ever had to deal directly with a client in my entire over two decades of work.
– Lowell the actuary
Part 2. Is actuarial science for me?
🧑💼 What actuaries do day-to-day
Contrary to popular belief, actuaries don't do math all day long.
It's funny, because the first few exams you take to become an actuary are focused on higher-level concepts in math (think: integrals in calculus). This might give you the impression that you'll be crunching numbers all day long, but the reality is that advanced math isn't all that applicable to your day-to-day work!
– Lowell the actuary
What do actuaries do then?
Work with data: You'll work with spreadsheets, analyze and manipulate data, work with large databases, create and maintain models, among many other things.
Answer questions: Actuaries are really important because they are relied on so heavily within insurance companies to help other departments with their questions. These might be questions about how a new product works, for instance, and that could have a big financial impact or legal ramifications for the company if you don't answer them correctly! It was very rewarding for me to help other departments answer their questions.
– Lowell the actuary
Here's how another actuary explains it.
As an actuary you will:
- learn all aspects of the business and its products
- answer interesting questions regarding the assessment of risk. These questions will involve mathematics, statistics, established actuarial methods or computer programming.
- meet with company managers and executives and present your findings
- work with information technology, risk management and compliance
– Actuary @ Automobile Protection Corporation
You'll also stay up-to-date on regulations.
A lot of our work is very much impacted by regulations, which change, and as they change you need to be able to recognize that and do the best for you and your company. The challenges people face today are different than five years ago. The economic environment is different, technology is different and so is big data.
– Former actuary @ Allstate Financial / Managing director @ Society of Actuaries
So you'll need to be good at math and analytical reasoning, but it's won't be the bulk of your job!
👍 Best parts of being an actuary
Every day I get to use my skills in mathematics and computer science to answer interesting questions regarding the assessment of risk.
– Actuary @ Automobile Protection Corporation
Quite frankly, there are relatively few actuaries, and people in our profession are well compensated for their jobs. It's typically an office environment so it's not physically draining and there are opportunities to advance.
– Former actuary @ Allstate Financial / Managing director @ Society of Actuaries
You get paid like doctors and lawyers, but you do not have to work with blood and do not have to go see your clients in jail.
– Professor of Actuarial Science @ Illinois State University
👎 Worst parts of being an actuary
#1 The exams
One of the major challenges of being an actuary is all the exams you have to take. If you have test anxiety or simply hate taking tests, this may not be the career for you!
There's just a lot of other reasons that made me choose data science over actuarial science – even though at the time, I knew way more about actuarial science.
The main thing ... is the exams. I mean, at the time, there were about seven exams that you needed to pass. I think now there's like 10 or 11 ... and then you probably won't even get an entry-level job until you complete the first one ... about probability or financial mathematics ...
I mean, I'm seeing people in their 30s and their 40s still not having completed all the exams, and I really did not want to be in my 30s still studying for exams.
– Data scientist @ Thermo Fisher Scientific
But what's so bad about the exams ... besides the fact that they're exams? Well, they're notoriously difficult. The average pass rate these days is 40-45% – lower than the average pass rate for the bar exam (closer to 60%)!
For the actuarial exams, they give you a score from 0 to 10. 6-10 is a pass, 0-5 is a fail. There were four times in a row where I got a 5, and by the time the third and fourth time, I came home and cried my eyes out.
It was just so stressful. I had put so much time into it. It's not so much how you did on the exams but that they only passed 30-40% of people when I took them. So you're competing against everybody else as well as the exam itself.
It's very rewarding once you do pass though. Generally compensation is really good, because of how much you need to go through to become certified.
– Lowell the actuary
Like Lowell, many actuaries fail some of their exams and need to retake them. And because employers don't always give you enough days to prepare for the exams, you may need to sacrifice some of your personal time to prepare for them.
I had to complete ten exams ... This took up a lot of my time. For the first five exams, I'd study intensely for two to three months. For the advanced five exams, I would study for four solid months.
Let me tell you, it's a lot of work. It takes up a lot of your mental capacity to study full-time four months before an exam and to tell your friends, "Hi, I can't go out with you because I'm studying for an exam that's in three months." ...
