I'm a qualified actuary working in the USA for years. Few more misconceptions/knowledge I would like to share:

1. There are many types of actuaries and they are very different.
I work in the P&C field. Other actuaries work in life, health, pension or even outside of insurance industry. Actuaries within these field can be furthered granularized to specific function. Like in P&C, most actuaries work in traditional roles in either pricing or reserving. Some actuaries work in non-traditional roles, such as predictive modeling, cat modeling, etc. I spend most of my career developing highly complicated capital models for insurance companies for regulatory compliance, which I believe is a very rare skill in Malaysia. But here is the states, or in EU, this skill is highly sought. I know some traditional reserving methodologies, but I am more familiar with the stochastic reserving. So the point is, there is a distinct difference between actuaries in each field, and the discrepancy still exist between each function within a field. I can hardly communicate "actuarially" with a life/pension actuary, and vice versa I guess. Or if I were to change my specialization to P&C pricing, I would be a complete newbie.

2. Actuarial field is more than what you think it is.
Most actuaries in Asia work on the life side, which is understandable since the P&C market in Asia is not as mature as in the states. But because of this their concept of "What an actuary does" is very limited. Just try to ask one of them what is a cat model and how actuaries make use of them. I can tell 90% of them do not know.

3. You need different skills in different types of actuarial works.
Some may say the math used in actuarial works is not hard. But again I can tell you - Your concept of what an actuary does is very limited (even if you are a qualified actuary). Some actuarial works require highly fluent computer programming skills, some require extensive Math background, some require excellent communication skills, etc. My coworker worked on a project that required her solving correlation matrices and mathematical proofs, which I probably not able to do.

4. You work in insurance field directly or indirectly.
Some say you can go to banking industry with actuarial science knowledge. Let me tell you this. Most things you learn in your exams are insurance related. And after you spend years passing all the exams, you change to banking industry? This sounds ridiculously to me. It would only make sense for people stop taking exams, but we don't call these people actuaries. I do know some actuaries work outside of insurance industry, and do something that is completely non-actuarial, but that is rare. Most actuaries work in insurance field, either directly or indirectly. Directly means you are employed by the insurance companies, indirectly means you could be an insurer regulator, a consultant, etc. A lot of actuarial knowledge is highly specialized and not transferable to other fields. Even for actuaries in banking industry, they are most probably working on some insurance products offered by the banks, and so technically speaking, their works are still actuarial related.

This post has been edited by Igloo0000: Apr 7 2014, 08:31 AM

I can tell you are not an actuary not because you said so, but because you define insurance very differently from an actuary. You define insurance narrowly in that your insurance understandings seem to focus only on the products, but product is just one of the many areas actuaries focus on. In fact many actuaries do not work on products but their works are still insurance related.

This depends on how you define “advance knowledge of insurance”. If you narrowly think insurance field solely as selling insurance products, then you are right. But I don’t think that way, and many actuaries don’t think that way. Understanding insurance is about understanding the entire life cycle’s cashflows of insurance products and all the risk involved. When an insurance policy is first offered, we experience underwriting and pricing risk. Some commercial policies could have credit risks. Some exposures are subject to cat risk. And when claims start to kick in, we need to estimate IBNR, which is when reserving risk comes in. Some long tail lines, such as professional liability has extreme long tail. And to manage these risks, we might need reinsurance. Every piece I mention here is about insurance.

You don’t need to explicitly mention the word “insurance” in the exams to relate them to insurance. I was once in the exam committee, responsible for drafting exams questions as well as grading the candidates’ papers. Some exams might not seem to be directly related to the narrow definition of insurance (or any specific insurance products), but in the real insurance world applications, they are. For instance you mention financial reporting. Pricing actuaries might not need to know a lot about financial reporting, but many other actuaries do. If I do not know the differences between GAAP, SAP and SII balance sheets, I wouldn’t be able to build a complete capital model. Don't just look at the names of the exams, focus on the exams materials and the exams questions. We put a lot of attentions on the insurance industry in the exams, even though the exams' names might look generic. There are a lot of things that are unique to insurance, for example the treatment of DAC in GAAP in SAP accounting. You don't need to know this if you are not in insurance.

These exams are designed primarily for insurance sector, and again I meant the broad definition of insurance, not just selling insurance policies. If you want to sell policies, you don’t need to take actuarial exams. If you want to do investment/trading, you don’t need to take actuarial exams. If you want to do corporate finance in banking or any other sectors, you do not need to take actuarial exams.

And by the way, actuaries involve heavily in ERM in the insurance industry because we understand risks in insurance field more than any other people. So actuaries working in ERM are still considered as working for insurance industry (refer to 4th point). My career is a good example here. I work in the corporate actuarial and therefore not involve in any specific insurance line. From corporate perspective, my work is part of the ERM process. And I have to admit my work is insurance related because at the end of the day I am employed directly by an insurance company. Don’t be narrow-minded to think that insurance related means you have to sell policies. No actuaries sell policies and I have never met an insurance agent before in where I work.

This aligns with my 2nd point - Actuarial field is more than what you think it is. I never say actuarial is about actuarial math. But let’s face it, actuarial is for insurance (not the narrow definition of insurance). There are some actuarial applications in the non-insurance field such as retirement as you said, but do you know in what rate this sector is shrinking? In the past many corporations used DB system to fund retirement, but with DC, actuaries are essentially not required.

You must have read some articles describing what actuaries do. Let me tell you this. Many of these articles are not 100% true. They tell you what sectors actuaries could involve in. But do they mention what is the proportion of actuaries working in non-insurance related sectors, such as banking, IB? I am only saying credentialed actuaries here because we do not consider those non-credentialed as actuaries. Come to one actuarial annual meeting in the US, and you will know what I meant. You can definitely find actuaries doing something non-insurance related, there is no doubt about that, but that is rare. My experience talking to people in the meetings is that at least 80-90% works in insurance field, either directly or indirectly, which can be either in pricing, reserving, modeling, ERM, reinsurance, etc. My specialization in the group is already considered rare but I still consider it insurance related.

It is uncommon that credentialed actuaries move from insurance sector to other sectors. Let me tell you why. Some of their skills can still be utilized in other sectors, but definitely not all of them. When they move out they have to compete with people with other backgrounds. Not that actuaries don't like competition, but if you are best at playing basketball, why do you want to give up playing basketball and play golf? Also actuaries have a very confine network. When you move to other sectors, you will end up disconnect in terms of what you're doing and what others are doing in the network. And we have all the valuable inter-connections in the network, why give up the connections? Even for me, my skills seem to be convertable to banking industry, but it is not that simple. In insurance our capital models main drivers are underwriting and reserving risks and we spend years understanding and parameterizing them. But in banking, interest rate and investment risks are more important (I think). So even as an expert in insurance capital models might be just average in banking, and vice versa. That would go back to the question - Why play golf when you are best at basketball.

ALM, corporate finance, trading and marketing are not common career paths for actuaries in the current real world. Pension is a little unique. There are quite some actuaries in this sector although it is not insurance related, but more and more Enrolled Actuaries “jump ship” to move out of pension. Energy and weather can be insurance related (refer to my 1st and 2nd points). We have a specialized cat modeling team under corporate actuarial that helps with weather perils, such as hurricane, wind storms. And cat modeling is a big topic in actuarial annual meetings.

This post has been edited by Igloo0000: May 18 2014, 01:10 PM