Comment by riskneutral | Hacker News Reader

Comment by riskneutral | Hacker News Reader

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> unless you're particularly interested in memorizing math formulas for insurance calculations

Note that the formulas in question are the opposite of interesting formulas. They're just made-up regulatory rules about how much capital an insurance company has to hold in order to sell insurance. Everyone agrees that some amount of capital needs to be held. Everyone, except maybe some of the "actuarial scientists" themselves, understands that this isn't a scientific endeavor like discovering the laws of General Relativity, it is an arbitrary and convoluted "rule of thumb" type of formula, but it's better than nothing because you really do need to force insurance companies to hold some minimum capital and you need some kind of standard formula to calculate that capital in order for there to be a level playing field between insurance companies.

I think actuarial science undergrad students choose that career because it is one of the safest choices for someone who is good at math but has no interest in science or technology. They are allured by the promise of steady employment and a $100,000 salary, and vague visions of being a high paid "math AND business expert" for a big insurance company where they will get to make decisions involving large sums of money with scientific precision using advanced mathematical concepts.

By the time your young actuary has started working, they are already too deep in to be able to change careers. They made the "safe" choice, now they have to live with it. At first everything seems new and exciting. But 10 years into it, they have settled down roots and family somewhere in the middle of Iowa (because that's where the insurance company is located), knee deep into spreadsheets calculating "Solvency II" formulas for "quarter end." They don't get to make any business decisions, they barely understand how their employers' business even really works, and their career has plateaued at a mediocre level despite having spent 10 years writing all of the available actuarial exams. Unfortunately, that is the only employer of actuaries in town, so they are completely marooned. They spend their free time learning the latest tips and tricks about Excel VBA programming, watching the movie "About Schmidt" repeatedly, and mistakenly envying their peers who work in banking instead of insurance

A small note, but actuaries do a lot more than capital reserving, and even then the regulatory aspect (while important) is not the only consideration.

I am not an actuary, but I have done a lot of actuarial work in a small insurance company, and the work included

- pricing (are we under of over charging for this product?)

- reinsurance (analysis so we can get a good price, as well as making sure what we sell remains within our reinsurance coverage)

- portfolio monitoring (performance/profitability/etc)

- risk aggregation (do we have too much exposure to a single risk or type of risk)

- loss forecasting (primarily for reserving, but also for a 'true' indication of performance, as claims experience is necessarily very laggy)

- product development (for example, what does a travel insurance product look like in a COVID world? What can we reasonably offer and how do we assess the pricing/reinsurance/risk appetite)

Moreover, none of these tasks required nor employed any memorised formulas. You either use a model someone else built, or build one yourself, and then analyse and test as much data as you can so that you can provide good advice. Importantly you have to be able to show exactly how you produced that advice, and be ready to justify every single choice you made while doing so. A large part of the actuarial training seems to be ways of working and thinking that enable this (at least this is my impression from the actuaries I work with).

There are actuaries who just calculate '"Solvency II" formulas for "quarter end"', but there are also actuaries developing advanced risk models for catastrophic weather events using large data sets and machine learning, or shutting down products because the market has shifted and it's no longer viable. In every insurance company I've worked at, actuaries are some of the most influential and respected people there, and do very interesting work (along with some really mind-numbing work!).

This is a fantastic summary of everything actuarial science can touch on. I started my career as a junior actuary at a small insurance startup and was fortunate to be able to meaningfully contribute to many of these areas because we didn't have many senior actuaries on staff. It was a lot of fun as a 23-24 year old to be involved in making such important strategic decision making, it made me realize that insurance companies are really fascinating financial objects.

There are definitely downsides as many are mentioning. As you specialize your job does get more narrow and "boring" (unless you climb the management ladder). Many major insurance companies are not headquartered in interesting or fun places to live. At some point I realized that life was not for me, and transitioned my skillset to data science/machine learning to give myself a more varied career.

But there are absolutely interesting problems to be solved in the insurance space, particularly for people with strong communication/business skills in addition to the wherewithal needed to deal with the actual nuts and bolts of the math and analysis.

"...that is the only employer of actuaries in town, so they are completely marooned..."

In any career there were always those who will limit themselves to the options "in town" and those who will go anywhere, anyhow to move ahead or find a better quality of life. Not saying that one is right and the other wrong, and this may now finally change with the remote work wave, but, there it is.

Are you okay there? It got a little specific at the end.

Don't worry, I'm not an actuary.

Some things that actuaries also do besides "memorizing formulas":

* Asset-Liability management, i.e. hedging of future claims on the financial markets [https://en.wikipedia.org/wiki/Asset_and_liability_management]

* Consulting multinationals and nations, how to structure their $bn pension schemes for future generations

* Valuation of embedded options and guarantees by stochastic modelling of the company [https://www.investopedia.com/terms/e/embeddedvalue.asp]

You can get a more balanced impression of topics, e.g. from the UK actuary society [https://www.actuaries.org.uk/studying/curriculum]

They also have past exams in full length incl. solutions.

Since the job is all about helping insurance companies manage risk, someone who makes "safe" choices would be a good fit.

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