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Some math majors enter
the actuarial profession. An actuary is often
defined as "a mathematician who works for an insurance company."
This is partly true, but it needs amplification on two counts:
1)
While
a person needs excellent mathematical skills to become an
actuary, he or she ultimately needs to know as much economics as a
major in economics and have as much business knowledge as someone who
majored in accounting or finance.
2) Only
about half of all actuaries currently work for insurance
companies. The rest can be found in consulting firms, government
and academia.
There are two "flavors"
of actuary-- life and casualty. Life actuaries deal with life
insurance, health insurance, annuities and pensions, while casualty
actuaries deal with insurance against events such as auto
accidents, fire, earthquake, tornadoes, and so on. Barring the
occurrence of a pandemic, life probabilities are very well
determined. Casualty probabilities are another matter.
Imagine betting on California
not having a Richter 7 earthquake in any given year (and being limited
by the state insurance commission with regard to premium
increases). Casualty actuaries definitely live life in the fast
lane.
Corresponding
to
these two flavors of actuary there are two accrediting societies,
the Society of Actuaries (SOA, for the life flavor) and the Casualty
Actuarial Society (CAS, for the casualty flavor). Admission to
full membership ("Fellowship") in either society requires passing a
series of examinations
Companies
usually want a student to have passed at least the first examination
(1/P) before hiring him or her as an actuarial
trainee. To attempt the first examination one should have
completed Math 131-132-233 and Math 493-494 (all with strong grades),
and also have self-studied the material on Insurance and Risk described
in the SOA web page for the first examination.
We
strongly recommend that Math 493-494 be taken in the junior year (or
even sophomore year for highly advanced-placed students). Taking
493-494 during the senior year puts the student at a competitive
disadvantage: it does not allow enough time to take and pass the
first
examination before interviewing for jobs. Note: the first examination is challenging.
Out of
3501 candidates who took the examination recently, only 1316 (38%)
passed.
Students
interested
in being either flavor of actuary take the same first exam (1/P) and
register
for it with the Society of Actuaries. An application form, and
other information about the exams, is available
There are
several
- Use of
a
calculator is permitted, but it MUST be one of a few
- The
first
examination is online ("CBT" = Computer Based Testing). To keep
from getting nervous, it is a good idea to prepare mentally for this
style of testing.
- There
is an absolute deadline
for registering for each examination, which means that the application
must be RECEIVED by the society on or before that date (NOT just
"postmarked" by that date). For the first examination (1/P),
there are four testing dates with applications due approximately two
months before each examination date.
The
second
exam (2/FM) is on financial mathematics. If you have taken
accounting and personal finance (courses in our School of Business),
you may be prepared to take this examination as well.
A
recently added requirement, independent of examinations, is "Validation
by Educational Experience" (VEE). Loosely speaking, this
requirement relieves the societies of the burden of testing you on some
of the material typically found in college courses. Please
see VEE
for
more details, including courses from Washington University that are
currently approved for VEE,
Employers
vastly prefer as actuarial trainees those students who have passed at
least one
Most
companies offer summer internships for undergraduates based on GPA,
skill set, and
interest but not based on having passed any examinations. If you
have some accounting knowledge and are good at spreadsheets, you may be
quite attractive as an intern. Internship can give you a good
idea whether you would like to pursue an actuarial career, but you
should not count on it helping you to pass the societies'
examinations. We occasionally receive information from insurance
companies and from former-students-now-actuaries about internships and
part time work they have available. If you are interested in
being recommended for such positions, please let us know, preferably in
an e-mail summarizing your
qualifications, which we will then forward in response to the inquiry
(with a copy to you, so you won't be surprised if you get a call about
it). In looking for internships, you should also visit The Career Center website in September and
again in January. Also look under Undergraduate
Study/Internship
Opportunities to find links to insurance companies
where you might get information about internship programs.
For both
SOA and CAS, there is a point about two thirds of the way
through the examinations where the candidate is declared an Associate
of the society.
Completing the full set of requirements
You
should try to do your very best on each of the examinations, but you
can take comfort in the fact that the actual score by which you pass is
not reported to anyone but you. Also, failures are not reported
to anyone but you. The only information available to the world at
large is which examinations you passed. There's a saying about
medical school: "What do you call someone who graduates at the
very bottom of the class?" "A doctor." The same philosophy
applies to the actuarial field; anyone who completes the rigorous
requirements of either society is a highly qualified individual.
Professor
Edward Spitznagel
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