What It's Like Being a Casualty Actuary

What It's Like Being a Casualty Actuary

Like doctors and lawyers, actuaries must pass a series of exams to gain status, standing and, ahem, salary in the workplace. Uniquely, however, actuaries may enter the field while they study for and take their exams, which can take years to finish. ValuePenguin interviewed a practicing casualty actuary who spent a decade on his. "I got notification over email, I think, and I just took the rest of the day off," Hayden Burrus, the principal of HB Actuarial Services, Inc., said of learning he'd passed his 10th and final exam at the age of 31. "I wasn’t at a company where I could celebrate with somebody else. So it was kind of anti-climactic. But most people really have a blow-out. It’s like a graduation party." We asked Burrus more about his work before and after the achievement that is common to successful actuaries.

This interview was condensed for clarity. To contribute to ValuePenguin’s coverage on careers, follow us on Twitter @VP_Careers.

When you're asked what you do, what's your response?

I guess I start off by just saying I’m a consulting actuary. And I get a variety of reactions; some people who have heard of the actuarial field before -- because they might have worked with an actuary, or worked in the insurance industry -- say, "Oh, you must be very smart." That’s one of them. Probably three-quarters of the time, though, people say, "What’s that?" They’ve never even heard of it, and they ask for a little bit more detail. At a cocktail party, they don’t really want a heck of a lot of details, so I try to summarize it the best I can in a sentence or two. I say something along the lines of, "We forecast financial results for insurance companies."

Let's ask the questions that those people may not: Why did you choose this as your profession?

I’ve always been very good at math — naturally so — and I was majoring in mathematics in college. Around my junior year, I was working with my college’s career services department, trying to get an internship or figure out what I’m going to do with my life after I graduate. A match came up with an actuarial intern position in New York City. I had never heard of it until that internship popped up. The pay was as great or greater than I was going to make painting the dorm rooms — which was my alternate job that summer — and so I jumped on it. I enjoyed it, because it used math and developed my computer skills and was a good match for my talents.

At that time, the kind of advice that career services people gave was, "Do what you love and what you’re good at, and a job will come to you." To me, that’s awful advice, but that’s the advice that everybody got in those days. And I was doing that, and I guess I was starting to get a little nervous. But the internship saved the day, with it being interesting and high-paying as far as internships go. Most internships, many internships, don’t even pay anything.

What did you gain from the internship experience?

One of the things that I learned during that internship is there is a significant and very rigorous examination process. At the time there were ten actuarial exams, each six months apart. The pass rate is 40%, meaning 40% of the people taking the exam pass; the rest fail. They’re very hard. My peer group — the young actuaries that were there, that I was meeting — they were telling me that it takes about 300 hours to study for an exam, and even after you’ve studied that much, you can’t really guarantee that you’re going to pass. My attitude was, "Well, I’m very good at math, I’ve always been tops in math, I did well on the SATs on the math portion... I’m not like everybody else." But what I didn’t realize was, my competition all said the same thing. My competition wasn’t an average person; my competition were also other people who were good at math. So it was a very challenging process.

I like studying, and I like learning and growing as a person. This was a sure way to get raises and promotions. I really loved that certainty: If I passed the exam, I got a raise. I loved that, when I was younger.

I went right out of college into the actuarial field, at age 21, and I hadn’t passed all my exams until I was 31. You’re getting job experience too, and you’re getting raises. Many companies will pay for somewhere around 100 hours to let you devote to studying for your exam.

It’s not that your initial pay is poor; it just doesn’t get to be excellent until you’ve passed a bunch of exams. By the time I had passed my exams, I had moved to working for a consulting firm. I thought that was interesting, and consultants tend to make a little bit more, which I enjoyed. There’s a little bit higher stress too, which I didn’t enjoy as much. I did that for a while. I got to be chief actuary of a small insurer at a relatively young age — I was, I think, 34. Not many people get that sort of opportunity, to be that high on the totem pole that young, but the fellowship really helps launch your career like that. That’s a very high credential, very difficult to get, and it can bring you into the boardroom earlier than you might otherwise get there.

Are there certificates associated with passing these exams?

There are two credentials. One is Associate of the — I’m a casualty actuarial — of the Casualty Actuarial Society, which requires passing seven of the exams. And then there’s "Fellow of the Actuarial Society," which is having passed all 10, which is what I have now.

Life actuaries have their own set of exams, as do pension actuaries, health actuaries. The first couple of exams are very straight-up math-based, and they overlap between all three. But then as you get more advanced, you’re learning specific techniques, rules and regulations, terminology and calculations specific for your field. The exams become different from there.

The content of the exams changes continuously. There’s things being added and things being deleted. Nowadays, there are nine exams instead of ten. The syllabus is slightly different. But the main concept, of there being a very vigorous credentialing process, is still there. I understand that the average time from start to completion is a little bit shorter now. But it’s reasonably similar to what I had to do.

What was a day in your work life like at the consultancy firm?

With any job anywhere, you’re doing what your boss tells you to do. In a consulting firm, though, your boss is generally the person who has gotten a new assignment by convincing some outside entity to hire your consulting firm. Every assignment is different. It’s like solving a puzzle that hasn’t been solved before. This is as opposed to working for an insurance company, where generally you have an area of responsibility and somebody is training you, "This is how we do it here. Do it like we did it last year." So, you’re learning a process at the insurance company and exercising judgement and suggesting changes in the process. But you’re going down a road that has been travelled before. Whereas consulting, especially when you’re junior, every assignment is 100% unique, and often you don’t have all the information you would like. It’s like doing a puzzle where you don’t have the picture on the box, knowing what the puzzle will look like; and you might not even have all the pieces.