#2 Working in insurance
If you don't have an iota of interest in the insurance industry, then this may not be the career for you either. Here's how a former insurance intern puts it.
I thought I wanted to be an actuary. I passed the first two exams, and suffered through a three-month-long internship ... The first of several reasons I decided not to pursue an actuarial career are related to the insurance industry as a whole.
For one, the insurance industry is very well-established so there's very little innovation happening, especially in comparison to other industries. You're not going to be making any groundbreaking discoveries or revolutionary changes if you try to pursue actuarial science today.
This is kind of related to my next point: insurance is mind-numbingly boring and if you pursue actuarial science you're going to be kind of pigeonholed into an insurance career. I used to think "I like math, I like statistics, I'm sure I'll find actuarial work interesting."
Wrong.
The industry you are in has such a big impact on how enjoyable you're going to find the work. I learned about this firsthand from a couple of experiences I had: one internship at a bank where I had the opportunity to work with different clients in totally different industries, then I also worked in economic consulting for a year where I worked with clients in roughly five different industries. And those experiences were really eye-opening for me.
Pretty much every company needs math-minded people. If you enjoy math and statistics, please do not limit yourself to insurance. You can use those skills doing analytics at a sports company or a music company.
So it's probably a good idea to get a taste of the insurance sector before committing to it full-time.
My first three years out of college, I worked at a life insurance agency. So I got to learn about the industry from a sales side and I grew to like it. And while I worked there, I passed a few exams and decided to pursue it more.
So if you're at all interested in becoming an actuary, try to get a feel for the field of insurance in general.
– Lowell the actuary
⚖️ Work-life balance
Overall, actuaries enjoy a decent work-life balance, though there are a couple of factors that affect this equilibrium.
#1 Exams
Starting out, actuaries have a lot on their plate, as they need to juggle exams on top of work. But once those exams are behind you, things even out.
The actuarial career is ... often known for its great work-life balance, but most actuaries will tell you ... that work-life balance doesn't usually come until you're fully credentialed because you ... no longer have to spend your evenings and weekends studying all the time for exams.
– Former actuary @ Equitable Life
#2 Whether you work in-house or as a consultant
Actuaries working at an insurance company tend to enjoy a better work-life balance than consulting actuaries.
That's because consulting is a stressful, high-paced career that involves dealing directly with clients – and sometimes multiple ones at the same time.
[As an in-house actuary,] I am not the person who is working with the customer. And so because of that, my timelines are much more flexible.
Because if everything that I'm doing is for my company, then if my company has seven different priorities for me, I can go, 'Okay, listen, which one of these is the most important thing for me to do?' As opposed to if I were in a situation where I were working for external clients, client A doesn't care that I'm working on something for client B. Client A wants their work done. So it's much easier for me to reprioritize work when all my work is going towards the same goal, which is making good insurance prices for the company that I work for.
Working for an insurance company is also more chill, because you don't have to travel all the time.
Consulting actuaries tend to do a lot of traveling and have to be away from family a lot. Living in the same location as the company you're working for tends to give you a better work-life balance.
– Lowell the actuary
#3 Your priorities
Finally, your work-life balance also comes down to your own personal choices.
I stopped taking exams after I reached associateship because right after I got my associateship, we had our first child. I didn't want to miss out on raising kids, so I decided not to go for fellowship. I decided enough was enough and it was time for me to stop. I don't regret the decision at all!
– Lowell the actuary
🌱 Learning & development
Learning & development varies from place to place but big insurance companies offer "work-study programs" or "student programs" to help you with exams.
Some typical study program benefits are:
They'll give you a certain number of hours to study while you're at work.
They'll give you a couple of chances to pass an exam.
They'll pay for your exam fees, books and resources – For instance, my company paid for me to attend a lot of classes. I'd travel to different places for 3-4-day seminars, which really helped. I found self-study difficult so it was helpful to hear people present on the topic and teach sample questions and how to answer them.
They’ll give you bonuses or raises when you pass your exams!
