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Why We Are Leaving
by Gil Student

In the ongoing debate over the relevance of an actuarial degree, my viewpoint is one that might add to the dialogue. I was an actuarial student for four years before I left the profession. For the past year and a half, I have been working in the credit risk department of a major credit card issuer and I am currently pursuing a CFA degree (I still read The Actuarial Review out of nostalgia).

I strongly agree with Sholom Feldblum. While I am not able to judge my actuarial capability without bias, all indications were that I was at least an average actuarial student. However, my growing family was more important to me than my exams and I was therefore passing them very slowly. The frustration of failure combined with the knowledge of the many years it would take to finally finish exams led me to my current path.

Don Mango and Thomas Struppeck ("The Market Relevance of the Actuarial Profession," AR November 2000) justified the current exam process with the following explanation. "Every profession puts up barriers to entry. If the goal isn't difficult to attain, it is typically not highly valued—the two are inextricably bound together...Members have a stake in the exams' staying difficult—maintaining the value of the designation."

The main reason given for the difficulty of actuarial exams is so that outsiders will value the actuarial designation. If anyone can be an actuary, "real" actuaries will not be respected. The truth, however, is that the outside world considers anyone with a few exams and a little experience to be an actuary, lack of title notwithstanding. The underwriters with whom I once worked did not differentiate between those on the actuarial staff based on titles. One of my former supervisors, who had over a decade of excellent experience but only two exams, was highly regarded by the nonactuarial staff. When discussing my experience with my current colleagues outside of the insurance industry, most assume that after four years of taking exams I would be a fully certified actuary. In fact, most treat me that way, which helps my marketability. In other words, it is too late. Anyone can be an actuary, regardless of the CAS's policies.

But even if this explanation were valid to students who spend hundreds of hours poring through extremely difficult study material with the knowledge that every minute footnote may be tested, this reason is not sufficient. If there was valuable knowledge to be gained by the added difficulty, maybe we could understand. Maybe. But the material can be learned to a working knowledge without being able to pass the exams. That is the ultimate frustration—knowing the material well enough to be able to teach a course on it but still being unable to pass an exam. And the main reason given by Mango and Struppeck is that we need to impress the nonactuarial world. Frankly, I think my nonactuarial former colleagues were greatly impressed with the actuarial staff's intelligence and knowledge of the business. They did not respect our exam experience; they pitied it.

It certainly is not the case that successful exam progress is a sign of competent actuarial behavior. We all know poor actuaries who readily passed the exams. Yet there are many who would make exemplary actuaries but cannot because of the exam burden.

While the above reason for the exam structure may be the opinion of Mango and Struppeck, I think there is another reason. Current Fellows had to sweat through this arduous exam process and consider it the only legitimate way to gain an actuarial degree. If new Fellows do not have to work as hard, why did they, the current Fellows, spend so much of their lives studying for exams? Thus, the difficulty of exams is more due to fairness to current Fellows than to external appearances. But that reasoning, which is frequently hidden in the back of Fellows' minds behind their logical actuarial exteriors, does not justify maintaining an irrational exam structure, because it is viewing the issue from the wrong perspective. If you want to have an exam process that is fair and rewarding to students, you have to look at it from their perspective.

The question that every actuarial student asks himself is whether the long journey towards Fellowship is worth it. Coming out of college, everyone thinks that he can pass exams quickly. Sure we hear the warnings, but we figure we're probably smarter than the rest. After we finally realize how hard these exams are, and everyone eventually does, we start to wonder whether all of the time we spend studying is being wasted. We are spending our youth studying for exams. Will it pay off?

We all have friends who are making more money in other careers without having to take exams. But can we do it? Are we to believe the often-repeated mantra that passing actuarial exams is a guarantee of job and salary security? The average salaries for Fellows that I have seen range between $90,000 and $120,000. While that seems low, I view that as the guarantee that the letters FCAS offer. Is that kind of salary worth all those years of intensive study?

Mango and Struppeck wrote, "[An actuarial degree's] market value is to some extent a result of the difficulty."

