Ask an Actuary

"The real skills you need are a natural people, and a talent for communicating complex ideas to non-technical colleagues."

Every other month a different casualty actuary will be asked to describe the path that led him/her to an actuarial career. This month's actuary is Katherine Porier, Claim Operations Support Executive at Royal & SunAlliance.

Q: When did you first decide to become an actuary?

A: Like most people, I didn't grow up with a lifelong dream of an actuarial career. I started out as a math major in college and ended up with a degree in statistics, so I knew I would probably end up doing something that made use of my interest and aptitude in math.

My parents always placed a high value on education -- my father is a college professor and my mother has a master's degree in higher education administration. Probably for that reason, I always assumed I'd go on to graduate school once I finished my undergraduate degree.

The time came during my senior year in college when I needed to start applying to graduate schools. But I quickly discovered that there was nothing I felt passionately enough about to want to spend the next few years studying it.

So my next plan was to see what my options were in the job market, thinking that would help give me some guidance about what I might want to study in graduate school.

During that job search, I landed an interview with Royal Insurance Company (now Royal & SunAlliance), and the rest is history. I am one of the lucky few who happened into a really great career directly out of college.

Q: Who or what influenced your decision?

A: Without question, the one thing that convinced me to take a job as an actuary was the great group of actuarial students at Royal & SunAlliance.

My original perception about the actuarial profession was that it was boring work -- a bunch of guys sitting around in cubicles with computer printouts and calculators all day.

But when I went to the job interview with Royal & SunAlliance in Charlotte, I was surprised to find that the actuarial departments were staffed with young, enthusiastic, interesting folks who genuinely enjoyed their jobs and each other.

After that interview, I still wasn't sure I wanted to be an actuary, but I was sure I wanted to be a part of the actuarial team at Royal & SunAlliance. It's one of the best decisions I ever made.

Q: What is your educational background? Where did you attend college and what was your major?

A: I have a B.S.Mathematical Sciences degree from the University of North Carolina at Chapel Hill with a concentration in Statistics (1987).

Q: What classes did you take in college that helped prepare you for the career? What class was most helpful? What classes outside of math and statistics (such as communications) were helpful?

A: To tell you the truth, I wouldn't spend my time on communications courses, accounting or most other business school classes. In order to be a successful actuary, you absolutely must be able to handle some heavy-duty math. This includes advanced calculus courses, as well as some probability and statistics.

The real skills you need are a natural inquisitiveness, a strong math aptitude, the ability to deal effectively with all types of people, and a talent for communicating complex ideas to non-technical colleagues. In my opinion, those skills can be developed more effectively through extra-curricular activities than through any kind of class.

My educational advice, then, would be to take some classes that you enjoy, particularly outside of the realm of math. You're only in college once, and it's a great chance to explore new areas and ideas. Then make sure you are active in college life outside of the classroom, whether that means a part-time job, a college-sponsored club, or any other structured activity which helps you develop time-management skills and some of the "people skills" that will serve you well in your career.

When I'm looking at a resume or interviewing for an entry-level actuary, I look for someone with good grades (shows intellectual horsepower as well as the diligence and study skills needed to pass the actuarial exams), a couple of the SOA/CAS exams if possible, a strong math background, and a broad range of non-math interests and activities.

So if you're interested in art history, archeology, music, French, physics or any other field, by all means take advantage of the opportunities you have while you're in school. Besides enriching your life with exposure to new ideas, they make a good balance to your math courses and they may even help when it comes time to enter the job market.

Q: What was your first job in the profession? How did you get the job? Did you start as an intern or in an actuarial training program? What type of work did you perform in you first actuarial job?

A: I started out as an actuarial trainee in the Corporate Actuarial Department at Royal & SunAlliance. My main responsibility was performing loss reserve estimates, which involved forecasting our future liabilities based on historical claim data, actuarial modeling methods, and judgment about current and future trends in our company's book of insurance business and in the insurance industry as a whole.

Q: When did you take your first exam? How long did it take for you to get through the exam process?

A: I took my first exam in February of my senior year in college. It took me seven years to get through all of the exams.

Q: What was your career path from your first job to your current position?

