When looking at careers in the financial services industry, you will have come across both actuaries and underwriters. Their roles are quite similar, but there are some key differences. So, what are those differences?
In this article we look at what each of the roles are, the differences and similarities between the two and who is best suited to each role.
What is an Actuary?
Essentially, actuaries calculate risk and uncertainty. They calculate the probability of different outcomes, such as major events, and their potential financial impact.
How do they do this? They analyse past and present data to create statistical information which allows them to make proper calculations to predict and measure emerging risks.
An actuary could be involved in advising a company on their pensions plans, managing financial assets and liabilities or determining the cost of insurance premiums. Traditionally, actuaries are found working in life and general insurance, investment, consultancy and in pensions. You can find out more about which companies hire actuaries here.
In terms of the insurance industry, actuaries make the calculations to develop insurance policies that are profitable for the company. For example, they could be responsible for determining the appropriate insurance premium to charge depending on various characteristics. However, these are general premiums, and do not take into consideration the individual. This is where they differ from an Underwriter.
What is an Underwriter?
An underwriter issues insurance policies. They essentially decide which policies their insurance company should offer potential clients. This means that whenever you have applied for insurance, be it car insurance, house insurance or life insurance, an underwriter would have looked at your individual circumstances and asses the risks, likelihood and potential cost of your claim.
These individual circumstances could include your age, location, gender, annual income or more specific details such as your medical or driving history. They will then work out if you are insurable or not.
As you can see, the roles of an actuary and an underwriter are similar in that they make calculations to determine risk, but actuaries are involved in determining the general risk, whereas underwriters determine the risk of an individual based on individual factors.
What qualifications do I need to become an actuary?
To become an actuary you need a high level of academic attainment.
If you were to take the traditional route into the actuarial profession you will have to have a Maths A-Level at a B-grade or equivalent, and a 2:1 in a numerical undergraduate degree such as mathematics, statistics or economics. You can also look at a doing a postgraduate course in Actuarial Science, you can find a list of the universities that offer postgraduate courses here.
However, school leaver schemes are becoming a popular route into the profession, in which case you will typically need 5 GCSE’s at grades A*-C, including a grade B/6 in Maths.
Once you have secured your place on an actuarial graduate or school leaver scheme, your education continues as you complete your qualifications. You will do your qualifications through the Institute and Faculty of Actuaries, who set the curriculum and ultimately award you with your qualification. You will have to go through six stages, two to qualify as an Associate and four to qualify as a Fellow. You can find more about the actuarial syllabus and exams here.
While this may sound daunting, you may find that your employer will pay for your exams on the first try as well as offer you study support, external tutorials and study leave. This does depend on the employer, but you will find that many employers on the Actuarial Careers website offer these benefits.
What qualifications do you need to become an underwriter?
Unlike becoming an actuary, you do not need a degree in a numerical subject, though many employers will require you to have a bachelor’s degree but this can be in any subject.
You may also be able to join the insurance profession through an apprenticeship, in which case you will need five GCSE’s A*-C and a certain amount of UCAS points, depending on the employer. You will then work towards your CII qualifications. Once you have this qualification you may be able to work towards a qualification in a more specialist area such as underwriting.
Alternatively, some people become underwriters by joining as an underwriting assistant with the chance to work their way up. You can find out more about the CII qualifications here.
Actuary vs. Underwriter; Which job pays more?
Money isn’t everything, but it is important to consider it which career might be the one for you.
Both actuaries and underwriters enjoy great financial reward, and earning potential in both careers can reach over six figures.
Graduate actuaries can expect to earn around £28,000, this increases to an average of £36,000 once you qualify as an Actuarial Analyst. This continues to rise and, depending on which route you could take, can result in a Partner salary of over £250,000. You can read more about actuarial salaries here.
A career as an Underwriter follows a similar pattern. A starting salary for a graduate entry underwriter is between £25,000 and £30,000. This can increase to £40,000 after 3 years. A career as an Underwriter could lead you to having an earning potential of around £240,000 depending on where your career takes you. You can find out more insurance salaries here.
Actuary vs. Underwriter: Which is best for me?
We’ve taken a look at what each role does, what you need to do to qualify and the earning potential of each role. So, which career is best for you?
It really depends on what your strengths are. Both require an analytical mind and good communication skills, but becoming an actuary requires a high level of mathematical ability and continued exams after you finish university. If you are highly numerical and aren’t phased at the thought of three additional years of study, then a career as an actuary may be the career for you. However, if you have a good level of numerical ability but value your communication and team work skills more, then you may be more suited to becoming an underwriter.
Either way, whichever career you choose, you will be in for a hugely rewarding career with great progression and a great salary to boot. You can find our latest insurance graduate roles here, and our latest actuarial graduate roles here.