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HOW ACTUARIES SEE THE WORLDJoint Math Meeting, January 5, 2012
Emily Kessler, FSA, EA, MAAA, FCASociety of Actuaries
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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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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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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
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
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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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.