Ask an Actuary

"The better you are at explaining what you do in plain language, the more effective you will be as an actuary, because people don't trust what they don't understand."

"Ask an Actuary" features an actuary that is asked to describe the path that led him/her to an actuarial career.  For this installment, our featured actuary is Ruth Howald, a Senior Actuary at Farmers Insurance Group in Los Angeles.

Q: When did you first decide to become an actuary?

A: Relatively shortly after I learned about the career - during my junior year of college.

Q: Who or what influenced your decision?

A: The chairman of the math department at my university received a notice of the preliminary exams, and invited me and several other math majors to take this national calculus exam. Since I have always been a "good exam taker", I did, and then decided that I should know WHY the exam was being offered. The more I looked into the profession, the more it appealed to me - a math major who didn't want to teach - by blending practical math, economics, business and problem solving.

Q: What is your educational background?  Where did you attend college and what was your major?

A: I have a Bachelor of Arts degree in Mathematics from Ohio Northern University in Ada, Ohio.

Q: What classes did you take in college that helped prepare you for the career?  What class was most helpful?  What classes outside of math and statistics (such as communications) were helpful?

A: Obviously, calculus, probability and statistics. I took an economics class to meet the core curriculum requirements, and discovered that I loved it; I took an accounting class, also "core curriculum", and hated it, so I knew I couldn't become an accountant. I did do some speech and public performing in a "reader's theater", which were fun and also helped prepare me for speaking in public. Otherwise, I think curiosity is the biggest asset - openness, willingness and desire to learn new things.

Q: What was your first job in the profession?  How did you get the job?  Did you start as an intern or in an actuarial training program?  What type of work did you perform in you first actuarial job?

A: I started out as an actuarial trainee at The Hartford Insurance Group, doing personal auto rate reviews. I got the job by mailing resumes to a number of companies that I was interested in, geographically, pulling addresses from the AM Best Company reports... but I did it AFTER the normal recruiting season, mailing my resume in early June. I had several interviews and was working by mid-July.

Q: What was your career path from your first job to your current position?

A: At The Hartford, I followed a pretty traditional actuarial rotation program -from personal auto, I took a job rotation into the Workers Comp unit. I got to do a variety of interesting technical projects there - implementing the change from advisory rates to advisory loss costs, mechanizing retro rating plan calculations, working on accident year/transaction reporting. From there, I rotated to the small business policy ratemaking unit, where I supervised the unit. This was also the first significant contact I had with working with other disciplines to solve a common problem.

I moved to St. Paul, MN, and changed companies. At The St. Paul, I started out as the actuary for commercial property and auto, eventually adding responsibility for the development of a new small business policy.

After getting married and getting tired of St. Paul winters, my husband and I moved to Baltimore, Maryland, where I became the VP of commercial lines pricing actuarial for The Maryland Insurance Group, a unit of Zurich Insurance. We reorganized into strategic business units in 1992, and I took the position of VP-Actuarial for the small business SBU... where we developed the policy as a team from a blank sheet of paper, including policy forms, rating plan and the policy-writing system.

Zurich then gave me the opportunity to work overseas for two years, in Sydney, Australia, to establish a property-casualty actuarial department. After two years, and about the time Zurich and B.A.T. Financial (Farmers Insurance, in the US) merged, I returned to Baltimore to lead the personal lines reserving section. After the merger was completed, I moved to Los Angeles to head the reserving section and work on professional development of the actuarial department.

In 2000, I realized a long-term goal to be "more than just an actuary" and moved into Product Management, where I am currently the Director & Product Manager for Texas Personal Auto. I have additional responsibilities for four other states.

Q: What type of work do you do on a day-to-day basis in your current position?

A: I manage a staff of underwriting and actuarial people, focussed on the financial results - profitability and growth - for our five states. This involves some actuarial work, some systems work, some underwriting decision-making, setting strategy and plans, determining key measurements and monitoring results.

Q: When did you take your first exam? Where are you currently in the exam process?

A: I took the calculus exam (old Part 100) in November 1976, finished the CAS exams with the November 1985 exams, and am now a Fellow of the Casualty Actuarial Society, a Chartered Property Casualty Underwriter and an Associate in Risk Management.

Q: What advice would you give to someone first starting out down the path of an actuarial career?

