Ask an Actuary

"Successful actuarial research in a business environment involves more than strong mathematical skills."

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 Glenn Meyers of Insurance Services Office, Inc.

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

A: I first heard about the actuarial profession from a fellow graduate student in mathematics. He said it would be a good back-up in case an academic career did not work out. I passed the first two exams, not knowing what actuaries did. After two years as a beginning mathematics professor on a temporary appointment, I started looking outside academia and quickly landed my first job as an actuary.

Q: Who or what influenced your decision?

A: I needed a job quickly. I had a four-month old son, and was living in faculty housing after my teaching appointment had ended.

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

A: I have a B.S. in Mathematics and Physics from Alma College, an MA in Mathematics from Oakland University (in Michigan) and a Ph.D. in Mathematics from SUNY at Albany.

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: For me, the graduate education in mathematics was more of a hindrance than a help when taking exams. The mathematical material on the exams is less rigorous than graduate-level mathematics. I first had to learn the material on my own terms, and then master the material in the standard actuarial way of thinking. To do this, it usually took one or more additional attempts to pass the mathematical exams after Parts 1 and 2. I actually had an easier time with the non-mathematical exams such as Part 8.

This should not be construed as a criticism of the examination process. Instead, I urge the student with a rigorous mathematical education to work hard to understand how most actuaries view their work.

Professionally, I think the graduate education in mathematics helped. As a research actuary I frequently run into problems that can be solved by either: (1) evoking higher mathematics; or (2) making additional assumptions so that the problem can be solved using simpler mathematics. I prefer (1), since in my view (2) is the more complicated solution. More assumptions make for more complicated models, which yield unanticipated consequences.

If you go the mathematical route in your work, you should work hard to communicate your conclusions. While a good liberal arts education helps, it is important to know your audience and to work hard to explain your work in their terms.

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: My first actuarial job was preparing private-passenger auto rate filings. Looking back, the experience was very educational, but the often adversarial regulatory environment was not my cup of tea. I was not really hooked on the actuarial profession until after a few years on my second actuarial job at CNA. Work in large account pricing, open competition in Workers' Compensation and cash-flow modeling really grabbed my attention. During my time at CNA I spent five years working for a statistician who was not an actuary. I quickly found out that the standard actuarial practices wound not satisfy him. It was during this time that I established my professional identity.

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

A: I took Part 1 in November of 1972. After passing Part 2 in May of 1973, I did not take exams while I still held out for a permanent job teaching mathematics. Ignoring the hiatus, my travel time was eight and a half years ending in November of 1981.

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

A: After eight years at CNA I returned to academia and became a professor in the Department of Statistics and Actuarial Science at the University of Iowa. During my time there, I found out that my time working in industry had changed my outlook. I was no longer an "academic." Four years later I took my current position as a research actuary at ISO.

Looking back, the time in Iowa was well spent. I taught courses in life insurance and developed a curriculum for casualty insurance. In addition to solidifying my statistical skills, I got to meet several of the leading academics in actuarial science and insurance finance. I joined the ARIA Risk Theory Society (most members are insurance and finance academics) and I still attend most of their annual meetings. This has helped me keep up with current developments in insurance economics. (I am not sure I agree with all their assertions, but we are closer than most people seem to think.)

During my time at CNA I was a member of a number of research committees at ISO and NCCI. This led to my doing research projects for ISO during the summers at Iowa, which in turn led to my working for ISO.

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

A: My day to day work consists of working on research projects. I supervise a staff of four people. As I work on these projects, I have been producing a fairly steady stream of Proceedings papers. Also I have been on a number of CAS and AAA research committees. I am also an officer on the Examination Committee.

My first project at ISO was to revise the increased limits ratemaking methodology. Subsequent projects included catastrophe ratemaking, and doing a number of research studies for the ISO Insurance Issues Series. The topics in this series included insurer financial analysis, loss reserving, risk-based capital and catastrophes.

Since ISO turned into a for-profit corporation my work has focused more on product development. For example, I have been working with our reinsurance division. Together we developed software for reinsurance exposure rating which includes a joint loss/ALAE model based on our increased limits data. Also we developed a commercial property size-of-loss model.

Currently I am working on securitization. ISO has been producing catastrophe indices, and part of my job has been to figure out how to use them. We are looking into producing indices for other lines of insurance. As I write this, there is a lot of work for the AAA Index Securitization Task Force on my plate. Another up and coming project is DFA. I am trying to quantify the correlation between lines of business using data reported to ISO.

