Facts about being actuary !
#Facts_about_Actuarial_Science
Most employers do not know so much about Actuarial Science, what it is all about, and what it entails.
In brief, Actuarial Science teaches you how to predict the financial consequences of future uncertainties. The future can be predictable or unpredictable. It can also help you determine the future value of an asset or a liability, or the current value(Actuarial Present Value) of future assets/liabilities. As such, actuaries are given a serious grounding in mathematics of probability and statistics.
Forecasting a future event, and it's financial implications, requires a mathematical or financial model. Before coming up with a model, you will need to collect data, process it, analyze it using statistical analysis tools like R or Excel, and prepare (smoothen it or graduate it) for the model. You will need to do some calculations involving interest rates (variable or constant or discount rates using actuarial formulae, and make assumptions on various factors such as economic conditions among others.
Whereas an accountant, while working on the cost of manufacturing, will work with inventories as at particular dates, on the understanding that the costs of inventory have not changed, (If for instance a company had 100m stock at the beginning of the year, and adds 200 m stock, and at the end of the year has about 50m stock remaining, an accountant will tell you that the net inventory used is 250 m), an Actuarial student will tell you that this is not true based on the time that has elapsed(time value of Money) , the applicable risks, and additional costs of storing this inventory.
A good example where Actuarial knowledge is used is in determining the yield of Treasury Bills. You could for instance buy t-bills worth 100m today at 95m. Means you'll gain 5 m at maturity(after 3 months) . Actuarial knowledge will be used to determine face/par value of the t-bill, and the applicable discounting rate, based on certain assumptions. (in short to determine how much you will profit if you invested in a t-bill)
An Actuarial student is not only versed with complex mathematical principles, but also proper communication and presentation skills. The student needs to break down complex issues that are not understandable to the common person, into simple comprehensible points. This is because an Actuary has to write a report on an occasional basis to present to senior management or a board.
This could be the proposed premiums to be charged on a new policy depending on a time period, or the risks involved in in buying certain shares, or a debt instrument that the company should use to raise capital, or even the issue price of a company's shares. (Actuarial Science has broad application areas)
At entry level, an Actuarial Science graduate should be able to work as a researcher, in data collection and analysis, and doing simple forecasts, under the guidance of an analyst. The ideal working environment of an Actuarial graduate is in insurance companies, where they should be able to do basic Underwriting, claims analysis, and assist actuaries in forecasting risks, by collecting and analyzing the relevant data.
The next ideal place is a pension fund, where they should be able to determine pension payments based on direct contributions or benefits. Other areas are investments, investment banking, and project management.
Of course, with experience and more qualifications, the Actuary will be able to do more complex tasks, like the actuarial valuation of a pension scheme.
A graduate of Actuarial Science is also well versed with the CMA, IRA and RBA policies and regulations and could thus help companies that are supervised by these state agencies in keeping in line with industry standards.
Why for instance, have most general underwriters been making losses? Is the problem in pricing? Is the data used compromised? Is there too much fraud? To what level does it affect a company's profits?
Why are most health underwriters nowadays asking Healthcare Institutions to prescribe generic drugs, and not original drugs, to their clients? Actuaries will tell you why. What percentage of contributions to NSSF funds should be used in administrative functions, and what should be invested for the fund to thrive? Which are the safe investment schemes for a pension fund, according to RBA guidelines? Ask the Actuary. What is the effect of a rise in the dollar against the shilling, on foreign government loans? And many more.
At entry level, an Actuarial graduate is no different from a B/Com graduate who majored in risk management. In any case, the actuarial graduate has a stronger insurance grounding, more than the B/Com graduate, and is more exposed to data collection and analysis. However, most employers will be comfortable with the
B/Com graduate because he/she 'majored in insurance', and insist that the actuarial graduate produces College of Insurance papers. The COI diploma consists of simple units which any literate fellow can understand, and in fact should be a requirement only to a form four leaver who wants to work in insurance, but the employer still wants the actuarial student who has a much better grounding in insurance, to have it before giving the job interview a shot. Not fair at all.
The next major hurdle for entry level actuarial science jobseekers is the misguided thinking that they are 'geniuses', typical rocket scientist, who know 'too much'. This creates a certain level of insecurity on their part. Other employers even fear that they might ask for too much remuneration.
The third hurdle stacked up against an Actuarial Science graduate is the little utilization of Actuarial principles and concepts by most insurers, banks and pension schemes. IRA, in a policy directive, made it mandatory for all insurance Companies to have Actuarial departments. This has not been fully adhered to.
The fourth hurdle is the many expensive professional papers that an Actuarial student needs to sit to be a qualified Actuary. And to make it worse, employers demand for these papers. A JAB/KUCCPS student can't afford IFoA papers, unless, and until he/she has a stable income.
In conclusion, Kenya needs to appreciate the role of Actuarial Science in the financial sector. Effort needs to be put in place to ensure that graduates are up to task. Employers need to stop demanding IFOA papers from graduates. Companies need to hire more graduates at entry level and invest in L&D. That is how this industry will grow in East Africa!
