HOW ACTUARIES SEE THE WORLD Joint Math Meeting, January 5, 2012 Emily Kessler, FSA, EA, MAAA, FCA...

HOW ACTUARIES SEE THE WORLDJoint Math Meeting, January 5, 2012

Emily Kessler, FSA, EA, MAAA, FCASociety of Actuaries

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WHAT IS AN ACTUARY?

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PART SUPER-HERO. PART FORTUNE-TELLER. PART TRUSTED ADVISOR.

ACTUARIES ARE EXPERTS IN:

• Evaluating the likelihood of future events—using numbers, not crystal balls.

• Designing creative ways to reduce the likelihood of undesirable events.

• Decreasing the impact of undesirable events that do occur.

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WHAT DO ACTUARIES DO?

WE MANAGE RISK

• Actuaries use a combination of strong analytical skills, business knowledge, and understanding of human behavior to manage today's complex risks facing our society.

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WHAT DOES RISK HAVE TO DO WITH IT?

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THE FUTURE IS UNCERTAIN AND FULL OF RISK.

WHAT IS RISK?

• Risk is the chance that an undesirable event will occur, but risk is also opportunity. That's where we come in.

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YOUR TURN!

It’s your turn to be the actuary. Try your hand at forecasting the future with these sample problems.

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BACKGROUND:• ABC Insurance Company

insures 1,000 eighteen year old drivers.

• Assume 300 of the 1,000 have accidents within a year.

• Assume the average repair cost for each accident is $500.

AUTO PRICING 101

QUESTION: WHAT IS THE

MINIMUM PREMIUM THAT

ABC SHOULD CHARGE AN

18-YEAR OLD FOR A 1-

YEAR CAR INSURANCE

POLICY?

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SOLUTION:• At a minimum, the total

premiums collected must equal the total cost of the accidents.

• Estimated cost of the accidents: 300 × $500 = $150,000

• Minimum premium for each driver: $150,000 ÷ 1,000 = $150

AUTO PRICING 101

CHALLENGE: SHOULD

ABC CHARGE MORE

THAN THIS PREMIUM? IF

SO, WHY?

AUTO PRICING 101

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BACKGROUND:• Assume 400 of the drivers

are males and 600 are females.

• Assume 200 out of 300 of accidents will involve males, and the remaining 100 accidents will involve females.

AUTO PRICING 101

QUESTION: WHAT

PREMIUM SHOULD BE

CHARGED FOR THE

MALES AND THE

FEMALES? SHOULD IT

BE THE SAME?

AUTO PRICING 101

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SOLUTION:• Total males’ premium:

200 accidents × $500 per accident = $100,000

• Each male’s premium: $100,000 ÷ 400

males = $250• Total females’ premium:

100 accidents × $500 per accident = $50,000

• Each female’s premium: $50,000 ÷ 600

females = $83.33

THE MALE’S PREMIUM

SHOULD BE THREE

TIMES THE FEMALE’S

PREMIUMS!

AUTO PRICING 101

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WHERE DO ACTUARIES WORK?

LIFE AS AN

ACTUARY…

WHAT’S GREAT ABOUT THE PROFESSION?

WHY DID YOU BECOME AN ACTUARY?

WHAT IT’S LIKE …

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NOT JUST INSURANCE.

Although insurance companies can’t function without actuaries, that’s not the only place you’ll find us.

• Consulting• The Government• Private corporations• Colleges and universities • Banks and investment firms • Public accounting firms • Labor unions • Rating bureaus • Fraternal organizations• Energy/Utilities• Transportation

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WHAT’S GREAT ABOUT THE PROFESSION?

TOP-RANKED JOB

• No matter the source, actuary is consistently rated as one of the best jobs. US News and World Report, the Jobs Rated Almanac, CNN Money, and others all agree.

GREAT SALARY

• Actuaries are well compensated. Experienced fellows have the potential to earn from $150,000 to $250,000 (USD) annually, and many actuaries earn more than that.