At what point did you decide to start your own firm? And why make that decision?

After I had worked for an insurer — I worked for that insurer for a little over five years -- I left for a couple reasons. One, I knew the insurer was exploring a buy-out, and I worked for a small insurer, so there can only be one chief actuary. They were going to keep the one at the bigger company, so I knew I was going to be gone when that happened. But I probably would have left anyway because it’s fun being the boss. That’s the best way to be totally on your own, and I wanted to give it a shot. You have complete control over your destiny. I feel like I am an actuary that has a higher-than-average skillset with regards to social interaction, as compared to my peer group. And that can set me apart and help me attract clients that other actuaries might not be able to get. I love it. I think it’s great that my commute is ten feet. I do what I want to do, all day long.

What is a day in your work life like now?

Now I’m a business owner in addition to being an actuarial consultant. So I have to do things like find the clients. Not only do the actuarial part, do the assignment, but I have to go out there and interact with the world, and convince prospective clients that I’m somebody credible and responsible that they would be interested in hiring. That was a little bit of a new experience, as compared to prior jobs. So I go to more industry meetings and meet a lot of senior executives at different firms that have actuarial needs. That’s a difference, and an add-on, that isn’t quite actuarial, but it certainly is a necessary part of being the principal of an actuarial consulting firm.

As for the actuarial work itself, can you take us through a recent project of yours?

Recently, I had a businessman come to me who wanted to form an insurance company that sold a unique insurance product — a legal services product, which is being considered insurance in the state of Florida. He wanted some help, some actuarial help and actuarial credibility, to figure out how much he would need to charge for this product in order to make a fair and reasonable profit; and how to document those calculations, and justify it to the state of Florida. Insurance is a regulated industry, and the state has to approve any insurance rates that are filed. So he hired me to go through that process with him.

More specifically, he asked for my help in developing pro forma financial statements. Those pro formas are essentially balance sheets and income statements for 2016, through 2020; they are our best estimate of the future financial condition of the company based on the anticipated revenues and expenses of the company. Pro formas are necessary to submit to insurance regulators as part of the licensing process for a new insurer.

He also asked for my help in preparing an insurance rate filing for this insurance. An insurance rate filing is an analysis of the rates an insurance company must charge in order to pay all of its claim and expenses and have a reasonable profit left over. An insurance department will review the rate filing for reasonableness and to ensure that the insurance company rates are "...neither inadequate, excessive, nor unfairly discriminatory."

In addition to preparing the documentation, part of my work will be communicating with the insurance department in an effort to get the department to approve the licensing of the new insurer and the proposed rates of the new insurer.

Hayden Burrus headshot

Beyond education and a natural gravitation toward math, what equips someone like you to succeed in the field?

Certainly to be successful in the actuarial field you need the drive and discipline to be willing to go for it and pass all of those exams. I shared earlier that it took me ten years to do. And it’s ten years of studying 300 hours of my personal time every six months. All of those hours were when I was between 20 and 30 years old, when all of my buddies were out having fun on Friday night. It’s somebody that’s willing to put an investment in their career for a pay-off for the rest of their career, once they get the fellowship. And also people who are reasonably good at taking exams. So that’s a key ingredient to being successful. And then, being able to uniquely solve problems, and have some computer skills as well, is also an important tool. But completing exams is of the most value.

Is that what you look for when hiring a young actuary?

Yes, I give them a speech about how hard exams are. If you think you’re just going to try and go halfway, then this is not the career for you. I’m not going to be happy with you, and you’re not going to be happy, because passing half the exams — getting five exams instead of a fellowship — that’s great, that takes a lot of work, but your reward is kind of like coming in 5th in the Olympics. People are impressed, but the gold medal is getting past all of your exams.

What is your advice for someone considering a career as an actuary?

Develop your technical writing skills. That’s the biggest weakness, I think, of new actuaries nowadays. Often they don’t have very good writing skills at all. They’ve been focused on math their whole academic life. They think that being an actuary is a math job, so they just want to do math problems, and put a box around a numeric answer. That’s only part of what we do; we have to explain it to others, people who are not math people. A good part of my work day is writing memorandums that are just text, and there are no formulas or numbers or calculations at all in there. I’m explaining what I did. Technical writing is very important for that.

Are there other ways for the next generation of actuaries to learn at the professional level?

I think networking is very important, especially for younger actuaries. The studying process is a very lonely process, and so you need a peer group to be supportive to one another. You need to develop a community that understands what you’re going through, because certainly nobody who isn’t an actuary at your place of business is going to understand what you’re experiencing. And there are discussion boards and websites that people build a community around. Larger employers — a company like Allstate, or any of the big firms — they’ll have dozens of actuaries, and the actuaries tend to form a community just right there. But if you work for a smaller company, where there might be only one person that’s taking exams, you have to find your community. And it is very helpful. You get exam tips, and suggestions on study techniques. It’s a very valuable process.

Burrus' Reading List for Being a Consulting Actuary

  • The Black Swan, by Nassim Taleb -- "I think that that my actuarial background makes me more interested in that book. Taleb’s thesis is that there are unknowns out there, and just because something has never happened before in your historic data, that doesn’t mean that it can’t happen, and you have to consider that possibility. That’s important for actuaries to consider especially, because actuaries are always using historic data to make forecasts about the future."