Actuary Versus Data Science
Observations on a changing landscape
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Introduction

Few college students are aware of the actuarial profession. Of those that are aware, many are becoming interested in data science and other non-actuarial careers. The offer of more money, absence of professional exams, and potentially more numerous employment opportunities has had a fundamental impact on entry level actuarial recruiting.

We recently engaged with actuarial clubs’ leaders, professors, recent graduates of fifteen universities, scoured observable market data, and tapped into our extensive library of intellectual capital to understand the core challenges faced by actuarial employers today, and identify opportunities to address them. This article contains a summary of this effort.

Challenges in the Actuarial Recruiting Market

The number of candidates sitting for entry level exam P and exam FM decreased over the last decade. Figure 1 below shows the total attempts for Exams P and FM halving over the past decade.

Figure 1 - Number of sittings for entry level actuarial exams

This represents an average decline of 7% per year across the two exams. This shows a major change from 2013 when the Actuarial Profession was consistently ranked #1 in national job lists and the number of candidates sitting for exams was growing year over year. For reference, Actuary is currently ranked #20, behind software developer (#5) and data scientist (#6).

One hypothesis is that data scientists and similar job openings are drawing potential actuaries away from the profession. To investigate this question, we queried fifteen colleges, actuarial clubs, and their recent graduates to see if this trend was noticeable, with key learnings summarized below:

  • Candidates at schools with Society of Actuaries (SOA)’s Centers of Actuarial Excellence (CAE) recognition are more than twice as likely to remain on the actuarial career path. Further, the strongest programs appear to attract other majors due to the top-tier program and resources
  • Recently established data science majors are pulling some students away from actuarial science and quite a few interviewees perceived that the popularity of the actuarial science program is declining
  • For international students, there is a general perception that it is harder to get an actuarial job that provides working visa sponsorship, while most data science jobs still provide sponsorship

The mixed results between the first two findings suggest that the strongest college actuarial programs are becoming stronger while schools with fledgling or small programs may be struggling. For example, actuarial career fairs tend to be successful only after achieving a level of scale so that they are well attended by both prospective hires and recruiters.

In addition to qualitative interviews and historical sitting numbers, we also investigated average compensation and location. These two factors can be benchmarked explicitly and can provide some insight into the perceived attractiveness and ease of entry of the two career paths.

We compared the trends of total compensation (base salary plus bonus) among actuaries, data scientists and its related careers in Figure 2. Compensation data sources we used include Actuarial Careers survey (source 1), a survey of individual salaries plus bonuses organized by actuaries on Reddit (source 2), and levels.fyi which was used to track total compensations for data scientists, software engineers, and business analysts in technology companies (source 3). The actuaries’ average incomes are lower at both entry level and experienced management levels.

Figure 2 - Comparison of average total compensation by years of experience

Regardless of accuracy or bias in these figures, they are still important to review because they shape public perception and influence candidate decisions.

In addition to compensation, location is also one of the fundamental factors that influence candidate decisions. Figure 3 plots the distribution of 79 life insurance companies’ headquarters in U.S., and all 77 U.S. universities and colleges that have actuarial programs recognized by SOA as CAE or Universities & Colleges with Actuarial Programs - Advanced Curriculum (UCAP-AC). The distribution highly overlaps with each other. Both life insurance companies’ headquarters and actuarial schools concentrate in the Midwest and Northeast states. It is notable that not all actuarial functions located in the same state as the company quarters, however the maps still tell a meaningful story. For states with high population like Texas, California, and Florida, there may be only one to three life insurance companies, while a great many companies hire data scientists and/or software engineers across most states.

Figure 3 - Distribution of U.S. life insurance companies and U.S. actuarial universities

These two heatmaps plot the geographic distribution of 79 life insurance companies’ headquarters in U.S., and all 77 universities and colleges that have actuarial programs with SOA recognition of CAE or UCAP-AC in U.S.

The maps highlight another key factor that, for states with fewer actuarial employment opportunities, the lack of a professional network or role models may effectively act as a barrier to build the awareness of actuarial profession among students and professors. This may explain why high percentage of potential candidates never fully explore actuarial opportunities.

International students attending colleges in the United States face these same issues and navigate additional challenges. Of the fifteen colleges we spoke to, we saw three major trends:

  1. International students from Canada or Africa are more likely to choose actuarial programs than international students from other parts of the world

  2. As H-1B visa policy tightened in 2020, attending graduate school in statistics, data science, or actuarial science became significantly more attractive; master’s degrees are perceived to increase opportunities for obtaining visa and full-time employment in U.S.

  3. There is a perception among professors and graduates that insurance companies are less likely to provide working visa sponsorship for entry level actuaries. However, many believe that high-tech companies are more willing and able to sponsor for entry level data scientists or similar positions

These unique situations that international students are facing may change their career planning and deviate a portion of these students to other fields.

How to Turn These Challenges into Opportunities

Companies and leaders who take steps in response to these market dynamics will position their teams to attract and retain the best talent.

  1. Hybrid development programs – Actuarial rotation programs are the industry standard for managing new actuarial talent. Some companies have recently launched similar but distinct data science development programs. Why not merge the two? This move would stand out among recruiters and would be extremely attractive to potential applicants. It would also forge a new type of quantitative professional whose career path may be more suited to non-traditional roles. We learned from a reinsurance company which created an initiative to offer the job title “Actuary and Data Scientist”, that currently there is no obvious difference in compensation package between hybrid roles and traditional actuarial roles. But these hybrid roles are so new, it’s likely the compensation will shift higher if more insurance companies need such hybrid talents. Capturing and developing that talent organically may be the best option for long term.
  2. Capitalize on geographic diversity – The last two years have taught us that remote work is possible and preferred by many. From our discussion with the recruiters at Oliver James Associates, geographic locations of actuaries are now noticeably more diversified across the U.S. In addition to talent already able to work in the U.S. without sponsorship, the international talent pool for data-oriented quantitative professionals is strong. At a minimum, company policies regarding sponsorship should be clear and well-founded given the recruiting landscape.
  3. Strategically expand recruiting – Campus recruiting often boils down to efficiency (i.e., number, quality, and interest of candidates) due to limited time and resources. Attending the tried-and-true campus recruiting events is safe and reliable but may not produce the most diverse pool of candidates. Consider targeted reach-outs to graduate programs, actuarial schools from other parts of the country that are designated by SOA as Centers of Actuarial Excellence, or industry associations like the International Association of Black Actuaries. These targeted reach outs may align with 1 & 2 above.
  4. Reconsider designation and job alignment – Actuaries do not have a monopoly on ability to work with insurance data. There may be functional areas (e.g., experience studies) that may benefit from an infusion of non-actuarial talent with a broad skillset in predictive analytics and other statistical methods. As companies go through modernization / transformation, the time is right to redefine traditional processes and create forward looking data-oriented roles.

With moves like these, forward looking talent managers can shape recruiting, retention, and the future of their organization. Recruiters may not perceive a shortage of entry level actuarial candidates (yet), but there are still plenty of opportunities to enhance actuarial programs to tailor to the diverse background and interests of the candidates.