Actuarial Science is the field that deals with predicting future financial risks and anticipating their impact on businesses and individuals.
But, here’s the million-dollar question – does Actuarial Science really need Accounting? This is a topic that has sparked heated debates within the industry. Some believe that accounting is an essential component for actuaries to make informed decisions, while others argue that it’s unnecessary.
In this article, we’ll explore both sides of the argument and see if we can come to a conclusion.
So, let’s get started!
What is Actuarial Science?
Actuarial Science is the study of identifying and evaluating risk, specifically for insurance companies and pension plans.
It involves analyzing data related to mortality or morbidity rates, financial losses due to an event such as an earthquake or hurricane, or any other type of risk that could affect a company’s bottom line.
This data is then used to develop strategies for minimizing potential losses or maximizing profits.
Actuaries use skills in statistics and mathematics to measure, evaluate, and plan for the future. They are like modern-day prophets who have math and science to back up their predictions.
The curriculum for an actuarial science degree includes courses in mathematics, economics, finance, accounting, computer science, business law and ethics.
Students will also learn about different types of insurance policies such as life insurance, health insurance and property & casualty insurance.
Additionally, they will gain knowledge about financial markets and investments which will help them understand how different types of investments can be used to reduce risk or increase returns.
Overall, actuarial science is a highly specialized field that requires strong analytical skills as well as an understanding of mathematics and statistics.
Does Actuarial Science need Accounting?
Actuarial Science does require knowledge of accounting principles to be successful as it is an essential part of the actuarial profession. Actuaries use accounting principles to calculate the periodic payments that a company must make to fund its employee pension benefits. They also use accounting principles to review data and calculate risks, typically for insurance premiums or business decisions.
Accounting helps actuaries better understand the financial impact of events that may or may not occur in the future, as well as develop strategies to mitigate those costs.
In addition, having knowledge about accounting can help actuaries become more competitive in the job market. Many employers prefer candidates with a background in both actuarial science and accounting since they have a better understanding of how these two disciplines intersect.
Overall, accounting is essential for any aspiring actuary. Accounting principles provide insight into how companies manage their finances and how they can reduce risk while still achieving their goals.
Actuary Vs Accountant: Key Differences
Actuaries and accountants are two important roles in the financial industry, but they have distinct differences.
Accountants focus on the past, analyzing and recording financial facts that have already taken place. On the other hand, Actuaries attend to future scenarios and attempt to predict their potential financial impact – no matter if they eventually occur or not. The primary discrepancy between these two professions is thus one of scope: accountants work with what has happened while actuaries anticipate what could happen.
Let’s understand key differences between these two disciplines in detail –
Career Opportunities
In terms of career scope, the main difference between an actuary and an accountant lies in their responsibilities and their potential career paths.
Actuaries
Actuaries have a more specialized skillset and are focused on predicting the financial impact of future events. They work primarily in the insurance and pension industries, but also in other financial institutions.
Actuaries have a range of potential career paths, including working for insurance companies, consulting firms, or government agencies. They may specialize in different areas such as property and casualty insurance, life insurance, or pension and benefits planning. Actuaries often have opportunities for advancement and may eventually become executives or directors in their respective companies.
Accountants
Accountants, on the other hand, work with existing financial data to ensure accuracy in financial records and to prepare financial reports. They are responsible for managing budgets, taxes, payrolls, and other financial records. Accountants work in a variety of industries, including public accounting, corporate accounting, and government accounting.
Accountants also have a range of potential career paths, including working for accounting firms, corporations, nonprofits, and government agencies. They may specialize in areas such as tax accounting, auditing, or forensic accounting.
Overall, both actuaries and accountants have solid career prospects in their respective industries.
Education and Examinations
For Actuary
To become an actuary, it’s recommended to have a bachelor’s degree, preferably in math, statistics, or actuarial science.
Some post-secondary schools require internships to get all necessary credits. Moreover, actuaries are required to pass 10 professional exams to be fully certified and it will take around 3 to 5 years.
These exams are challenging and test the candidate’s mathematical skills. The pass rates are typically below 50%, and it takes around 7 to 10 years to complete all of them.
