Actuaries and underwriters might seem like the same sort of career, but the two jobs are quite different in scale, skill, and other important ways. While an actuary gauges and seeks ways to mitigate future risk, underwriters help companies decide if a client is worth the gamble. Here’s a look at what the two career paths entail and the difference between an actuary and an underwriter.
What is an Actuary?
Actuaries are business professionals with strong grasp of mathematics and financial theory. They are employed by all manner of companies -- from insurance to government pension funds and banks to employee benefits departments. In a nutshell, an actuary’s responsibility is to determine if and what kind of future events may lead to financial crises for a corporation or business and ways to avoid those crises. Actuaries use creative thinking, statistics, and strong communication skills to help clients prepare for the future.
Being an actuary might involve creating charts and presentations, sifting through statistics, figuring out how likely a natural disaster is to happen (and what it’s going to cost), and creating new plans or policies to make sure calamity comes as cheaply as possible. Getting through an actuarial science program takes a great deal of dedication and perseverance, but the reward can be well worth the time and effort.
What is an Underwriter?
Underwriters work largely for insurance companies and bank or mortgage lenders. By and large their responsibility is to look at a client and decide if the client is worth the cost of providing them with the requested service. For example, if someone was seeking a life insurance policy, an underwriter would determine if the company should risk insuring that person. Are they going to pay on their policy for enough years to make it worth the company’s time or is the applicant likely to cash in on the policy in a few short months?
An underwriter might go over individual’s applications for various types of insurance, loans, or mortgages; investigate further to ensure the accuracy of or seek further information regarding the client’s application; meet one-on-one with clients; use specialized software programs to evaluate the risk of a particular client; determine appropriate policy or interest amounts for the client; and ultimately decide if the applicant is appropriate for the company. Of course, insurance underwriters’ specific responsibilities differ from mortgage underwriters’, but overall they provide the same service for different types of companies. It is also important to note that the “client” could be another business.
What’s the Difference?
Ultimately, the big difference between actuaries and underwriters is that actuaries are focused on the unknown risks of the future and how to avoid them, while underwriters have a rough criteria for what is and is not acceptable from individual clients. There are also a lot of smaller differences that can be a big deal when you’re trying to choose between careers.
An actuary needs at least a bachelor’s degree, but most employers prefer a master’s (and sometimes even doctorate) just to get started. Actuaries must also undergo rigorous testing to be accepted into professional societies. Underwriters may not need even a bachelor’s degree—although many companies prefer it—experience may be sufficient with a high school degree. There are also particular certifications that may be required depending on the position.
Salary and job growth rates also draw a big line in the sand between actuaries and underwriters. According to the Bureau of Labor Statistics, individual’s in actuarial science generally start out making about $60,000 a year, but can soar to six figures ($200,000 depending on your career track). Conversely, underwriters make a median salary of just over $60,000 (although the highest paid 10% in the field make more than $100,000 a year). Additionally, the job growth rate for actuaries is much faster than average at 16% between 2014 and 2024. For the same decade, underwriters are facing a -11% job growth rate that has been steadily dropping.
If you’re trying to make a decision between underwriting and actuarial science, consider what you are willing to put into and what you are looking to get out of it.