Your choice

It's reassuring to hear Jim Blair's perspective on the choice between an actuarial career in property/casualty or one in life/health. "One thing I've noticed," says Blair, who is head of actuarial recruiting for Prudential Insurance Company of America, "is that the people in each track think they've chosen the right one for them."

When it comes time to break from the pack and choose the Casualty Actuarial Society's (CAS) exam track or the Society of Actuaries' (SOA) exam track, choosing the one that's right for you requires asking some questions about the aspects of actuarial science you enjoy most. Blair would like to see all actuarial candidates do internships on both sides of the divide. "If they haven't had an internship, how are they to gauge which one they like most?

Dale Porfilio, FCAS, pricing director at Kemper Insurance Companies, advises candidates to consider what issues they enjoy exploring and spending time on. "Are you interested in becoming an expert about how people own, use and insure their autos and homes? Or are you interested in life and health, the well being of people and how you can invest their money?"

According to Porfilio, p/c actuaries have to be good at different things than life/health actuaries to succeed. "In p/c, you need to understand the economy, how the potential for loss on an auto or home varies with drivers or owners, how people drive, how cars differ, where

people build homes."

What are the differences?
Blair said, "I've been told casualty people often feel their area is more mathematically challenging than the life side. I wouldn't disagree with that. There are so many events outside life experience that actuaries have to consider in p/c."

Porfilio explains, "The risk that p/c actuaries are pricing is very different from the risk life actuaries are pricing. On the p/c side, companies make money by who they write. On the life side, companies make money by holding the policyholder's money and investing it well.

"In p/c, we're going to pay out on an auto claim in year one, two or three. We're only holding a policyholder's money for six, 12, or 24 months. Whereas on the life side, the money is held for decades."

Blair agrees but says there is more similarity between p/c and health insurance. "There are more factors in health insurance to consider than in life. It's more like auto and property insurance. A person with life insurance dies just once and the amount of liability is known, the face amount of the policy. But in p/c, as in health insurance, the frequency and severity of a claim is unknown. A person may or may not get sick, he or she might become ill often, need surgery or be very healthy to a very old age, Blair said.

Two other important dimensions affecting p/c and health insurance are catastrophic loss and government regulation. Catastrophes like hurricane Andrew in 1984, causing $28 billion in losses, and the flu of 1918 where millions died occur infrequently, but they must be evaluated. Reinsurance may also be part of an insurance company's risk management.

In addition, politics can affect car insurance when candidates for state positions promise rate reductions if elected. Federal statutes already regulate some businesses on the life side (e.g., pension plans) but if you write healthcare coverage, the federal government through, new laws, can suddenly affect how you run your business totally changing your calculations of expected claims.

Porfilio said there is similarity between health and p/c, but p/c is far more linked to the economy. Because its fluid and dynamic, the "underwriting cycle" dictates how much a company can make on auto insurance. "You have to keep current on the auto and home insurance business," Porfilio said. "Losses will change. We must move the rates up and down. Continuing education is a key to success on the P/C side."

Where are the jobs?
More jobs and more recruiters exist on the life side. However, Porfilio points out the major advantage in looking at property casualty employment right now is that casualty actuarial employment is growing so fast. "We see that borne out in the number of new Fellows and the growth in employment.

In his own job, Porfilio has hired two new actuaries in recent weeks. "There's a lot of job creation like that," he said.

He also points out that while casualty exams have always contained financial material, it's only recently that casualty actuaries are getting more into financial work. " Now, more people are being employed in areas that are actuarial in nature but require financial modeling."

Still, life/health offers far more openings every year than p/c. The members of the SOA outnumber members of the CAS by more than five times. "There are just more life insurance companies out there and more professors teach courses structured for the life side," said Blair.

The larger size of that job market has advantages, according to Blair. "It creates a lot of opportunity. Life and health actuaries can enjoy great diversity in what they do."

Prudential, for example, would love to attract more actuarial students to its life side. Many of our rotations have a finance or investment component. Like other big insurers, Prudential is engaged in a struggle for job candidates with Wall Street and the dot.coms.

"Our own actuaries love doing "nontraditional" work. It is highly prized within Prudential.

"It's hard though, trying to attract financial consultants, or the people from one of the financial engineering programs at Cornell, MIT and Michigan. We have to go out and compete for the right people with investment firms that can pay a lot more," Blair said. But the result is that actuaries can have a choice of very interesting work.

Where's the money?
While it is difficult to get accurate numbers on actuarial salaries, there does appear to be a difference in earning potential between the tracks beginning at the Associate level. Salaries obviously are based on many factors including geography and years of experience. However, an unscientific sampling of information from actuarial recruiters and SOA and CAS members who responded to salary questions on the CAS and SOA discussion groups last year shows gives an idea of salary ranges and the difference between CAS and SOA member earnings.

Taking the U.S. Midwest as an example, entry-level actuaries with one exam/course can expect to begin in the low to mid-$40,000 range whether in p/c or life/health/pension. New ACAS actuaries often earn from the low $70,000's to the high $80,000's, while new life/health associates can expect from the low $60,000 range to the mid-$70,000 range. New pension ASAs can make between $59,000 - $80,000. New p/c Fellows can make $80,000-$120,000, new Fellows in life/health, between $80,000 - 105,000, and new pension Fellows can earn between $80-$101,000.

And for the ambitious?
Is there one track that leads to senior management more quickly than the other? "Both will get you there," said Blair. "The real question is how do you get broad enough exposure to be seen as more than a technical person, one who can see the " big picture"? Partnering with others outside your specialty is one way. Actuaries could volunteer to be on projects that match their interests and provides a broader business perspective," he said.

From The Future Actuary, Vol. 9, No. 3,  December 2000
Copyright 2000 Society of Actuaries
and Casualty Actuarial Society