The difference between an underwriter vs. actuary is subtle. Both professionals assess risk and often work in the insurance industry. However, actuaries work more behind the scenes developing methods to measure risks and analyze trends. On the other hand, underwriters apply findings from actuaries’ studies to individual customers to determine if a client can qualify for a loan or insurance policy.
While these differences can seem small, because the type of work underwriters and actuaries do can vary, there are different paths to get these roles — as well as different salary ranges and work environments.
So, what are the key differences between an actuary vs. underwriter? And if you’re considering a role in the insurance industry, which one is right for you?
What Does an Underwriter Do?
Underwriters evaluate risk, but the act of underwriting also has a layer of assuming risk.
Take car insurance: Insurance companies want to avoid paying out claims as much as possible — that’s how they make and keep profits. When underwriting a car insurance policy, the company tries to determine how likely that customer is to file a claim. Customers with a history of accidents are statistically more likely to need to file a claim than those with spotless records. The underwriters attach a price to the risk the company assumes by insuring that customer — this is the policy premium or how much the customer needs to pay for their coverage. For that reason, lower-risk customers tend to have lower-cost policies.
>>MORE: What Is Underwriting?
Where Do They Work?
Underwriting isn’t just for car insurance, though. Underwriters work in all types of insurance, including life, property, pet, and health insurance. Banks also use underwriters to measure risks associated with giving loans and mortgages to consumers.
In investment banking, underwriting is slightly different. These underwriters determine how much the bank is willing to pay for tradable securities, like stocks or bonds. The bank then takes a chance when buying securities that it may be unable to resell for a profit.
Underwriters often work in fast-paced, customer-facing environments. They must regularly interact with sales teams, agents, and customers to gather information, assess risk, and determine appropriate coverage and pricing. The role requires strong analytical skills as well as effective communication abilities to explain complex insurance products and decisions.
What Does an Actuary Do?
Actuaries use statistics, mathematics, and data science to quantify risks in areas like business, finance, and insurance.
A typical day as an actuary involves “working with analytical tools such as spreadsheets or statistical modeling software to develop models and analyze information to develop solutions,” says Ken Williams, FCAS, staff actuary at the Casualty Actuarial Society.
Actuaries are especially common in the insurance field, where they study past claims, technological improvements, and economic trends to create models that inform policy approval and pricing decisions.
For instance, an actuary working in car insurance may be responsible for “evaluating recent trends in the frequency of auto accidents to determine needed adjustments to the premiums charged to the company’s policyholders,” says Williams.
They use factors like advancements in airbag safety technology, recent recalls for parts or equipment, and broader changes in driving habits to aid their evaluation.
>>MORE: What Is an Actuary?
Where Do They Work?
Outside of car insurance, actuaries work in all types of insurance, such as health, life, and pet insurance. Actuaries also work in banking and finance, creating models for the risks involved with investments and loans. However, actuaries are also necessary outside of insurance and finance. Their skills in evaluating risk and tracking trends are beneficial in health care, consulting, labor unions, and more.
“Actuaries can work in any industry that needs to evaluate and quantify future risk,” adds Williams.
Actuaries typically work in analytical, office-based environments. They spend a lot of their time developing complex statistical models, analyzing data, and presenting their findings to managers and other decision-makers. The role requires strong technical skills in mathematics, programming, and data analysis, with less direct customer interaction than underwriting positions.
Find your career fit
Discover if this is the right career path for you with a free job simulation.
Actuary vs. Underwriter Salaries and Job Outlook
While both actuaries and underwriters work in the insurance industry, their salaries can vary greatly — and the future of each role looks a bit different.
Underwriter vs. Actuary Salaries
Salaries for either actuaries or underwriters can vary greatly depending on location, company, and level of experience. According to the U.S. Bureau of Labor Statistics, actuaries make an average annual salary of $132,500. However, salary estimates on Glassdoor suggest that those with a significant amount of experience can see salaries closer to $300,000.
Underwriters, on the other hand, tend to make less than actuaries. For example, according to the BLS, insurance underwriters have an average income of $85,610 per year. Experienced underwriters with over ten years of experience can make six figures, based on estimates from Glassdoor.
| Experience Level | Underwriter | Actuary |
|---|---|---|
| Early Career (<1 Year Experience) | $80,000 | $140,000 |
| Average for All Experience Levels | $94,000 | $217,000 |
| Experienced (>15 Years Experience) | $120,000 | $304,000 |
So, if both careers are responsible for similar things, why the discrepancy in pay? Ultimately, actuaries perform more in-depth analyses of data and trends, using programming languages like R and Python to quantify and evaluate risks. Underwriters typically apply these findings from actuarial sciences to specific cases rather than calculating risks broadly.