But only "to some extent." Similar balances of salary and security are available elsewhere with less difficulty, so an actuarial degree is not worth its purported value. Since passing actuarial exams is harder than getting a master's degree in statistics or business, actuarial salaries should be much higher than in other industries. But they aren't. So why bother? I see statisticians and MBAs easily making over $100,000. Those with the ambition and skill to finesse their way up the corporate ladder make much higher salaries.

I've posted my experience of leaving the actuarial field on actuarial message boards a few times and have been inundated with questions and private e-mails. The general feeling that I have gotten is that many students do not think that the actuarial path is worth the struggle. The same salaries (or more) can be made with similar work conditions and without any exam requirements.

Who are these people who succeed in leaving the actuarial field? Are they the ones who were never cut out for such a prestigious and highly valued profession? More likely, they are the ones who are daring enough to leave their comfortable surroundings—the risk-takers. Those smart enough and presentable enough to be able to convince businesses to take a chance and hire someone without industry experience. After years of trying to shed the pocket calculator, back-office image, the CAS is causing an adverse selection that will bring it back.

Mango and Struppeck wrote, "Actuarially inclined students considering actuarial careers must first ask, `Insurance, yes or no?'"

How many students really care whether they work in insurance or another similar mathematical or risk-related field? Why should it matter? No one I know, other than a few graduates of the College of Insurance, left college with a love for insurance. Frankly, I question why anyone would have such a passion. If anything, the trend towards nontraditional areas of practice seems to imply that actuaries are trying to reach out beyond insurance.

I am not an actuary and I analyze a noninsurance contingent liability with a very different cash flow. It took a while to get used to it, but I am using the same skills I was always using in a slightly different context. I am using the same analytical skills, the same spreadsheet and programming tools, and I still have the occasional obscure theoretical discussion about the statistical behavior of losses and premiums. The only difference is that we discuss loss rates instead of loss ratios and my colleagues are statisticians and MBAs instead of actuaries (by the way, I hold no graduate degree but no one seems to care because I am an "actuary").

There are many different areas where an actuarial student's skills can be used and, particularly for those with only a few years of experience, there is very little practical difference. And the need for talent is very real. My company is dying for anyone with mathematical skills and I have recruiters calling me all the time for other companies with similar needs.

Mango and Struppeck also wrote, "Exams 3 and 4 teach the fundamentals of the `actuarial approach,' unique to our profession. We have both worked with financial engineers and capital market quantitative professionals, at firms such as Center, RiskMetrics, and Goldman Sachs, who expressed great interest in learning these actuarial techniques."

I agree. Actuarial techniques have not yet made it to mainstream economists or statisticians. So what? A colleague of mine, with a Ph.D. in econometrics, was undertaking the equivalent of a trend analysis. It was a grand experiment for the department, which held much hope for slightly more accurate forecasts (the cash flows are extremely quick so forecasting can be done with very recent data, which mitigates the inaccuracies of untrended analyses). He was starting from scratch so I gave him some actuarial readings to help. He quickly picked it up and did a job that would make any actuary proud. All this, and he never passed a single actuarial exam!

Mango and Struppeck very wisely asked, "Is our rigorous training a net benefit to our employers, after recognizing the costs?"

This is an excellent perspective that I have not seen addressed elsewhere. Perhaps the time has come to shorten the study time and number of exams so that employers won't have to pay for so much "vacation" time. To employers, that is what study and exam time is. For five to ten years, they are annually paying for employees to have hundreds of hours for themselves. Multiply that by a few dozen employees and the cost is hundreds of thousands of dollars. Add to that all of the travel expenses of the frequent actuarial "seminars" in extravagant places like Bermuda. If high salaries are most important for actuaries, then reduce the other expenses that go along with an actuarial department because artificially inflating your worth is not working. The statisticians with whom I currently work would be glad to try their hand at insurance scoring

Readers Respond to Student

Dear Editor:

In the February 2001 issue of The Actuarial Review, an opinion piece by Mr. Gil Student appears. In this essay, "Why We Are Leaving," Mr. Student quotes from an opinion piece that we wrote. Two sentences that Mr. Student combines into a single quote do appear, but in totally different contexts and in totally different sections of our paper.