A: I guess the first thing I do is to advise candidates that there are two different paths - toward FSA and toward FCAS. I am an FCAS, and love what I've been able to do - the field is so dynamic and so influenced by outside forces (recessions/expansion), the price of gas, court decisions, safety innovations) that no two days are ever the same. That level of constant change isn't for everyone, so give that some serious thought.

The second thing I tell exam takers (who ask) is to spend the time and learn the material the first time through a given exam syllabus. I was pretty stubborn about the accounting material, and it cost me time and disappointment. You may not always pass when you know the material, but you WILL NOT pass when you don't!

Finally, get good at communicating technical concepts to non-technically inclined people. I became an actuary in part because I didn't want to teach, and have spent the last 23 years teaching! The better you are at explaining what you do in plain language, the more effective you will be as an actuary, because people don't trust what they don't understand. If you want people to act on your recommendations, they need to understand how you got there.

Additional Questions

Q: I am 26 years old with a BS in electrical engineering and I would like to know if it is a little bit late in order to start a career in actuarial science.

A: No, 26 is not too late to start pursuing an actuarial career. The biggest challenge you may face, as compared to someone starting out straight out of college, is re-establishing good study habits. I would encourage you to take Exam 1 (you may even have all the textbooks you need), prepare to answer the interview question about why you now believe you want to be an actuary, and go for it!

Q: Also why have so many people never heard about this profession?

A: As to why so many people have not heard about the career - I believe it is a matter of numbers. There just aren't a lot of actuaries - the Society of Actuaries has just under 17,000 members, and the Casualty Actuarial Society approximately 3,500 - and we generally work in a field that isn't high profile or exciting or newsworthy. The SoA, CAS and American Academy of Actuaries have done a lot to make people aware of the profession, sponsoring this website, holding twice-a-year career information fairs for high school students and their teachers, providing expert non-partisan testimony to legislative bodies, mailing newsletters and sample exams and career information, encouraging actuaries to serve as university liaisons... but there's still plenty of room for improvement.

Q: I had no idea what an Actuary was until today. After researching by surfing the web, I can't believe how perfect this career sounds so far. But, how do I build my prerequisites for interviews and/or internships if I'm already out of school with a BS in Applied Mathematics?

A: The first thing to do is to register for Exam 1 for the next available sitting - given that it is now February 2002, register for the May 2002 sitting. That way, you can put "sitting for Exam 1, May 2002" on your resume, which shows potential employers that you know there are exams involved and you've committed to taking the first one. You should probably note in your cover letter what about the field makes you believe it is what you want to pursue, showing you've done your "homework". You may also want to ask companies in your area for the opportunity to do "informational interviews" with some of their staff - in that way, you have contacts, and names of people to whom to direct your resume, which is always preferable to sending it to Human Resources as a "Dear Sir or Madam" letter.

Some companies, but certainly not all, will have a minimum requirement of one completed exam for entrance into their actuarial program. Be persistent, get a job in the field if you can, but to really broaden your options - pass that first exam! A BS in Applied Math is an excellent background for an actuarial career.

Q: Hi, I'm a junior math major and my question is that whether a Master's degree in mathematics will help me in actuarial career or not. I want to spend an extra year in my current school, but it seems getting a Master's degree in mathematics is irrelavant to actuarial jobs. What do you think?

A: I don't think a Master's degree would have made much difference to the vast majority of actuaries, either in landing a job or in the working environment. What we look for is GPA, exams, relevant courses (calculus, probability, statistics, economics, finance), work experience and communication skills. The Master's degree might make a small difference in starting salary, but exam progress and work product are what matter over the long run.

Q: I am a soon-to-be 40 year old high school math teacher who is thinking about a move to an actuarial career. Everything I read regarding entry into the profession is geared toward recent (or soon-to-be) college graduates. Do you feel that the actuary profession is open to someone like me who is making a mid-life career change? If so, do you have any advice as I begin my job search? I have a master's degree in mathematics and passed the course 1 exam last spring. I will be sitting for the course 2 exam in May. Thanks.

A: Actually, I think you are pretty well positioned for a change into the actuarial field, based on your question. I have known a number of actuaries who switched into the field from teaching positions, and done very well. The practice you have in explaining things to people should help you make the transition.