Most employers do not know so much about Actuarial Science, what it is all about, and what it entails.
In brief, Actuarial Science teaches you how to predict the financial consequences of future uncertainties. The future can be predictable or unpredictable. It can also help you determine the future value of an asset or a liability, or the current value(Actuarial Present Value) of future assets/liabilities. As such, actuaries are given a serious grounding in mathematics of probability and statistics.
Forecasting a future event, and it's financial implications, requires a mathematical or financial model. Before coming up with a model, you will need to collect data, process it, analyze it using statistical analysis tools like R or Excel, and prepare (smoothen it or graduate it) for the model. You will need to do some calculations involving interest rates (variable or constant or discount rates using actuarial formulae, and make assumptions on various factors such as economic conditions among others.
Whereas an accountant, while working on the cost of manufacturing, will work with inventories as at particular dates, on the understanding that the costs of inventory have not changed, (If for instance a company had 100m stock at the beginning of the year, and adds 200 m stock, and at the end of the year has about 50m stock remaining, an accountant will tell you that the net inventory used is 250 m), an Actuarial student will tell you that this is not true based on the time that has elapsed(time value of Money) , the applicable risks, and additional costs of storing this inventory.
A good example where Actuarial knowledge is used is in determining the yield of Treasury Bills. You could for instance buy t-bills worth 100m today at 95m. Means you'll gain 5 m at maturity(after 3 months) . Actuarial knowledge will be used to determine face/par value of the t-bill, and the applicable discounting rate, based on certain assumptions. (in short to determine how much you will profit if you invested in a t-bill)
An Actuarial student is not only versed with complex mathematical principles, but also proper communication and presentation skills. The student needs to break down complex issues that are not understandable to the common person, into simple comprehensible points. This is because an Actuary has to write a report on an occasional basis to present to senior management or a board.
This could be the proposed premiums to be charged on a new policy depending on a time period, or the risks involved in in buying certain shares, or a debt instrument that the company should use to raise capital, or even the issue price of a company's shares. (Actuarial Science has broad application areas)
At entry level, an Actuarial Science graduate should be able to work as a researcher, in data collection and analysis, and doing simple forecasts, under the guidance of an analyst. The ideal working environment of an Actuarial graduate is in insurance companies, where they should be able to do basic Underwriting, claims analysis, and assist actuaries in forecasting risks, by collecting and analyzing the relevant data.
The next ideal place is a pension fund, where they should be able to determine pension payments based on direct contributions or benefits. Other areas are investments, investment banking, and project management.
Of course, with experience and more qualifications, the Actuary will be able to do more complex tasks, like the actuarial valuation of a pension scheme.
A graduate of Actuarial Science is also well versed with the CMA, IRA and RBA policies and regulations and could thus help companies that are supervised by these state agencies in keeping in line with industry standards.
Why for instance, have most general underwriters been making losses? Is the problem in pricing? Is the data used compromised? Is there too much fraud? To what level does it affect a company's profits?
Why are most health underwriters nowadays asking Healthcare Institutions to prescribe generic drugs, and not original drugs, to their clients? Actuaries will tell you why. What percentage of contributions to NSSF funds should be used in administrative functions, and what should be invested for the fund to thrive? Which are the safe investment schemes for a pension fund, according to RBA guidelines? Ask the Actuary. What is the effect of a rise in the dollar against the shilling, on foreign government loans? And many more.
At entry level, an Actuarial graduate is no different from a B/Com graduate who majored in risk management. In any case, the actuarial graduate has a stronger insurance grounding, more than the B/Com graduate, and is more exposed to data collection and analysis. However, most employers will be comfortable with the
B/Com graduate because he/she 'majored in insurance', and insist that the actuarial graduate produces College of Insurance papers. The COI diploma consists of simple units which any literate fellow can understand, and in fact should be a requirement only to a form four leaver who wants to work in insurance, but the employer still wants the actuarial student who has a much better grounding in insurance, to have it before giving the job interview a shot. Not fair at all.
The next major hurdle for entry level actuarial science jobseekers is the misguided thinking that they are 'geniuses', typical rocket scientist, who know 'too much'. This creates a certain level of insecurity on their part. Other employers even fear that they might ask for too much remuneration.
The third hurdle stacked up against an Actuarial Science graduate is the little utilization of Actuarial principles and concepts by most insurers, banks and pension schemes. IRA, in a policy directive, made it mandatory for all insurance Companies to have Actuarial departments. This has not been fully adhered to.
The fourth hurdle is the many expensive professional papers that an Actuarial student needs to sit to be a qualified Actuary. And to make it worse, employers demand for these papers. A JAB/KUCCPS student can't afford IFoA papers, unless, and until he/she has a stable income.
In conclusion, Kenya needs to appreciate the role of Actuarial Science in the financial sector. Effort needs to be put in place to ensure that graduates are up to task. Employers need to stop demanding IFOA papers from graduates. Companies need to hire more graduates at entry level and invest in L&D. That is how this industry will grow in East Africa!
Comments
Post a Comment