ISO has a lot of data that has been traditionally been used to calculate loss costs. My job is to find additional uses for this data.

Q: How long have you been in the profession?

A: Twenty-five years.

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

A: Successful actuarial research in a business environment involves more than strong mathematical skills. Equally important is knowing how to communicate your results. The hardest part is knowing how and when to compromise in order to achieve business objectives.

Q: I have taken exam 100 once and my mark was 01 out of 10. I only have one more chance to do this exam in November, and I graduated last June. Should I focus on passing this exam once more or should I focus on getting some experience in the business area and start studying for the new system since my mark is so low. If I should study what can increase my chances of passing this time?

A: My general advice to any student is to take exams at every sitting until you become a Fellow.

The transition rules (found in the Student section of the CAS web site says the following. "Credit will be given if candidate has passed Part 1 (Calculus & Linear Algebra) or Part 2 (Probability & Statistics)."

If you pass Part 1 this November, you will be further along the path to becoming a Fellow. If you fail, you will be better prepared the next time.

Q: How long did it take for you to become an ACAS?

A: My travel time to becoming an ACAS was six and one half years. I had eight exams when I became an ACAS having passed Part 8 before passing Part 7. Getting the ACAS was not a major milestone for me. My goal in taking the exams was to become a FCAS.

Q: I'm currently considering whether or not to pursue the Actuarial Science profession. Will jobs concerning Actuarial Science be stable in the future with technology going as fast as it is?

A: Almost all the actuaries that I know are keeping up with the latest technology. The continuing education system of meetings and seminars provides ample opportunity for actuaries to keep up to date. Every profession has its ups and downs. A few years back, there was a change in the pension law that reduced the need for enrolled actuaries, and the number of students registering for Part 1 dropped by almost 50%. For the actuarial profession, most of the training is done on the job while working as an actuary. Dislocations are short-lived because the supply is cut off at the entry level before any real investment of time is made. The instabilities that arise do not affect those who are well established in the profession.

I would contrast this with getting a Ph.D., where one puts in several years of study before looking for a job. This leads to the chronic employment problems that have plagued the academic fields for years.

Q: I have been working in the life and health actuarial field and have experienced several layoffs due to downsizings in the last couple of years. I am looking at P&C atuarial as an alternative, but cannot seem to generate any interest from P&C companies. I have passed approximately 5 life actuarial exams. Any suggestions as to how I might get my career untracked and get started in the P&C actuarial field?

A: I suggest you keep trying. The jobs are there. Beginning in 2000, your five SOA exams (assuming they are the right five) should give you credit for the first four CAS exams. I suggest you aim for a salary that is somewhere between entry level and that of someone with casualty actuarial experience and four exams. Your work experience in a corporate environment should be worth something.

While this may not apply in your case, I have some general advice. Simply passing some actuarial exams does not guarantee a job as an actuary. You have to show that you have the potential to be a true professional. You start when you apply for an actuarial position by presenting a well-organized resume. In a job interview you show enthusiasm and demonstrate that you can communicate.

Q: I currently hold my CPCU and AIAF designation. I did not attend college even though I had high grades in high school including, but not limited to, Trigonometry and Pre-Calculus. I have been working in various Commercial Lines positions in the Insurance Industry for 17 years including Rating, Marketing, Underwriting, Product Development and one year of pricing experience. My plans are to take Actuarial Exams that more closely relate to my experience and the CPCU & AIAF coursework first and then take exams heavy in calculus and statistics while I go to college to take Calculus and Probability & Statistics. What suggestions do you have regarding courses I should take in college, which exams I should take first and any general comments on my career path &/or education plan? How much behind the eight ball do you think I am since I did not go to college and the majority of people in the profession hold degrees in mathematics? Also, are there any salary formulas that take CPCU/AIAF designations and non-actuarial insurance experience into consideration? Thank you!

A: During my career I have run into a number of people who attained fellowship without a degree in mathematics. I also know one FCAS who also did not attend college. So it can be done. I for one, like the varied backgrounds of the people who become actuaries. I think someone with your perspective could add to our profession. Your considerable work experience in the insurance industry would make you a rare, if not unique, person in an actuarial job track.

I don't know of any salary formula for someone in your position. I do not like to apply formulas to unique situations. I checked with one of the senior CPCU's in my company. We do not give actuarial exam raises to those who are not on our actuarial track. To find out if other companies do, I suggest you post this question on one our discussion forums.