For An Accountant
To become an accountant, you must earn a bachelor’s degree in accounting or business, and complete the required courses in auditing, taxation, and business. With these qualifications fulfilled, you will be ready to enter this challenging yet rewarding field!
Completing the degree program requires four years, but it doesn’t stop there. To achieve a major accounting designation – Chartered Public Accountant (CPA) – two tests must be passed: the demanding CPA exam and an Ethics test which is only necessary in specific states.
The Ethics exam is relatively easy, whereas the CPA exam requires more preparation time.
The CPA (Certified Public Accountant) exam consists of four distinct sections, each lasting 4 hours in length. In order to pass a section, you must obtain at least 75% on the test.
The pass rate for the designation is typically between 40% and 60%, which must be completed within 18 months. Additionally, it’s mandatory to have 6 months up to 2 years of work experience in order to qualify, varying by state.
Salary Point of View
An Actuary Salary
According to the US Bureau of Labor Statistics, the median annual salary for an actuary as of May 2020 was $108,350, with the lowest 10% earning less than $63,140, and the highest 10% earning more than $194,590.
Factors that can impact an Actuary’s salary include their level of education, years of experience, industry, size of the employer and location.
Additionally, companies may offer performance-based bonuses and other benefits, such as profit-sharing plans, retirement contributions, and insurance coverage, which can also impact an Actuary’s total compensation package.
Actuaries can work in various sectors, including insurance, government, healthcare, banking, and consulting firms. Insurance carriers are the largest employers of actuaries, and they tend to offer the highest salaries due to their complex risk management needs.
Actuaries in government positions tend to earn less than those working in private industry.
An Accountant Salary
The salary of an accountant depends on a variety of factors, including experience, location, and industry.
In 2021, the median annual wage for accountants and auditors was $77,250 according to the U.S. Bureau of Labor Statistics (BLS).
However, salaries can vary widely depending on where you live and work. For example, the average salary for an accountant in Austin, Texas is $59682 per year according to Indeed.com. This is slightly lower than the national median wage but still higher than other cities in Texas such as Houston or Dallas.
The salary of a senior accountant in Austin is even higher at $88,876 according to BuiltinAustin.com. Senior accountants typically have more experience than entry-level accountants and may be responsible for managing teams or providing advice on complex financial matters.
In addition to their base salary, senior accountants may also receive additional cash compensation such as bonuses or stock options depending on their employer’s policies.
The job outlook for accountants is projected to grow by 4% from 2019-2029 according to BLS data which is about as fast as average compared to all occupations. With more businesses relying on accurate financial information and analysis, there will be a continued demand for qualified accountants in the years ahead.
Can Actuary Become an Accountant?
Yes, an actuary can become an accountant, as both professions require a strong understanding of financial systems and principles. However, it would require additional education and training as the skill sets for each profession are slightly different.
To become an accountant, an actuary would generally need to pursue additional education and gain relevant experience in the field. For example, they could obtain a degree in accounting or complete relevant coursework, and then study for and pass the necessary certification exams, such as the Certified Public Accountant (CPA) exam.
Alternatively, some employers may offer on-the-job training or the opportunity to take on new responsibilities, gradually transitioning into an accounting role over time.
Is Actuarial Science Harder than Accounting?
Yes, actuarial science may be harder than accounting as it requires knowledge of advanced mathematics and statistics, and the ability to apply that knowledge to solve complex financial problems.
Accordingly, Actuarial Science programs can be rigorous and demanding, often requiring students to pass challenging exams offered by the Society of Actuaries (SOA) or the Casualty Actuarial Society (CAS) to obtain certification as an actuary.
To pass the exams, students need to study extensively, and it can take up to several years to achieve certification. Moreover, the pass rate for these exams can be low, with some exams having pass rates as low as 30%, which can make it quite a challenging endeavor.
Also Read – Does Accounting Require Calculus?
Wrapping it up…
In conclusion, it is clear that actuarial science and accounting are very different professions with their own unique skill sets. While an actuary may be able to transition into the field of accounting if they have the necessary education and experience, this would require a significant amount of effort on their part.
In addition, accountants should not expect to easily transition into actuarial roles as these positions can be highly competitive due to their technical nature.