• Actuaries earn while they learn. An entry level actuary with 1-2 exams passed will bring in a starting salary of $45-$65,000 (USD) depending on region.

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WHAT’S GREAT ABOUT THE PROFESSION?

JOB SECURITY:

• Actuaries enjoy certainty in uncertain times. We're always in demand as the world confronts risk.

LIFE IN BALANCE:

• More than a fulfilling career, being an actuary allows you to maintain a low-stress, highly sought-after work/life balance.

MAKE AN IMPACT:

• Actuaries manage today's complex risks facing our society.

WHAT IS AN ACTUARY

WHERE WILL I LIVE?

GEOGRAPHIC REGION

SOA MEMBERSHIP (%)

Eastern U.S. 26.5

Central U.S. 21.7

Southern U.S. 16.2

Western U.S. 9.2

Canadian and International members

26.4

GEOGRAPHIC REGION

CAS MEMBERSHIP (%)

Eastern U.S. 41.2

Central U.S. 23.5

Southern U.S. 11.2

Western U.S. 10.1

Canada 7.8

International members

5.9

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WHY DID YOU BECOME AN ACTUARY?

• How I found out about the profession

• Why I became an actuary

• What I like best about being an actuary

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LET’S COVER SOME

BASICS…

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HOW DO I GET STARTED?

If you want to be an actuary, start preparing now!

• Follow a college preparatory curriculum of high school classes.

• Take math classes every year.

• Take advantage of Advanced Placement (AP) and advanced courses such as statistics and calculus.

• Enroll in computer science courses to develop your computer skills.

• Explore colleges and universities that offer actuarial science curriculum.

• Look into scholarship opportunities.

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WHAT ABOUT COLLEGE?

• Among the college majors you might choose: actuarial science, math, statistics, economics, business and finance.

• Your equation for success should include the following courses:- finance- microeconomics and macroeconomics- calculus - linear algebra - calculus-based probability and statistics - actuarial science courses, as available - computer science courses - business courses, such as marketing - communication courses, such as speech, business writing and

technical writing

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HOW DO I STAND OUT?

While you’re hitting the books, don’t forget to

• Apply for scholarships. There are a number of scholarships open exclusively to actuarial students.

• Look for internship opportunities. An internship will give you a head start on an actuarial career with relevant work experience.

• Get involved with your actuarial or math club, if your school has one.

• Talk to an actuary.

• Start taking exams!

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BECOMING AN

ACTUARY…

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BECOMING AN ACTUARY

Actuaries earn credentials to be able to practice

• Life/Health/Pension (Society of Actuaries)• Associate of the Society of Actuaries (ASA)• Fellow of the Society of Actuaries (FSA)• Chartered Enterprise Risk Analyst (CERA)

• Property/Casualty (Casualty Actuarial Society)• Associate of the Casualty Actuarial Society (ACAS)• Fellow of the Casualty Actuarial Society (FCAS)• Coming soon: CERA

BECOMING AN ASSOCIATE (SOA)

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*(effective July 2012)

BECOMING A CERA (SOA)

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BECOMING A FELLOW (SOA)

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VEE* (Economics, Corporate Finance, Applied Statistics)

Exam 1/P*

Exam 2/FM*

Exam 4/C*

Exam 3F/MFE*

Exam 3L

Exam 5

Exam 6

Online Course 1

Online Course 2

CAS Course on Professionalism

*Shared with SOA

BECOMING AN ASSOCIATE (CAS)

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ACAS + Exam 7

Exam 8

Exam 9

BECOMING A FELLOW (CAS)

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FIND OUT MORE…

Follow us:

Like us on Facebook

beanactuary.org

riskisopportunity.net

DIVERSITY PROGRAMS…

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TO DO THIS, WE ACTIVELY SUPPORT:

• Summer actuarial programs for high school students so students can get comfortable with the profession.

• Reimbursements for qualified minority students who pass either of their first two exams.

• Mentoring opportunities for those who want more guidance on what it takes to be a professional in today’s economy.

• Scholarship opportunities are available from the Actuarial Foundation and other organizations.

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QUESTIONS?