A: In my 11 years with Royal & SunAlliance, I have had five distinct actuarial jobs as well as my current non-actuarial position in the Claim Department. After the loss reserving job, I moved to Commercial Lines ratemaking, then back to Corporate Actuarial as supervisor of the loss reserving team. I then took a position in Syracuse, working for our Personal Lines field executive. I came back to Charlotte in Commercial Lines supporting our Western Region branch offices, then took my current position in Claims.

One of the best things about an actuarial career is that many insurance companies have a job rotation program which allows you to move from one area of the company to another every year or two. This is a great way to learn about the business, and it definitely keeps things fresh and interesting.

At our company, there are three traditional actuarial departments -- one loss reserving team and two ratemaking/results analysis teams. We have also had actuarial rotations to a number of other departments including investments, marketing and a couple of our field offices. We even have some actuaries who have rotated to England for two-year stints with our parent company!

Q: What type of work do you do on a day-to-day basis in your current position?

A: My team is responsible for claims technology, results analysis, total cost management, file quality peer reviews, and customer value. I get to do a little of everything, from working with a team that's developing a new claim adjuster workstation, to visiting the field claim offices to help train them on our online management information system, to working with the group that administers our annual customer satisfaction survey.

I'm also getting a chance to see a side of the business outside of the actuary's usual realm. In the past two months, I have spent a week in Virginia Beach on "catastrophe duty" after Hurricane Bonnie and a few days working a desk in our Charlotte claim office. In both cases, I had a chance to call and visit insureds, work with outside appraisers, and even issue some claim checks -- a real change from the things I've done in my actuarial roles. All of these experiences will help me make better decisions about the way we support our field claim operations.

Q: What advice would you give to someone first starting out?

A: If you enjoy a good challenge and have a strong math background, the actuarial profession is a great choice. I don't want to minimize the challenge of the actuarial exams. They take a tremendous amount of time and dedication, and you will have to sacrifice some other things in order to get through them. But I see that as the price of admission to a career that is always interesting, challenging, and personally rewarding.

Q: Is it easy to rate an insurance policy or do you need a lot of information before a conclusion may be reached; and how much do the ratemaking exam and study materials help future actuaries?-- Elie Massaad

A: Insurance ratemaking practices vary by company and type of insurance, so I won't try to give a one-size-fits-all answer to your questions. For the traditional insurance lines, such as auto, homeowners, general liability and workers compensation, there are industry-standard ratemaking methods which are used by many insurance companies and are generally accepted by insurance regulators in each state. You will find a number of these methods described in the syllabus readings for the ratemaking exam.

For newer, niche products, there is often not a lot of historical loss data available since the product hasn't been widely purchased yet. In these cases, an actuary will need to be more creative in determining what an appropriate rate should be -- perhaps creating a rate based on underwriters' judgments about what the loss experience will be or using mathematical models to project future losses.

In both cases, the ratemaking exam and study materials provide a good background into the theory behind these ratemaking methods. The exam is even more useful if it can be combined with a job rotation in a ratemaking area -- the on-the-job experience and the exam readings will complement each other to give you an even better understanding of how insurance rates are set.

Q: I am a math major and want to get into the actuarial type of work. However, my math major was in computational mathematics, NOT the stats and probability option as I have so often heard is the one you need for this area. What I plan on doing is taking some of the stats and probability classes, but do you feel I need to take the second semester of advanced calculus (I have taken one semester of it, however for the stats and probability major, a second course of advanced calculus is required- the reason I ask this is I dont think any of the actuarial exams are actually on the topic of advanced calculus). Also do you feel I should take some classes in accounting and economics or should I just focus on taking the courses necessary for the actuarial exams?--Jeff Anspach, Arizona State Univ.

A: Great questions. In answer to your question about a second semester of advanced calculus, that really depends on what is covered in the first and second semesters of advanced calculus at your school. My guess would be that a first semester of advanced calculus may be sufficient, and you may want to supplement it with a linear algebra class if you haven't already taken one. Just to give you some guidance, the first actuarial exam includes the following topics:

functions, equalities, and inequalities analytic geometry of two and three dimensions standard algebraic and transcendental functions, including polynomial, rational, trigonometric, logarithmic, and exponential functions limits, continuity, differentiability, and integrability the fundamental theorem of calculus partial derivatives, multiple integrals and their applications sequences and series, including the Taylor series expansion linear equations, vector spaces, bases (spanning sets), dimension and subspaces scalar products, linear transformations, and kernel and image space matrices, determinants, eigenvectors, and eigenvalues polar coordinates and parametric equations

Your best bet is probably to request a sample exam and see if you are familiar with all of the topics covered on the exam. If not, a second semester of calculus is probably in order. You can obtain a sample exam from the CAS. Fax your request to (703) 276 3108. Old exams are available from the Society of Actuaries at 475 North Martingale Road, Suite 800, Schaumburg, IL 60173, (847) 706-3500.

