What does this career entail?
Actuaries develop a sound understanding of the financial world and the skills to solve business problems. They are required to analyse data to interpret the past, create models to forecast the future, assess risks, estimate outcomes and communicate facts, ideas and recommendations in a way that can be understood by actuaries and non-actuaries alike. They work in many areas that directly benefit the public, including life and non-life insurance, advising pension funds, savings, capital projects, investment, healthcare and risk management. Such work offers management opportunities, often at boardroom level, with actuaries having a commercial as well as technical role.
The variety and choice of rewarding opportunities available mean that it's a stable profession, with very few actuaries unemployed or feeling the need to leave the actuarial world. The actuarial qualification is an excellent and widely recognised base for a business career.
Details about actuarial work in a number of key sectors follow.
Life assurance companies provide pensions, life assurance and other financial services. Actuaries are involved at all stages in the product development and in the pricing, risk assessment and marketing of the products. In addition, actuaries fill key roles in financial management and the investment of policyholders' money: developing strategies that ensure customers get a good return. It is a legislative requirement that each UK life office has an "Appointed Actuary". The Appointed Actuary has the statutory responsibility for certifying that the company can pay claims and for ensuring that the many millions of pounds invested by policyholders is secure, and is required to represent the policyholders' interests.
In an increasingly global business world, mergers between life companies are becoming more frequent. However, when life offices are bought and sold or life funds merged, actuaries tend to be retained by both sides.
Actuaries are increasingly involved in taking a view of the whole market in order to assess a particular company's competitive position. They can achieve this by analysing the statutory and regulatory returns made by life assurance companies to the Stock Market and the Financial Services Authority. This analysis is often supplemented by visits to meet a company's senior management face to face.
General insurance is a fast growing area of employment for actuaries, both within insurance companies and at Lloyd's, where they also have certain statutory duties. General insurance includes personal insurance, such as home and motor insurance, as well as insurance for large commercial risks. As there are many different factors which can affect the size and number of claims, general insurance companies employ actuaries to assist with their financial management, in particular in connection with premium rating and reserving.
Actuarial and statistical techniques are used extensively in the analysis of often substantial amounts of available data. This analysis is then used to rate the risks and to ensure that claims reserves are adequate. Increasingly actuaries are being asked to provide formal opinions on the technical provisions for general insurance companies. They are also involved in sales and purchases of general insurance companies.
Actuarial consultancies are probably the biggest employers of actuaries in the UK. Many actuarial consultancies offer advice to employers and trustees who run occupational pension schemes. The 1995 Pensions Act made it a statutory requirement for the trustees of a pension scheme to appoint an actuary. The advice to clients will cover a wide range of topics from setting up a new scheme to assessing the level of contribution to be paid by the members and valuing the fund if the company is to be taken over.
Additionally, consultancies will offer a whole range of services to their clients, such as acquisitions, mergers, corporate recovery and financing capital projects. Because of their knowledge of the finance industry and their technical skills, actuaries work alongside other business professionals in consultancy firms.
The Government Actuary's Department (GAD) provides advice to the Government via Royal Commissions, as well as giving advice to other government departments and a wide range of public sector bodies including local authorities and the NHS. An important part of this work concerns the occupational pensions for about 4 million people via the operation of the National Insurance Fund. GAD also produces the official national population projections for the UK and reports regularly to Parliament.
Actuaries have been involved in the field of investment management for decades. Indeed, it is probably true to say that more people have exposure to actuaries through the daily stock exchange indices than through any other source. Actuaries are involved in buying and selling assets, investment analysis and portfolio management. In addition, actuarial techniques are ideal for use in measuring investment performance. Many employers recognise the skills that actuarial training provides and have allowed actuaries to develop these techniques alongside those of other specialists such as financial economists.
Solving problems while making correct investment decisions is a constant stimulus. Actuaries are continually seeking to improve their tools both in development of valuation models and in refinement of traditional methods. Detailed knowledge of statistical and actuarial techniques is needed.
Although generally regarded as the province of the investment banker, actuaries are today demonstrating that they can add value in this area. An actuary's basic skills in forecasting and assessing risks are ideal for estimating whether a capital project (e.g. for a new hospital or a transport infrastructure project) is financially viable. Employers might include property companies, government departments or management consultancies specialising in this area. As an example of innovative work, actuaries have been heavily involved in helping to produce a manual entitled Risk Analysis and Management for Projects (RAMP). This illustrates how actuarial skills can be used in very non-traditional areas.
Another area in which actuaries are becoming progressively more involved is banking. To some extent this has arisen because the old barriers that existed between insurance and banking have been broken down. In particular, a number of leading insurance companies now have their own banking operations with a number of senior executives being actuaries. As in other areas, actuarial training in the use of models, probability theory and the mathematics of finance makes actuaries well skilled for the field.
With recent legislation leading to more private healthcare provision, there are new opportunities for actuaries. Insurance companies are extending their range of products to include medical insurance, critical illness insurance and disability insurance. Again, actuarial techniques are used to assess the premium rates and reserves. The actuarial profession also participated with the Royal Commission to examine long-term care for the elderly, demonstrating again the high value placed on actuaries' skills, knowledge and impartiality.
Actuaries are often involved in court cases requiring specialist evidence - such as calculating damages for industrial injury or unfair dismissal, assessing the value of pensions in divorce settlements, and acting as expert witnesses in complex fraud trials.