Predicting the future uncertainties and risks can help in avoiding serious impending mishaps. This holds true for the financial and business world as well. Every insurance company works on the principle of predicting the forthcoming risks and profits by processing and studying the data that is gathered over the years. For this purpose, they hire experts known as actuaries. An actuary is a qualified professional who analyses and recognizes the risks involved in insurance companies, stock markets, financial investments, banks, and other ventures involving potential risks. They are strategic thinkers and problem solvers that help in taking less dicey decisions. Actuaries identify, assess, and manage the financial risks involved in various businesses using probability, computer science, and financial theory. Risk assessment and management is necessary to maintain a balance between financial success and the level of risk involved.
Actuarial Science
Analysing the financial risks requires the knowledge of finance, mathematics, economics, probability, statistics, and computer science. All these required fields are converged under the umbrella of actuarial science. It involves the application of social science and mathematical techniques to predict and solve problems in financial areas or industries. The study of actuarial science can be used in various departments, such as banking, pension funds, government’s actuaries departments, insurance companies, accountancy firms, management consultancies, etc. Risk assessment and risk management are major parts of actuarial science. Courses in statistics, maths or industrial experience paves a direct way for a major in actuarial science. However, students having degrees in other quantitative fields can also opt for it.
Glimpsing into the History of Actuarial Science and Actuaries
Initially, actuarial science consisted of analysis of mortality, construction of life-tables, study of compound interests, and premiums using deterministic models. As the demand for long-term insurance was generated, actuarial science became a formal discipline in late 17th century. In the past, only insurance companies and pension funds required actuaries to maintain the profits of the company while protecting the public interests. Later on, the demand for actuaries increased in number of sectors. Revolutionary and fast-paced changes in science and technology have enabled the fusion of stochastic actuarial models with modern finance theory. Advancements in actuary helped combined various methods to generate accurate risk assessments and better solutions to handle the risks. With development of high-speed computers and different software, the data handling capabilities and the ability to handle larger numbers increased, due to which risk assessment and management became advanced and easy. This helped create a large number of applications of actuarial science in variety of industries.
A Path to Becoming an Actuary
Anyone who has love for mathematics and has a particular strength in it can become an actuary. The path to becoming an actuary is a bit lengthy, but is it very fruitful. Several universities, today, provide under-graduation and post-graduation courses in actuarial science. These courses are usually distant-learning courses, although university courses are available as well. With an under-graduation degree, one qualifies to write the examinations required to become an actuary. Individuals who have any mathematical-based degree, other than in actuarial science, can also opt for this career. The next step is to join an actuarial firm or an industry to develop the knowledge and skills simultaneously while qualifying. To qualify as an actuary, various countries have levels of examinations that are to be passed, or should be granted exemption in. Further, to become an associate or a fellow of the actuarial society, an experienced and qualified individual can register as a student member with the society. There is no age limit for joining the actuary profession.
Developing the right set of skills
Problem-Solving: An actuary needs to develop analytical problem solving skills as their job is to identify and minimize the risks of an undesirable outcome. Financial and statistical techniques, along with the quantitative skills, can help in solving the business related problems efficiently, especially in the ventures that involve huge risks. Dynamic risk assessment and management is another useful skill in solving problems and taking real-time decisions.
Acquiring Domain Knowledge: It is important for an actuary to understand how the concerned business works, in order to recognize the problem areas and the risks involved in that particular business. Advanced domain knowledge can help an actuary to develop expertise in the particular area on which he/she has to work.
Computer Skills: Developing one’s computer skills is crucial as well. There are various software in the market for statistical modelling and grinding the large numbers to generate required outcome. An actuary must be well acquainted with programming languages, statistical analysis programs, spread-sheets, and database management.
Math and Statistical Skills: As the actuaries have to deal with large numbers, their mathematical skills should be quick and accurate. Probability, statistics, and finance theory are the key areas to be learned and improved continuously.
Communication Skills: Actuaries also have to develop good communication skills. This is required as they have to communicate with the higher dominions and the clients to convey the assessed problems and risks efficiently. They also have to interact with professionals from other departments like programmers, accountants, etc.
Actuarial profession is extensively intellectually satisfying. Actuaries help large organizations in risk assessment and decision-making which has a remarkable impact on the businesses, legislation as well as people’s life. If one has a liking for maths, the job will always be interesting. Actuarial career is highly remunerative and guarantees a stable future; it is one of the very high-salaried job profiles. Moreover, it is encouraged to earn and get a good experience while studying, in this profession. Actuary is a very old and reputed profession of the world, which is required in wide array of industries everywhere. Compared to other finance jobs, actuary provides a good work-life balance. It is a global profession; one can work as an actuary anywhere in the world.
Actuaries assess and manage risks for a large number of organizations in the world. The applications of this field aren’t limited to insurance companies and pension funds anymore. Actuarial profession has entered numerous businesses that involve risk-taking. The demand of actuaries, today, is very high in both, developed as well as emerging markets, but percentage of actuaries present is insufficient. This imbalance creates enormous job opportunities for the candidates opting for this profession. For a person having an interest in mathematics and finance, actuarial science is the best career preference.
