What is an Actuary?

actuary

The majority of the time, when I tell people that I am studying Applied Mathematics and Statistics, they (after giving me a look of disgust) ask what career I hope to get into with a degree in Statistics. I tell them that I want to go into the actuarial field, and most of the time they (after giving me a confused look) say they have no idea what that is. Therefore, I figured I would write a post that gives an overview of the actuarial field and explains what an actuary does.

Definition

One dictionary definition of an actuary is “a statistician of an insurance company who calculates risks and premiums.” Another definition is “a person qualified to calculate commercial risks and probabilities involving uncertain future events, especially in such contexts as life assurance.” In my own words, an actuary is someone who uses statistics and probabilities in order to analyze risks associated with insurance, and makes recommendations based off their findings in order to make sure insurance companies are charging the proper amount for their premiums.

Education

Although I am majoring in Applied Statistics, which is more flexible with class selection, Bryant offers a specific major called Actuarial Mathematics. Other schools may call this field Actuarial Science. Actuarial math requires a base knowledge of calculus, a thorough understanding of statistics and probability, and a basic knowledge of how insurance works (for example: knowing what a deductible is, calculating a premium, etc.). It is also common to have a minor in Finance, since Finance uses statistics very frequently on the business side.

The Exams

exam p

One of the requirements for becoming a full time actuary and ultimately becoming an Fellow of the Society of Actuaries (FSA) is to pass a challenging and rigorous set of exams. There are ten base exams, and then you can choose to go down a certain track, such as life insurance or health insurance. Exams P/1 and FM/2 are typically the first exams taken. Exam P/1 is a probability exam that consists of 30 multiple choice questions. The pass rate is between 30 and 40 percent, and the amount of questions correctly answered usually is around 20. I have already attempted this exam once and was completely overwhelmed. I am currently studying to take it again in March.

My Internship

bcbsma

This summer I will be working in Boston as an actuarial intern for Blue Cross Blue Shield of Massachusetts. It is a full time, paid internship that will last between ten and twelve weeks from June through August. I look forward to the opportunity to gain some real world experience in the career that I am interested in. I will have the opportunity to live in Boston, work with other actuaries, participate in social events, and even do some community service. I would say that’s definitely an upgrade from my part time Dunkin Donuts job.

I hope this post was helpful in explaining the career that I hope to go into. Please like the post if you enjoyed reading, comment if you have feedback, and share/follow my blog.

Thanks,

Jeff

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About Pierro Perspective

Die hard Boston sports fan
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6 Responses to What is an Actuary?

  1. kpierro1 says:

    Well Jeff, you have been tracking statistics since you were 8, starting with football stats from your backyard games and continuing through high school. I’d say this seems like a good fit.

  2. John Pierro says:

    Hey Jeff, can you give a few more details on what goes into the analysis actuaries perform? For example, what are the factors that go into evaluating the risks for life insurance for a particular person? Besides things like age, medical history, and lifestyle habits what other details are looked at?

    • The first step is determining those factors that you mentioned. The second step is determining the probability that those factors will increase the chance of death, in the life insurance case. This is done by using probability distributions. These distributions are based on analyzing historical data. Three of the most common distributions used are the normal, uniform, and exponential distributions. The key parameters for these distributions are the mean and variance. Confidence intervals are another tool used to estimate risk. Insurance companies like to have at least 95% confidence for a given risk factor. The main software programs used to do all of this analysis are Microsoft Excel and SAS (Statistical Analysis Software).

  3. Aunt Do says:

    That was very well explained Jeff. I think even I undersatnd what an actuary is now. Thank you. It sounds like it’s right up your alley. I’m so excited for your internship. You should be extremely proud of yourself. I know I am.

  4. davi44 says:

    I learn something new everyday, and here you’ve made such a challenging subject quite understandable and life-applicable! very well done Jeff! ❤

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