Our piece entitled "The Market Relevance of the Actuarial Profession" (The Actuarial Review, November 2000) was in response to an earlier opinion piece by Sholom Feldblum. Mr. Feldblum wrote: "Our advanced modeling and simulation exams…lead the best students elsewhere." We responded to this by writing: "What leads students away? Study requirements, pass ratios, or difficulty? Every profession puts up barriers to entry…."

In the second section of our piece, we look at the exams from the viewpoint of our employers, we write: "Members have a stake in the exams' staying difficult—maintaining the value of the designation. But are our interests at odds with those of our employers? …"

Mr. Student combines portions of these two passages into a single quote, from which he concludes: "The only reason that there are so many exams, and the only reason that they are so difficult, is to protect the jobs of already certified actuaries…."

It is unfortunate that Mr. Student feels that way; however, it is neither what we said nor what we meant.

Readers who wish to put these quotes into context, please visit for our original article.

- Donald Mango, FCAS and Thomas Struppeck, FCAS

Dear Editor:

Before commenting on Mr. Student's article (The Actuarial Review, February 2001), I should explain my background. I became a Fellow in 1965 after seven years of taking exams (offered only once a year in those days). I am 70 years of age and have been retired for ten years, so I am not worried about saying anything that might insult the "powers-that-be." In my day, I had to study on my own time, not the company's time. I only had to study 300 to 500 hours per exam. (It was no easier then, even though my kids would say, "But dad, there wasn't much insurance before autos and planes were invented!") I was married at the time and had two, then three children before my ordeal was over.

I agree with Mr. Student on several points. The exams are hard. They were in my day, too, and we students complained as much as he does. Questions were questionable—footnotes and all. The study material was "poorly written." There were too many exams. Grading was impossible, and so on, and so on. Students have always complained about exams. It is also true that, for certain actuarial tasks, a nonactuary can do as good a job as an actuary—in some cases, maybe even better. My eleven-year-old grandson runs a computer much better than I do, but I'm still a better actuary than he is.

The exams serve a useful purpose. My analogy would be to Marine training. They go though hell in basic training. They do a lot of things that they may think, at the time, may never aid their future careers, but they go through it together, and when they are through, they are bonded in a group that has pride and the recognition that they are among a chosen few. The things that they have learned may seem of little value until a day when that knowledge means the difference between life and death, either literally in terms of a Marine, or figuratively, in terms of an actuary. I, too, thought that the exams were tough, but real life is even tougher.

Mr. Student seems to be among that group that wishes to dumb-down education. "No one should fail, all should pass. Don't have anything on the curriculum that isn't immediately useful." He decries actuaries for being obsessed with money, but says many, including himself, can make more money without the pain of passing exams. More power to him and, I say, thank goodness he didn't pass the exams. We don't need any more money-grubbers in our society.

Actuarial exams are not all mathematical, although actuaries should have a good basis in math. The CAS exams also cover law, policy forms, regulation, accounting, pricing, marketing, product development, investments, claims, and all other aspects of the insurance world. Passing the exams and enjoying a fascinating business, gives the actuary the opportunity to contribute in many ways to an insurance company, as well as the tools to succeed in other fields. In my experience, actuaries who are more rounded insurance experts seem to go farther than the pure mathematicians, although both have satisfying careers.

In today's fast-moving business climate, continuous learning is essential to success. What better way to become disciplined to this lifetime of learning than by taking the CAS exams?

I agree that the Society should expand its studies beyond insurance, and they are doing that, but wouldn't that make the exam process even longer and more difficult? Perhaps that is best. When I became a Fellow in 1965, only eight others received their Fellowships that year, to make a total of 218 Fellows of the Casualty Actuarial Society. In 2000, there were 149 new Fellows admitted, for a total of 2,061. Obviously, the exams have gotten easier since I became a Fellow.

I also believe that the whining students like Mr. Student are necessary, so that the prize of an FCAS becomes even more valuable to those of us who stuck it out, through endless study and bad exam questions, and were glad we did.

- Darrell W. Ehlert, FCAS