March 6th 2023
As a student in both high-school and college, perusing a degree and later a career in a math-related field can be a daunting task. However, if you enjoy and excel in math, find statistical analysis fascinating, and are interested in a career that incorporates both, the actuary and accounting paths may be for you. While both actuaries and accountants work in finance and are appealing options, there are key differences between the two: the scope of duties and academic requirements.
Unlike an accountant, the main objective for actuaries is to predict, assess, and navigate the financial implications of future events that may or may not happen and manage the risks of financial investments or insurance policies. To do this, actuaries utilize and analyze very large data sets to calculate the risk and probability of certain events. Once probability has been estimated, actuaries determine the expected cost or earnings the event will incur, knows as the expected cost.
Most actuaries play a critical role in the insurance industry by reducing potential risk and uncertainty. For example, actuaries can calculate the risk factors for accidents, floods, or fires to give an accurate representation of the risk insurance companies will assume by insuring a business or individual. For example, property and casualty actuaries estimate the probability of certain events and the projected financial risk to insurance companies or self-insureds in the event those events occur at some point in the future.
However, actuaries are also responsible for producing financial solutions and strategies that mitigate or avoid those risks or events altogether. They must also be able to correctly evaluate how well these strategies will work to lessen the risk carried by the insurance companies they represent while still providing an appropriate benefit to policyholders.
To become an actuary, the first step is to earn a bachelor’s degree in math, statistics, actuarial science, or a related subject, typically taking between three to five years to complete. In addition to the degree, actuaries must pass ten professional certifications to be fully certified. The exams evaluate the test taker’s math and statistical abilities, and although they are generally difficult, certifications last for life.
Generally, accountants investigate financial reports, prepare tax documents, oversee payroll services, or perform bookkeeping, and can do so in a variety of industries. Some accountants work as managers, auditors, forensic accountants, or clerks and some work in the financial sector, insurance industry, or the government. Unlike actuaries, accountants report on the financial implications of events that have already occurred. They do not make predictions like actuaries and work with known numbers.
Like actuaries, accountants can also assess financial risk and perform internal audits. When performing an internal audit, accountants examine their client’s financial records in extreme detail, using their findings and data to make recommendations on financial processes or to detect potential fraud. To be successful in accounting, excellent math skills in algebra, calculus, and statistics are usually a necessity, as they are used daily.
Along with actuaries, accountants also need a bachelor’s degree in accounting, finance, or business. Many accountants take the CPA exam (to be a Charted Public Accountant), as job opportunities increase with licensure. To take the exam, accountants must have completed 150 college credits; therefore, some earn their master’s degree before taking the CPA exam and have worked in the field between 6 months and 2 years (depending on the state). The CPA has four sections, which are 4 hours each and each section must be completed with at least a score of 75%. Unlike the actuarial exams, which are sometimes completed within years, the CPA exam must be completed within 18 months.