In this post from our course director in Actuarial Science, Dr David Smith, we delve into both the course and the career on offer to students.
What is an actuary?
An actuary is someone who applies mathematics, statistics and probability theory to solve problems that normally involve risk and finance.
Traditionally, actuaries worked in life insurance and pensions. In the area of life insurance, the actuarial profession collects data on mortality, calculates the probability of death at any given age and then project these rates into the future, taking into account any trends that have been observed. With this data, we can then answer questions such as ‘what is the probability that someone aged 40 will die at age 50?’ or ‘what is the probability that someone aged 50 will survive to age 80?’. We are then able to derive premiums that need to be charged to cover the benefits that the company promises its policyholders.
Until around the 1990s, most actuaries were still involved in life insurance and pensions because the type of calculations that actuaries carry out took a long time and hence were only suitable for mortality studies where risk changes slowly. For example, you could use mortality data from 2000 and transform it relatively easily into mortality rates that approximate those in 2020. However, you couldn’t do the same thing with, say, motor insurance as the risk environment of driving is very different in 2020 compared to 2000. Fortunately for actuaries, as computer power has increased actuaries have moved into other areas of risk as we are able to carry out calculations a lot quicker and hence measure the present risk environment using very recent data.
By getting involved in other areas of insurance, actuaries now study the risk in insuring many different types of risk such as mobile phone insurance, travel insurance, motor insurance and home insurance. These risks are very different and so we need to employ a large variety of different modelling techniques. This becomes even harder if we are trying to price rare risks such as earthquakes or new risks such as cybercrime.
Actuaries also use their financial modelling skills in the investment industry, particular in risk management and the use of derivatives.
What does it take to become an actuary?
Technically, to become an actuary you need to pass 13 exams from the Institute and Faculty of Actuaries (IFoA). In terms of personality then you need to be highly numerate, a problem solver and have an interest in finance
Where can actuarial science take you?
Actuarial science can be thought of as the multi-disciplinary skills that an actuary employs. As discussed this is statistical and probability modelling and finance. With these skills, and as the world becomes even more data dependant and computer power increases, actuarial science can take you into many different areas both established and cutting edge. For example, the skills that an online company uses to suggest what you want to purchase or watch next is modelling this using data
Why City is a great potential option
We are the longest established degree programme in England and have a high number of qualified actuaries on the teaching staff. During your time at City you can gain exemptions from 6 of the IFoA exams. We are part of the business school and so you will be able to take a variety of investment options when you study here. We offer three different actuarial programmes allowing you to change the focus of your study whilst you are here.