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Actuaries

(D.O.T.  020.167-010)

Nature of the Work

Why do young drivers pay more for automobile insurance than older
drivers?  How much should an insurance policy cost?  How much should
an organization contribute each year to its pension fund?  Answers
to these and similar questions are provided by actuaries, who design
insurance and pension plans and ensure that they are maintained on a
sound financial basis.

   Actuaries assemble and analyze statistics to calculate probabilities
of death, sickness, injury, disability, unemployment, retirement,
and property loss.  They use this information to determine the
expected insured loss.  For example, they may calculate the
probability of claims due to automobile accidents, which can vary
depending on the insured's driving history, type of car, and many
other factors.  They must make sure that the price charged for the
insurance will enable the company to pay all claims and expenses as
they occur.  Finally, this price must be profitable and yet be
competitive with other insurance companies.  In a similar manner,
the actuary calculates premium rates and determines policy contract
provisions for each type of insurance offered.  Most actuaries
specialize in either life, health, or property and casualty
insurance; others specialize in pension plans or in financial
planning and investment.

   To perform their duties effectively, actuaries must keep informed
about general economic and social trends and legislative, health,
and other developments that may affect insurance practices.  Because
of their broad knowledge of insurance, company actuaries may work in
investment, underwriting, or pension planning departments.
Actuaries in executive positions help determine company policy.  In
that role, they may be called upon to explain complex technical
matters to other company executives, government officials,
policyholders, and the public.  They may testify before public
agencies on proposed legislation affecting the insurance business,
for example, or explain changes in premium rates or contract
provisions.  They also may help companies develop plans to enter new
lines of business, such as environmental risk, or long-term health
care.

   The small number of actuaries who work for the Federal Government
usually deal with a particular insurance or pension program, such as
Social Security or life insurance for veterans and members of the
Armed Forces.  Actuaries in State government are usually employed by
State insurance departments that regulate insurance companies,
oversee the operations of State retirement or pension systems,
handle unemployment insurance or workers' compensation problems, and
assess the impact of proposed legislation.  They might determine
whether the rates charged by an insurance company are proper or
whether an employee benefit plan is financially sound.

   Consulting actuaries provide advice for a fee to various clients
including insurance companies, corporations, hospitals, labor
unions, government agencies, and attorneys.  Some consulting
actuaries set up pension and welfare plans, calculate future
benefits, and determine the amount of employer contributions.  They
also provide advice to health care and financial services firms.
Consultants may be called upon to testify in court regarding the
value of potential lifetime earnings lost by a person who has been
disabled or killed in an accident, the current value of future
pension benefits in divorce cases, or the calculation of automobile
insurance rates.  Actuaries who are enrolled under the provisions of
the Employee Retirement Income Security Act of 1974 (ERISA) evaluate
the pension plans covered by that act and report on their financial
soundness.

   Although few in number, actuaries provide essential services to
insurance companies.

Working Conditions

Actuaries have desk jobs that require no unusual physical activity;
their offices generally are comfortable and pleasant.  They usually
work at least 40 hours a week.  Some actuaries, particularly
consulting actuaries, often travel to meet with clients.  Consulting
actuaries may also be expected to work more than 40 hours per week.

Employment

Actuaries held about 15,000 jobs in 1992.  Some actuaries were
self-employed.

   Well over one-half of wage and salary actuaries worked in the
insurance industry.  Most worked for life insurance companies;
others worked for property, casualty, and health insurance
companies, and insurance agents and brokers.  Most of the remaining
actuaries worked for firms providing services, especially consulting
actuarial services.  A small number of actuaries worked for
government agencies.

Training, Other Qualifications, and Advancement

A good educational background for a beginning job in a large life or
casualty company is a bachelor's degree in a mathematics- or
business-related discipline, such as actuarial science, mathematics,
statistics, economics, finance, or accounting.  Some companies hire
applicants with a liberal arts major, provided the applicant has a
working knowledge of mathematics, including calculus, probability,
and statistics, and has demonstrated this ability by passing at
least the beginning actuarial exams required for professional
designation.  Courses in accounting, computer science, and insurance
also are useful.  Companies increasingly prefer well-rounded
individuals who, in addition to a strong technical background, have
some training in liberal arts and business.  Good communication and
interpersonal skills are important, particularly for prospective
consulting actuaries.  Although only about 55 colleges and
universities offer an actuarial science program, hundreds of schools
offer a degree in mathematics or statistics.

   A strong background in mathematics is essential for persons
interested in a career as an actuary.  It is an advantage to pass,
while still in school, two or more of the examinations offered by
professional actuarial societies.  Three societies sponsor programs
leading to full professional status in their specialty.  The Society
of Actuaries gives a series of actuarial examinations for the life
and health insurance, pension, and finance and investment fields and
the Casualty Actuarial Society gives a series of examinations for
the property and casualty field.  Because the first parts of the
examination series of each society are jointly sponsored and cover
the same material, students need not commit themselves to a
specialty until they have taken the initial examinations.  These
examinations test competence in subjects such as linear algebra,
probability, calculus, statistics, risk theory, and actuarial
mathematics.  The first few examinations help students evaluate
their potential as actuaries.  Those who pass usually have better
opportunities for employment and higher starting salaries.