The two questions you will get asked most often will probably be (1) why you want to change careers at this point in your life - either what you dislike about teaching or what you find attractive about the actuarial path, and (2) whether you really understand and are prepared to make the commitment to finishing the actuarial exams. Having taken and passed the first exam is a big step in the right direction.

Also consider emphasizing the skills you have in time management, explaining technical concepts to non-technical people (like high school students!!), and quickly learning new concepts yourself. Good luck!

Q: I am a lady, aged 21 and doing my Honours in Computer Science,and currently in my third year.Because of my proficiency in Math, I have decided to pursue a career in Actuarial Science. I have done quiet a number of Math courses in Calculus, Operations Researsh and Analysis all of which I have taken with the Actuarial Science Class at my University.

I have decided that after graduating , I will enroll with another university/college for my PostGraduate Degree in Actuarial Science(probably with exemption in some courses). I was also wondering if for my final year project I could do a project along Actuarial Science lines using Technology as a tool in the field. Please help and advice accordingly .

A: It doesn't sound like you need a lot of advice - but here is some anyway.

First, take some general business, economics and finance courses while you are still in school. They will help in the future. Second, you mention your final year project as an Actuarial Science project using Technology. I'm not sure what you have in mind, but the areas of multi-variate analysis, neural networking, generalized linear modeling and probablistic financial modeling are all issues actuaries are exploring to take advantage of the capabilities of the current technology. You may want to contact some companies near your university to see if they would be interested in working with you to design such a project, or bringing you in to work on their project team, as an intern or part-time employee.

Finally, I don't think post-graduate degrees are necessary for a successful actuarial career. A Master's degree in Actuarial Science may build your confidence, and give you an opportunity to move through the first few exams with supporting classes, but proving your capabilities in a working environment is much more valuable in the long run.

Q: I'm a high school student considering a career as an actuary. What is your insight on the future of this career? Do you think there will be many opportunities for future actuaries? What type of actuary do you think would receive the most growth in the future?

A: Thanks for the opportunity to "pitch" my profession! I do believe there will always be a strong job market for people who can analyze data, formulate solutions, and communicate - and that is exactly what actuaries do. In addition, the actuarial education process is second to none in the insurance industry - so a Fellow has a very good idea of what it takes to run an insurance company, from sales and marketing, regulatory compliance, financial analysis, and claims settlement. The opportunities to be a part of the solution are tremendous, and ours for the taking.

What "type" of actuary do I think will see the most growth? Here I must admit my bias as a Casualty Actuary, and will put my field first. The world of P&C insurance is constantly evolving to meet the needs of the economy - think about the internet, "cyber-vandalism", insurance for Small Office/Home Office businesses, the emergence of new automobile types (SUVs, electric/hybrid motor). When I began my career, these were either nonexistent or small enough to be ignored, and now actuaries are involved in establishing insurance coverage and pricing for these "new" risks. Innovation in the broader world will result in opportunities we haven't even dreamed of yet.

The issues in Life, Health and Pensions are different, yet all have changed dramatically over my career as well, and I expect that they will continue to do so. AIDS, viatical settlements, 401(k)s and other "defined contribution" pension plans, managed health care, changes to Social Security, long-term care... and actuaries play an important role in creating society's reactions to these issues. Add to that financial analysis - a broader field than "traditional" actuaries work in, but one that is growing and getting more attention. I am personally acquainted with a couple of actuaries who work for brokerage firms as insurance industry analysts, and the leaders of our profession are working to keep an actuarial education relevant to the needs of our employers and potential employers.

Long answer to a short question... sorry about that! I do think it's an exciting time to be an actuary.

Q: I have heard that a knowledge of programming languages and date bases, such as visual basic,access, c++, etc., is useful in the actuarial profession. I would like to know specifically how actuaries utilize these languages in their work. For example... Which language would they use to create a model... what do they use VB for... Thanks

A: Different actuaries will use different tools in their day-to-day work.

I use Excel almost all the time, using it for analyzing data, creating charts and graphs, doing calculations and building relatively simple projection models. I also use Word and an e-mail/calendaring software on a daily basis. We use SAS on our mainframe computers to extract, sort and summarize data to download into Excel spreadsheets and Access databases- Access when the number of rows exceeds Excel's capacity, or when we need the "relational DB" features of joining tables and normalizing data.

