It is the study and application of financial concepts associated mainly with demography (i.e. analysis of population mortality, life expectancy etc.) to real world problems predominantly in the insurance arena.
Actuaries apply financial and statistical theories to solve real business problems. These business problems typically involve analysing future financial events, especially when the amount of a future payment, or the timing of when it is paid, is uncertain. A lot of actuaries’ work might be thought of as ‘risk management’, assessing how likely an event may be and the costs associated with it.
Understanding how businesses operate, how legislation may impact and how financial economics can affect values are all vital skills for an actuary. But what differentiates actuaries is their core mathematical, economic and statistical understanding and their ability to apply this to real financial problems.
The traditional areas in which actuaries operate are: consultancy, investment, life and general insurance and pensions. Actuaries are also increasingly moving into other areas of the financial sector where their analytical skills can be employed.
Actuarial consultancies offer a whole range of services to their clients on issues such as acquisitions, mergers, corporate recovery and financing capital projects. Many also offer advice to employers and trustees who run occupational pension schemes. In fact, such consultancies are probably the biggest employers of actuaries in the UK.
In the area of investment, actuaries are involved in a range of work such as: pricing financial derivatives, working in fund management, or working in quantative investment research. Often investment actuaries work in fields where their understanding of insurance or pension liabilities helps them to manage the investment of the corresponding assets.
The work carried out by actuaries in insurance includes designing new insurance policies, setting premium rates, calculating a company’s financial status (based on the policies already sold), and answering technical queries from policyholders. Insurance actuaries also undertake detailed investigations of different experiences; such as how assets and expenses have performed and the extent of different types of claims for different types of insurance policies (eg death claims for life insurance or car theft for motor insurance).
Pensions & Employee Benefits
In the pensions field, actuaries are usually involved in designing and advising company pension schemes, especially where a value needs to be placed on a scheme’s accumulated pension promises. Actuaries are also involved in designing schemes for employee benefits.
To become an actuary, you will generally need to have a high-level of mathematical ability and an above-average level of intelligence.
Important characteristics for an actuary to have would be as follows:
- Interest in solving complicated problems.
- Interest in business, finance and economics.
- Good oral communication skills.
- Good written communication skills.
- Perseverance (especially in tackling the exams!!!).
The areas of work for actuaries are not limited to insurance firms only. Instead, the horizon for this line of job is very wide. Below are some of the areas of work which actuaries do:
- Life Insurance / Family Takaful
- General Insurance / General Takaful
- Reinsurance / Retakaful
- Actuarial Consulting
- Investment and Financial Services
- Employee Benefit Industry (e.g. EPF)
- Government Sector (e.g. BNM)
- Colleges and Universities
Actuaries have historically taken on the following positions in companies:
- Chief Executive Officer (CEO)
- Chief Risk Officer (CRO)
- Chief Financial Officer (CFO)
- Appointed Actuary / Signing Actuary
- Asset/Investment Consultant
- Management Consultant
Given the expected continuous growth in the insurance market, it is anticipated that the demand for actuaries in Malaysia will continue to grow in the next few decades.
Future regulatory developments (e.g. requirement for certification of IBNR) and the increasing need for risk management are likely to result in significant increase in demand for actuarial services by general insurers.
Malaysian insurance regulator, Bank Negara Malaysia and the Actuarial Society of Malaysia (ASM) recognize Fellows of the following organizations as qualified actuaries:
- Society of Actuaries (USA)
- Casualty Actuarial Society (USA)
- Faculty and Institute of Actuaries (UK)
- Institute of Actuaries of Australia
- Canadian Institute of Actuaries
The ASM does not conduct its own exams. Actuarial students in Malaysia have a choice of completing the examination modules of any of the above recognized professional bodies. The current examination structures are given in the Route to Becoming an Actuary section.
Some of the universities/colleges offering degree programs for actuarial studies are given below. This list is not exhaustive.
- Universiti Kebangsaan Malaysia (UKM)
- Universiti Teknologi Mara (UiTM)
- University Tunku Abdul Rahman (UTAR)
- University Malaya (UM)
Degree transfer programs are offered by these colleges:
- University College Sedaya International (UCSI)
- Help Institute
- Inti College
- Prime College
- Curtin University
- National University of Singapore (NUS)
- Nanyang Technology University (NTU)
- University of Hong Kong.
- London School of Economics
- Heriot-Watt University
- City University
- Southampton University
- University of Kent
- University of Wales
- Macquarie University
- University of Melbourne
- Australian National University
- University of New South Wales
- University of Pennsylvania
- Wharton School of Business
- University of Wisconsin
- University of Iowa
- University of Illinois
- University of Nebraska
- University of Minnesota
- University of Waterloo
- University of Calgary
- University of Manitoba
- University of Toronto
Relative to other professions, actuaries enjoy competitive remuneration.
Most, if not all local and foreign companies support their actuarial students by having actuarial development programs with the following incentives:
- Study and exam leave
- Full/partial reimbursement on costs of study material
- Salary increment and/or bonus upon passing of exams
A normal bachelor degree spans 3 years (+1 year if you consider an Honours degree in Australia). Thereafter, completing the professional exams may take another 3-7 years (considering working full-time while studying).
Passing rates are generally low compared with other professions. Passing rates in the range of 15%-25% per subject are not uncommon.
- Financial – qualified actuaries have significantly higher salaries than most other professionals in the financial services industry. In addition, due to increments commonly offered for exam progress, actuarial executives can expect to outperform their peers in other sectors even before qualifying.
- Intellectually stimulating – actuaries are rewarded for their problem solving and analytical skills. As such, job satisfaction comes from working in an intellectually stimulating and challenging environment. This encourages continual growth in one’s technical skill and ability, paving the way to involvement at senior levels of all organisations.
- Employment opportunities – due to the constant demand for actuaries exceeding supply, there is rarely ever a shortage of demand for actuaries. Many actuaries have also successfully transitioned to other non-traditional areas such as corporate finance and investments, where their analytical and quantitative skills are highly sought after.
With only about a hundred qualified actuaries in Malaysia, the market for actuaries can perhaps still be considered unsaturated.