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Number Crunching

Actuaries provide a valuable service for insurance, other sectors

What is an actuary and what do they do? These mainstays of the insurance industry are not crunching numbers with a magical twist; they’re grounded in mathematics, logic and statistics. They’re also listed on job-rating lists as one of America’s top 10 best jobs. Furthermore, the road to becoming an actuary is long and challenging.

“Even though we now have computers, our skill set is still based in math. We’re like engineers but we work with numbers,” said Ken Johnston, vice president of product development for Southern Farm Bureau Life Insurance in Ridgeland. “The easy description of an actuary in the past was someone who works for an insurance company, but that’s changed a lot.”

The advent of computers has changed what actuaries do, but the use of math and logical thinking is still the bedrock of this profession. “In addition to those skills, today we must be communicators and able to explain the actuarial models,” he added. “We must have the ability to influence major corporations, and hopefully in a way that gives leadership. We try to place financial consequences on uncertain events.”

Hunter D. Pratt, a consulting actuary in Jackson, makes it clear that a whole series of examinations must be taken to become an actuary. “These tests are administered by the American Society of Actuaries, and it is a rigorous process,” he said. “I started studying for the exams in 1970 and it took me six years to complete them. It’s not easy at all.”

He thinks that rigorous battery of tests discourages young people from becoming actuaries. However, many companies will hire actuary students while they’re in the examination process if the students have completed a couple of the tests.

“The first couple of exams deal with math,” he points out. “The questions are asked so that you must know what you’re talking about to answer them correctly. The exams don’t stay the same from year to year, either.”

Pratt says the society’s website has a sample examination and a lot of good information for anyone thinking of becoming an actuary.

Originally from Inverness, he earned an undergraduate degree in math from Mississippi State University and then went to graduate school to study actuary science at Georgia State University, one of the few schools in the country offering that program. As a consulting actuary, he works with clients in the retirement field, assisting with their 401(k) and defined benefit pension plans. Clients include insurance companies and government agencies.

“I like to work with my private and public clients and help them solve problems with their plans and how the plans should operate,” Pratt said. “I get satisfaction from it. I deal with my clients daily and do interesting things helping them. Being an actuary is not for everybody, but it fits me.”

As an Air Force kid, Johnston lived in a number of places but later settled in Hattiesburg where he went to high school and graduated from the University of Southern Mississippi. He feels the rigor and discipline of the tests to become an actuary are every bit the equivalent of a Ph.D.

At Southern Farm Bureau Life, he has managed a student actuary program in the past. The company no longer has a large formal program but new actuaries are brought in as actuary students when there’s a need. “It’s set up to help aspiring actuaries pass the exams,” he said. “We expect them to study and give them some time to study. We review their progress on an annual basis.”

Johnston says that type program was valuable for him in completing the exam process. “Doing it outside a structured program is very difficult,” he said. “It must be done that way or by going to school.”

The majority of actuaries work in careers associated with the insurance industry, but growing numbers are working in other fields that include government, financial services, commercial banks, investment banks, corporations and retirement funds. They play a key role in designing insurance plans by determining the premium, monitoring the profitability of insurance companies and recommending corrective action when appropriate. Actuaries working in insurance companies also ensure that the companies have set aside enough funds to pay claims and provide advice on how to invest the company’s assets.

For more information, visit the Society of Actuaries website at www.soa.org.

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About Lynn Lofton

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