There is a section in our Corporate Actuarial Department which uses Access much more extensively, and which creates Visual Basic macros in Excel for the rest of us to use - to load data into a spreadsheet for further analysis, to pull data in and write data out to Access databases, to update "production" tools. They are also our SAS experts.

So generally, you will need some "number-crunching" language or package for manipulating large quantities of data, and most models will be built on PCs and will take advantage of the inter-connectivity you get in any "suite" of PC software.

In my experience, which computer language you know isn't as important as knowing one - and if you can get spreadsheet experience, you will be ahead of many of your competitors for jobs. Always remember: computers are really stupid and will do exactly what you tell them to do, and knowing that and knowing the traps we fall into will serve you well (as an example, I have been having trouble with a spreadsheet lately that does not treat the character 3 the same way it treats the number 3 - any human being would know that 3 is 3....).

Q: Dear Madam, I just completed my A Levels and will be studying Actuarial Science in the UK very shortly. I have been told by a lot of friends that this field is fast getting saturated, I would like to know whether this is true or not? Also, how long does it take to become a full fledged actuary?

A: I can only answer for the US market. It is true that it is a highly competitive field, and more is expected of entry-level candidates than twenty or even ten years ago. The same things that have always given one candidate "an edge" over others still apply - begin the exam process while in university, make sure that your communication skills as well as your math skills are excellent and demonstrable, take on a leadership role, know something of the history of the company with which you are communicating, work as an intern in an actuarial or insurance-related company before graduation. If you want to know more about your local job market, try contacting companies for informational interviews, ask what they consider positive and negative on a resume or CV, ask about their most recently hired actuaries and their backgrounds.

As for how long it takes to become a Fellow of the CAS, I the CAS tracks "travel time", which is defined and discussed in the "Travel Time" report to be found at http://www.casact.org/students/reports.htm. Their conclusion of an average of 18 sittings (at two sittings per year) to FCAS equates to nine years. That figure is an average, with all that implies - some people take less time, some more. I took my first exam in November 1976 (or May 1977? it was a long time ago) and finished with the November 1985 exam - but didn't take the second exam until November 1978. I was also stubborn about the accounting exam, and took that one many more times than necessary.

Q: Do you think an actuary would be able to work part-time or from home? I have a degree in Math Education and will soon begin the exam process. Due to various reasons I want to plan for as much work at home as possible. Second, if I'm unable to obtain work for a long period of time, should I keep studying and taking exams? If not, what would be the most effective way to develop my skills for employment?

A: I am having a hard time imagining a beginning actuarial student working from home - you would need to be able to ask questions when you get to a certain point, for example, almost all actuarial training is "on-the-job" in supervised and reviewed projects, and we believe that our actuarial assistants learn a lot from working with each other. That doesn't mean that no company will do it... just that I expect you will have to work VERY hard to find a company that will allow you to work from home in the early stages of your career. The more experienced you become, the more the company is familiar with your work and knowledge level, the greater the probability you could arrange to work from home.

Part-time is a different story. I believe more employers would be willing to offer part-time employment to an actuarial student; most companies these days are pretty "clued-in" to alternative working arrangements. Be up-front about your desire for part-time work (why isn't anyone's business, but the fact that you won't be in the office or available several days a week IS) and be prepared to be told "no, thank you". As for pursuing the exams while looking for work, absolutely! Parts 1 and 2 - calculus, probability, finance, economics - can be done, and often are done, self-study without company support. It gets harder after that - materials are more costly and more specialized, and practical hands-on knowledge is more useful. Perhaps you could work with a local company and borrow exam materials from them? We, for example, would consider such a request, and would probably be willing to give your name and contact information to exam-takers within our company if you were interested in joining a study group.

The only thing you need to be careful about is letting your exams get too far ahead of your experience. We know what the "market rate" is for an actuary with five exams and four years' experience... five exams and no experience is much less common and therefore harder to be certain we treat fairly. We can't pay you too much because of the lack of experience, but we can't pay too little because of the progress toward Fellowship.

Q: Hello ! I am French. I have just completed my diploma of economist-statistician, which is equivalent to a double master of statistics and economics. My specialization is : "Finance and Actuarial Science". And I have passed my exams to become a fellow of the French Institute of Actuaries. I would like to know if it is possible for non American people to become fellow of Casact. And how much time it take to pass the exams when you already have quite strong skills in actuarial science, probabilities, statistics, econometrics, microeconomics... Is a Ph.D necessary to pass Casact examinations? Thank you for your answer.