A lot of big companies will also offer rotation programs where you'll get to work in different areas of the business, like product development, valuation, and corporate actuarial work over one to two years.
Then there's something called "continuing education," which is about keeping up with all the regulations and changes within the profession after you are certified. Actuaries are required to do 30 hours of continuing education every year over webcasts, reading articles or regulations, attending sessions at conventions, among many other things.
– Lowell the actuary
💵 Pay
In the actuarial world, DW Simpson is the best source of information on salaries. You can input factors like your region, years of experience, your certifications, your specialization, and whether you're a consultant – and it'll tell you how much you'd be paid.
For example, here's how much you'd make across the country when you first start out and after you've been in the field for 20-25 years.
| Region | Actuary pay at 0.5-2 years of experience (Designation: "Student Actuary) | Actuary pay at 20-25 years of experience (Across designations) |
| Northeast | $91k | $315k |
| West | $85k | $281k |
| Midwest | $85k | $273k |
| South | $83k | $271k |
| Southwest | $81k | $277k |
However, your pay will mostly boil down to your title (i.e. how high up you are in the organization you work for).
Actuarial salaries vary so much depending on where you live, how many exams you've passed, your level of experience, and your title.
Out of all of these, your title and level of experience are probably the biggest factors. There are so many different levels – from student actuaries to President/Vice President and CEO’s. But to attain these higher titles, one usually (not always) has to attain Fellowship.
– Lowell the actuary
📈 Career progression as an actuary
#1 Starting out
When you first start, you're like an apprentice learning the ropes. You're doing a lot of the same work as the experts did when they first started—like cleaning up data (which means organizing and fixing any errors in the information you have) and building models (which are like complex equations to predict future events).
Building models is such an important thing for actuaries. One example of a model involves the software that companies use when they make a new product and have to put all the different assumptions that they make into the model. The software then calculates and summarizes all of the different profit measures for that set of assumptions.
For instance, if it's a life insurance model, examples of assumptions would be how many people you expect to pass away, how many people you expect to give up on their insurance plan, and expenses associated with issuing and maintaining the polices.
Say your profitability is 10%, but we're seeing that mortality is 20% higher than we expected. Then the model would need to be updated with this increase and see what the revised profitability is.
– Lowell the actuary
#2 Growing in your role
In an actuarial career, you can take two main paths.
First, there's the independent contributor path, where you'd focus on becoming a "super expert," doing the nitty-gritty analysis work without managing a team.
I work with teams and groups of people but I've never had to supervise people during my 20+ years as an actuary. Not that I'm against it; it's how it worked out.
– Lowell the actuary
Then there's the managerial path. This involves leading teams and making big decisions. To climb higher in management, you'll often need to become a "Fellow." This is like earning a black belt in actuarial science. It involves passing a bunch of tough exams that prove you're really good at what you do. Even though some companies say you don't have to be a Fellow to move up, in reality, because everyone will be a Fellow, it's almost expected.
As you move along, you use your math skills less and less. Especially when you get promoted to really high levels, it's much less about math – and more about the decisions that you make. Like at the Vice President level, you won't be diving into spreadsheets!
– Lowell the actuary
[Side note] Actuarial consultant career progression
The career progression we've covered above applies to in-house actuaries. If you decide to work as an actuarial consultant, your career progression will look more like the career progression of a consultant.
🔀 Exit options as an actuary
Being an actuary is a sweet gig (after you pass your exams), so you'll come across a lot of people who've been in the field for 20, 30, even 40+ years!
What do people typically do after they leave insurance?
Actuaries generally stay in the field. It's very rewarding, compensation is really good, generally job stress isn't bad. There are so many positive things about being an actuary that leads to a high percentage of people who stay in the field. Most people who leave the company that I know of either switched to another job as an actuary or retired.
That said, I do know a few people who were actuaries for a long time and then went into teaching. My first boss, for instance, became a teacher at a university teaching students the material on actuarial exams, though he still works as an actuary part-time.
– Lowell the actuary
Where to find internships?
You can find plenty of internships on Prosple – we have a huge database of internships curated for students like you. Simply filter 'til you find the right fit!