In terms of probability and statistics, you may also want to look at the recommended readings for the second actuarial exam and see if you can teach yourself enough to pass the probability and statistics portion of the exam. The complete syllabus of examinations is available from the CAS on this website, or you can request a hard copy from the CAS office at (703) 276-3100. A classroom course would definitely help here, but it is not necessary for everyone. It really depends on your learning style. While the later exams are almost all self-taught, many students do find that a probability and statistics course is a big help.

I have similar advice on the accounting and economics question. I don't see any need for an accounting class, but you may find that an economics class would be beneficial for the economics exam. On the other hand, the syllabus readings are thorough enough to teach you enough economics to pass the exam if self-study is something you do well. Beyond the exams, you may find an introductory economics course to be useful on the job, but I would skip the accounting classes.

You will find that there are as many different approaches to the exams as there are actuaries, so you will probably get different advice from different people. You're asking good questions, and it's definitely a good idea to ask a few actuaries for their advice if you can find others to ask. Then you can weigh our combined advice along with your own knowledge of your study habits and learning style to choose a course of action that will work for you. Good luck!

Q: Can you please describe ---in detail if at all possible---how you use calculus on the job? Thank you.--Daniel Babouri

A: This is an easy one because the answer is -- I don't use calculus on the job. If memory serves me right, I haven't ever used calculus in 11+ years as an actuary. So why are actuaries required to learn so much calculus? I have a couple of theories. First of all, a solid background in calculus is one way to ensure that actuaries have the high-level analytical abilities required to do the job. Second, some of the later exams build on concepts which require calculus from the first actuarial exam, so a calculus background is required in order to understand the proofs in the later exams. And finally, there are some actuarial jobs which probably do use calculus on a fairly regular basis. One example would be rating bureaus which are responsible for designing new ratemaking methods dealing, for example, with excess losses.

I was a statistics major in college, and I do find that there are practical uses for the statistical methods I learned in school. Calculus, on the other hand, has been more useful as an underlying basis for understanding the development of actuarial methods rather than a tool to use in my daily job.

Q: Why is it important to be able to deal effectively with all kinds of people? Doesn't an actuary just need to deal with numbers and statistics in his/her work? Thanks, Rita Pun

A: Good point -- you've hit upon part of an actuary's job which makes it so rewarding. While an actuary does spend a fair amount of time analyzing data, we spend the rest of our time working with our business partners so we can use this analysis to lead to better business decisions.

A typical example is a rate filing. The process might begin with a conversation with our underwriters and marketing staff to help determine whether a rate change is needed. Are we uncompetitive in a certain market segment or geographic area? Are we introducing new coverages? Or perhaps we normally examine our rates once a year and it's time for an annual update. In any event, a discussion with non-actuaries helps us understand the current business conditions, which then helps explain some of the trends we may see in the data.

After a thorough actuarial analysis of the data, there is always a need for further discussion with different types of people. A rate filing must often be approved by each state's insurance regulators, so our ratemaking techniques and judgments need to be explained to them. In order to effectively market our policies using the new rates, our underwriters and marketing staff must also clearly understand the reasons for the rate change so they can explain it to our producers and/or insureds. We also need to point out any trends we noticed so the underwriters can change their practices if needed.

This example shows one way in which an actuary needs to be able to deal effectively with a broad range of people. During the course of my career, I have worked with employees from almost every area of the company, including systems, underwriting, financial services, marketing, and claims. This includes people in our corporate office and field offices, as well as coworkers from around the world. I have also met with producers and insureds, state regulators and rating bureau employees. I have had a lot of contact with fellow actuaries as well, but our conversation has definitely not been limited to discussions about data! Just another reason this can be a great career choice for the right kind of person.