Actuary vs. Underwriter Job Outlook
Actuarial sciences is a growing industry, while underwriting is not.
In fact, BLS data suggests that the employment of insurance underwriters is expected to decrease by 4% between 2023 and 2033. This decline is primarily due to the fact that some underwriting tasks can be completely automated, especially if the models made by actuaries are statistically sound. On the other hand, employment of actuaries is expected to grow 22% over the same time period — much faster than the average growth across all occupations.
Underwriter vs. Actuary: Which One Is Right for Me? Quiz
Now that you know more about what loan officers and underwriters do, which one best matches your skills, career goals, personality type, and more? Take the quiz! You’ll need to sign up to get your results, but it’s absolutely free.
How to Become an Underwriter vs. an Actuary
Education
To become an actuary or an underwriter, you need at least a bachelor’s degree. While there isn’t a specific type of degree required for either, coursework focusing on mathematics, statistics, economics, business, and finance can be great ways to prepare for these careers. Some colleges and universities do offer degree programs in actuarial sciences, but you can still become an actuary with a degree in a different discipline.
Ultimately, the goal in college should be to hone the essential skills needed for actuarial sciences or underwriting, namely mathematics and statistics, as both careers require making quick calculations and understanding numerical data.
Certifications
In addition to a bachelor’s degree, actuaries have several exams they need to pass to become certified. Both the Society of Actuaries (SOA) and the Casualty Actuarial Society (CAS) provide credentials for actuaries.
Each organization specializes in different areas or industries, so actuaries who work in property and casualty insurance go through CAS for their certifications. On the other hand, those working in life or health insurance would pursue the SOA certification. The exams for each organization differ slightly, but both cover topics like statistics, risk management, and regulations.
Underwriters often don’t need certifications, but having one can certainly help! Certificates are often industry-specific. Underwriters who want to specialize in mortgages can gain credentials through the National Association of Mortgage Underwriters (NAMU). Those interested in property and casualty insurance, though, would likely want a Chartered Property Casualty Underwriter (CPCU) certification.
>>MORE: Learn more about what mortgage underwriters do.
Skills
Underwriters and actuaries both need strong analytical skills and attention to detail. There isn’t room for error when measuring risk since mistakes can cost companies a lot of money. Both careers also require skills in mathematics and statistics to analyze data and communication to explain findings to coworkers and customers.
For actuaries, programming skills are important, too. Williams advises actuaries to “learn at least one computer language such as R, Python or SQL.”
>>MORE: Check out our picks for the best coding bootcamps and best SQL bootcamps of 2024.
Understanding certain coding languages can help with data analysis and manipulation, making actuaries more effective at measuring risk and more marketable to employers. Additionally, actuaries need in-depth knowledge of their industry.
Showcase new skills
Build the confidence and practical skills that employers are looking for with Forage’s free job simulations.
Bottom Line: What’s the Difference?
“Both actuaries and underwriters specialize in evaluating risk,” says Williams.
However, underwriters don’t go as far in their analysis and often rely on data and models created by actuaries to complete day-to-day tasks. Instead, underwriters may work more closely with clients than actuaries, using their interpersonal skills to get more information about client risk level and provide recommendations.
| Actuary | Underwriter | |
|---|---|---|
| Primary Function | Use advanced mathematics and statistical modeling to analyze the financial costs of risk and uncertainty. | Guide customers through the process of finding and applying to insurance policies. |
| Education | Bachelor’s degree required. Can be in actuarial sciences, but also in mathematics, statistics, economics, or other related fields. | Bachelor’s degree required. Usually in mathematics, statistics, economics, or another related field. |
| Certification | Required. There are several exams to become certified, varying depending on the industry | Not required, but there are industry-specific certifications. |
| Average Salary | $217,000 | $94,000 |
| Necessary Skills | Analytical thinking Mathematical skills Attention to detail Programming | Analytical thinking Mathematical skills Attention to detail Relationship management |
| Work environment | Focused and detail-oriented | Analytical and relationship-oriented |
Want to explore other careers in financial services? Check out Forage’s free finance job simulations.
Image credit: Canva