I recommend the following courses to help you pass the early exams. You should take two semesters of calculus, a semester of linear algebra and two semesters of probability and statistics. This should get you through Course 1 and prepare you for some of the material in Courses 3 and 4. You may also want to take some finance courses to get through Course 2. Good luck.

Q: I have been flirting with taking the actuarial exams for a year and I am looking for some guidance. I have worked in the insurance industry for 10 years. Seven years underwriting surety bonds ( pure financial analysis ) and three years working as a financial analyst designing risk financing plans and structuring Loss Portfolio Transfers for Fortune 1000 companies. During the past couple of years I have been exposed to quite allot of actuarial analysis and have read a great deal on topics such as securitization, DFA, etc.

Thank you for any advice.

A: The integration of finance and insurance was one of the major considerations in the recent restructuring of the examination syllabus which goes into effect next year. Parts 2 and 8 cover finance explicitly. Also, securitization, finance and DFA are frequent topics in many special interest seminars sponsored by the CAS. See the web site (See the "Calendar of Events" for future meetings. See the "Download Library->Meeting and Seminar Handouts" for past meetings.) You can start attending these seminars now.

Studying to be a FCAS will expose you to the special characteristics of insurance. Of particular importance is the analysis of insurance liabilities. You will learn how insurance liabilities are traditionally calculated. You will learn about the sources on insurance data along with the other uses (Important!) of this data. You will also be introduced to the mathematical tools needed to advance the state of the art. This education would be difficult to obtain elsewhere.

While we certainly encourage non-members to participate in CAS meetings and seminars, as a FCAS you will be more plugged in to the considerable activity in this area.

Q: To pursue my goal of working doing research for companies, is it helpful to have membership in Casualty Actuarial Society or is just enough to have the Masters Degree in Statistics?

A: I doubt that either is "enough" to do research in a company environment. Those with the inquisitive attitude that is necessary to do research will find themselves going far beyond their academic training.

A master's degree in statistics will provide you with some of the necessary tools to do research. But you should also be aware of the needs of those who would use your research. If your goal is working with the "financial implications of future contingent events" you should take actuarial exams. If your goal is market research, I am sure you will find that there are many other things you need to learn.

Q: I am currently employed as the business mgr of a small firm. My 15 yr career history includes working closely with Presidents & VPs of both small & large companies gaining experience in many facets of running a company. I was halfway through my B.S. degree in business when I changed gears to mathematics. I am considering pursuing a career in the actuarial field.

Aside from the math courses, what other courses would you recommend? Do you think there would be any disadvantages to my resume vs. the traditional actuarial student entering the workforce? Thank you.

A: After the usual probability and statistics courses, I would recommend course in economics and corporate finance. The material covered in Exam 2 under the 2000 Syllabus of Examinations should provide a guide to the particular courses you should take.

I don't see any particular disadvantages to your resume once you demonstrate that you can pass exams. After passing Exam 1, you should start applying for actuarial positions. You should apply to several companies in order to find one willing to start you at a level that recognizes your extensive business background.

Q: Does udergraduate GPA factor heavily into an employer's evaluation of an actuarial candidate? I will finish college in the spring of 01 and I expect my GPA to be between 2.7 and 2.9 (I will have a double-major in philosophy and math). Should I place much hope in securing an actuarial position with these low grades? Also, do you recommend summer internships as a way to "beef up" one's resume? If so, then what sort of internships do you recommend?

A: My undergraduate grades were not a whole lot better. Generally speaking, it is easier to get that first actuarial job (or internship) with good grades than with bad grades. But bad grades can be overcome with other positive qualities. Passing the first two exams will take you a long way toward this goal.

Q: I am a student in Computer System Engineering in a local university besides that I am also appearing in the exams of SOA. Do you think I can utilize my degree in Computer Systems in the actuarial profession? Do any jobs exists in which I can serve as an actuary as well as a system engineer for a firm? Any suggestion will be deeply appreciated.

A: I would like to answer your question yes, but I don't know of any living examples, i.e. FCAS's who work in a systems area. I have seen a number of computationally talented individuals enter into the actuarial profession, but drift off into the systems work environment and stop taking the actuarial exams.

I do think there is room for both disciplines in the actuarial profession. I have been involved in developing a number of actuarial applications, most recently in Visual Basic, for my company. I have had better luck with actuaries who are willing to learn the computing skills necessary to complete the project, than with pure systems people. Many systems people want you to "program the application in English" first. Debugging is difficult at this stage. Actuaries can figure out that what I said may not be what I meant (or should have meant). Also, actuaries take more pride in the work product since they know how it will be used. This does make a difference.