   Actuaries are encouraged to complete the entire series of
examinations as soon as possible; completion generally takes from 5
to 10 years.  Examinations are given twice each year.  Extensive
home study is required to pass the advanced examinations; many
actuaries study for several months to prepare for an examination.
Actuaries who complete approximately half of the total examinations
in either the life insurance series or the pension series or seven
examinations in the casualty series are awarded associate membership
in their society.  Those who pass an entire series receive the title
fellow.

   The American Society of Pension Actuaries confers several
designations, both actuarial and nonactuarial, for which
requirements vary.  However, membership status generally requires
the passage of some actuarial exams, as well as some pension
experience.

   Pension actuaries who attest to the Federal Government as to the
financial status of defined benefit plans must be enrolled by the
Joint Board for the Enrollment of Actuaries.  Applicants for
enrollment must meet certain experience, education, and examination
requirements as stipulated by the Joint Board.

   Beginning actuaries often rotate among jobs to learn various
actuarial operations and different phases of insurance work, such as
marketing, underwriting, or product development.  At first, they
prepare data for actuarial tables or perform other simple tasks.  As
they gain experience, they may supervise clerks, prepare
correspondence and reports, and do research.

   Advancement to more responsible work as assistant, associate, and
chief actuary depends largely on job performance and the number of
actuarial examinations passed.  Actuaries with a broad knowledge of
the insurance, pension, and employee benefits fields often advance
to administrative and executive positions in underwriting,
accounting, or data processing departments.  Actuaries with a
business background and supervisory ability may advance to
management positions in other areas, such as marketing, advertising,
or planning.

Job Outlook

Employment of actuaries is expected to grow faster than the average
for all occupations through the year 2005.  College graduates who
have passed at least two actuarial examinations while still in
school, have a strong mathematical and statistical background and
strong communication and problem-solving skills, and have gained
some practical experience by completing an internship should have
the best prospects.

   Employment growth of consulting actuaries is expected to be faster
than growth in life insurance companies, traditionally the major
employer of actuaries.  As companies seek to boost profitability by
streamlining operations, some actuarial departments may be cut back
or eliminated completely.  Insurance companies may increasingly turn
to consultants to provide actuarial services formerly performed
in-house.

   The need to assess the financial effects of prospective changes in
the health care system and health problems such as AIDS or heart
disease on insurance companies or government will result in
continued overall employment growth.  Also, shifts in the age
distribution of the population will result in a large increase in
the number of people with established careers and family
responsibilities.  This is the group that traditionally has
accounted for the bulk of private insurance sales.  As people live
and work longer, they draw health and pension benefits for a longer
period, and actuaries are needed to re-estimate the probabilities of
such events as death, sickness, and length of retirement.

   The liability of companies for damage resulting from their products
has received much attention in recent years.  Casualty actuaries
will continue to be involved in the development of product liability
insurance, medical malpractice and workers' compensation coverage,
and self-insurance, which may involve internal reserve funds
established by some large corporations.  The growing need to
evaluate environmental risks and calculate prices for insuring
facilities which carry such risks, such as underground storage
tanks, will contribute to the demand for actuaries.

   Despite expected employment growth, actuaries may face competition
for jobs.  Due to favorable publicity about the actuarial
profession, the number of workers entering this small occupation has
increased substantially in recent years, while at the same time,
demand is expected to slow due to slower growth in the insurance
industry.

Earnings

In 1992, starting salaries for actuaries averaged about $31,800 for
those with a bachelor's degree, according to the College Placement
Council.  New college graduates entering the actuarial field without
having passed any actuarial exams averaged slightly lower salaries.

   Insurance companies and consulting firms give merit increases to
actuaries as they gain experience and pass examinations.  Some
companies also offer cash bonuses for each exam passed.  A 1992
salary survey of insurance and financial services companies,
conducted by the Life Office Management Association, Inc., indicated
that actuarial students who have been designated Associate, Society
of Actuaries, received an average salary of about $46,000.  Newly
designated Fellows, Society of Actuaries, received an average salary
of nearly $65,500.  Fellows with additional years of experience can
earn substantially more.

   Actuaries typically receive other benefits including vacation and
sick leave, health and life insurance, and pension plans.

Related Occupations

Actuaries determine the probability of income or loss from various
risk factors.  Other workers whose jobs involve related skills
include accountants, economists, financial analysts, mathematicians,
rate analysts, rate engineers, risk managers, statisticians, and
value engineers.

Sources of Additional Information

   For facts about actuarial careers, contact:

   American Academy of Actuaries, 1720 I St.  NW., 7th Floor,
Washington, DC 20006.

   For information about actuarial careers in life and health
insurance, contact:

   Society of Actuaries, 475 N.  Martingale Rd., Suite 800, Schaumburg,
IL 60173-2226.

   For information about actuarial careers in property and casualty
insurance, contact:

   Casualty Actuarial Society, 1100 N.  Glebe Rd., Suite 600,
Arlington, VA 22201.

   Career information on actuaries specializing in pensions is
available from:

   American Society of Pension Actuaries, 4350 N.  Fairfax Dr., Suite
820, Arlington, VA 22203.
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