A: Yes, it is definitely possible to achieve an FCAS designation while being outside of North America, though less convenient. There has been a great deal of attention and thought given to international issues over the last 5-7 years, and as much attention given to what the designation "ACAS" or "FCAS" should mean to an employer of actuaries. The results of this attention include the creation of an international association of actuarial organizations, and clarified reciprocity rules. I suggest you review a couple of pages on the CAS website, specifically: http://www.casact.org/students/syllabus/2002/graderules.htm#waiver for information on exam waiver requirements and process, and for exam centers in Europe: http://www.casact.org/students/syllabus/2002/centers.pdf

As to how long it will take to finish the exams, with strengths in actuarial science, probabilities, statistics, econometrics, microeconomics already, you should do quite well in the early exams - which are also the most likely (in my uninformed opinion) to be the exams waived in your case. The CAS exams 5-9 are aimed at mastery of actuarial methods and other insurance-focused material. The combination of factors other than intelligence - study habits, ability to work under exam pressure, mastery of the concepts and the ability to apply them, memorization skills, persistence, and so on - will determine your progress through those exams.

Finally, do you need a Ph.D. to pass the exams - emphatically NO. I don't know the percentages, but I expect that the vast majority of actuaries in North America have Bachelor's degrees... some Master's degrees... very few Ph.D.s.

Q: I have a B.S. in computer science and I am researching the field of Acturial Science for my Masters, and even as a career path. I have loved math ever since I've known it and I did really well in all my math classes in my undergrad (Calc I-III, linear algebra, diff. equations), except one - probability. And my question is regarding this. How important is it to have have a solid understanding of probability? AND what can I do to have a very good understanding of probability? Given my love for mathematics and curiosity to solve problems, especially, math problems, do you think I will enjoy getting a M.S. degree in Actuarial Science?

A: I never thought about that before - can you be an actuary without a solid grounding in probability? Probably not. In the first place, that first exam covers math, probability and statistics, and in my experience you can't pass an exam without having solid knowledge of all concepts covered. In the second place, as an actuary, you will get asked all of the probability and statistics questions that come up - some engineer friends of mine once called to confirm that combining two independent, normal distributions results in a normal distribution. (I admit, I had to look it up to be certain.) And of course, probability and statistics underlie our day-to-day work.

So, the question really becomes, how do you get proficient at probability and statistics? Have you tried auditing the probability course, this time with a different professor? I found the Schaum's Outline of Probability (I checked, it's still available) - and the opportunity to work LOTS of practice problems - essential to my understanding of probability. I also picked up a used copy of "Probability for Business Majors" at my university, which is a very helpful non-mathematician's resource book.

It's worth the effort. You'll have to work a little harder at the exams, but if you manage that, you'll have enough knowledge of probability and statistics to be an effective actuary.

Q: I am from Ghana West Africa, struggling with course 2. Any advice on how to combine work and studying? Any tit bits on studying?

A: The first thing is to determine WHEN you are at your best for studying. For example, if I had tried to study in the morning, I would still be taking exams because I don't focus well early. Some of our actuarial candidates who ARE good in the morning come in early and study, taking their company-sponsored time as the first working hour of the day. I would always take my time as the LAST hour of the day, and then keep studying until I was no longer effective (it helped to be single). Study breaks are important, too - get up, stretch, go for a short walk...

Some other things that I did, that may or may not work for you - I read the material taking notes, and then took notes on my notes... I used flashcards for some exams, particularly one with lots of memorization (write a question on one side of the card, the answer on the back, and "test" yourself frequently)... take advantage of old exam questions and answers posted on the CAS and SOA websites (casact.org and soa.org)...I had a friend who was preparing for the Professional Engineer exam at the same time I was studying for Course 9, and she and I would have breakfast together every Saturday for 6 weeks, go to the university library to study, and then have dinner together as our "reward" for putting in 6-8 hours (peer pressure - neither of us wanted to be the one to call a halt for the day!).

As for combining work and study, I recommend establishing a routine. Leave the office at the same time every day, create a study schedule that gets you through the material enough in advance for review, study at the same time and in the same spot every day, build in goals and rewards. Good luck!

Q: Hello. I'm a sophomore at college, studying actuarial sciences. I was wondering what are the different benefits between causality(CAS) and society(SOA) and how do I choose which path to pursue. Also should graduate work be pursued right after I finish college, is it really needed?, or should it be held off till after a few years of on the job training? Thank you.

A: First, let me begin with a disclaimer. I am a Casualty actuary, love what I do, and am therefore biased.

To me, the most exciting thing about casualty work is that it is changing ALL the time, and the economy and courts have tremendous influence over the cost of the product. Most of the population has auto or homeowners insurance because they are required to, either by the state or by the lender, and so politics is also a key influence. In addition, the Casualty Actuarial Society has far fewer members than the Society of Actuaries.

Life insurance is a discretionary purchase, so not everyone has it, and the unknowns are more on the financial end - you know that you will pay the claim eventually, and how much, but the timing and the interest rate environment are the drivers of the insurance company's results.

Health insurance is more like casualty, in that the environment is constantly changing, and that politicians and regulators are involved. I cannot recommend pension work - with the rise of "defined contribution" plans like 401(k)s and IRAs, the decline of the traditional "defined benefit" plans, and the fact that the IRS is setting formulas for those that still exist (removing the judgemental aspects) - I just don't see a glowing future.

With a bachelor's degree in actuarial science, you do not need an advanced degree. If you have time, try to get one or two internships before you graduate, to find out what some of the work is like (if you get a property/casualty internship and hate it, then you may want to target your full-time job search to the life or health industry, for example).

Q: I am a certified public accountant with a specialty in the benefit plan industry. I have always had a keen interest in Math, and the actuarial field is of interest to me. I have not yet seen a Bio of an actuary who did not possess some sort of math degree. Is a math degree required, or are advanced math skills enough? If no degree is required, what courses would you recommend I take to prepare for Course 1?

A: A Math degree is NOT required. I have known actuaries with degrees in psychology and history - though as you point out, most of us do have math backgrounds.

I suggest a review of the topics on the Syllabus for Course 1 (http://www.casact.org/students/syllabus/2002/exam1.htm) and see how that matches up with courses at the college or university you have in mind. Calculus, probability, statistics...

Q: Hi there, thank you for answering all the questions. It's been very helpful. I have three questions for you. First, you mentioned in previous answers that communication skill was critical. Can you give some suggestions on how to improve that? Especially for a shy person? Second, does globalization have an impact on the actuaries? Does your group pretty much focus on the US market only or you are expanding business to other regions? Third, can you recommend some journals and websites which you frequently read or visit to keep yourself updated?

A: Here are a couple of suggestions on how to improve communication skills:

If you are still in school, see what the English/Language department offers in the way of speaking courses. You get coaching and immediate feedback on presentation skills. Another possibility is to work in the tutoring lab--- explaining mathematical concepts to people who are struggling with the topic can get you used to re-phrasing and trying different approaches to understanding in a one-on-one environment. Consider Toastmasters International, as well. They have a structured program which also provides coaching and immediate feedback, generally in smaller (15-20) groups.

On Globalization - In my opinion, this is a big issue for the profession. CAS members tend to work primarily in North America, but are scattered throughout the world. The issue of reciprocal recognition with other actuarial organizations around the globe has been discussed a lot in the past 5 years or so, and there are now more answers available. Generally speaking the FCAS is a widely recognized property/casualty designation, and would earn you at least some credit toward membership in organizations outside the US. The FSA designation will gain reciprocal rights in a number of countries. Full reciprocal recognition of the FCAS isn't happening, largely due to the differences in syllabuses (syllabi?)... the CAS is to my knowledge the only actuarial organization focused entirely on property and casualty issues.

Some of the insurance websites I visit frequently, to keep up with developments in the industry, are:

Business Insurance (www.businessinsurance.com)
National Underwriter (www.nationalunderwriter.com)
Insurance Journal (www.insurancejournal.com)
Best's Review (www.bestreview.com)

And of course, for actuarial issues:

Casualty Actuarial Society (www.casact.org)
Society of Actuaries (www.soa.org)
BeAnActuary (www.beanactuary.org)
American Academy of Actuaries (www.actuary.org, not to be confused with
www.actuary.com, which also has useful content but is a commercial site)