What is an actuarial consulting firm?
An actuarial consulting firm provides services to companies on a consulting basis. This means completing projects for the client in exchange for consulting fees.
Actuarial consulting firms provide actuarial services to companies, either billing by the hour or by the project. Per hour billing means that every staff member has a billing rate, and the number of hours each person works on a project multiplied by their billing rate equals the charge to the client. So if a senior consultant spends 5 hours on a project and his rate is $400/hour then the client is charged $2000. For per project or fixed fee projects, the client is charged a fixed amount for the work done. For example, to calculate the actuarial reserves of a small company, the consultant may charge the client $20000, regardless of how many hours or who works on the project. There has been a trend to shift from per-hour billing to per-project billing in recent times.
See list of actuarial consulting firms to see a list of firms, which is helpful when you start applying for jobs.
Actuarial Consulting – Compensation
Salaries at actuarial consulting firms tend to be higher than at insurance companies. In terms of the work itself, see Actuarial Consulting vs Insurance for more information.
While the consulting firms bill their clients a lot ($200-$600/hour), the actuaries themselves are being compensated approximately at the same level as their colleagues in the insurance companies. Why is this? Actuarial consulting firms also need to market their services and incur overhead that is not billable, such as office expenses and marketing. There could be periods of time when the staff are not working on a client project but still need to be paid. The time and effort taken in order to get paid work must also be taken into account.
How to Land an Actuarial Consulting job?
There are many jobs available in actuarial science. While the overall number of jobs available aren’t very high compared to computer science or accounting, there are also far fewer people competing for these jobs. This is especially true for internships because there is high turnover. It is generally easier to land an internship than a full time position. This is because companies see actuarial internships as less risky (they don’t have to keep you if they don’t like you) and because there’s higher turnover. A company may hire 2 actuarial interns per semester or 6 interns per year, but only hire 2 full time actuarial staff per year. Out of the 2 that they hire, it is very likely that they choose from the actuarial intern pool since they’ve known them for 4 months. A 4 month internship is a much better interview than even a full day of interviews. So the best way of breaking into the actuarial science industry is to get an actuarial internship while you’re still in school.
What do actuarial interns in consulting firms do?
Actuarial interns in consulting firms perform a variety of roles. It’s not just photocopying all the time! Generally my week comprises of data cleanup, preliminary analysis of actuarial claim reserves, and making presentation decks (not the actual presentations themselves, unfortunately). When we’re engaged to perform actuarial analysis on the reserves for a client, the client sends us claim data. I help make sure that the data is reasonable, then put it into certain templates so we can look at the indications from a variety of standard actuarial methods (chain ladder, loss ratio, Bornhuetter-Ferguson, etc.). The consultants select their opinion on the assumptions and the actuarial interns such as myself then put it into Powerpoint presentations for the clients.
Final Comments on Actuarial Consulting
Working in an actuarial consulting firm is fun. I definitely recommend jobs in actuarial consulting because you learn a lot and get exposed to a variety of industries. You can also learn a lot as an actuarial intern in an insurance company, but an actuarial consulting firm exposes you to a wide variety of companies and best practices. See our list of actuarial consulting firms and apply today!
Actuarial Consulting – Terminology
Actuarial Consulting Firm – Professional Services Firm – Consulting firms typically call themselves this. The actuarial consulting firm comprises of professionals, who offer their services to clients
Time and Expense Project – This means that the client is charged based on time spent (hours worked by staff) and expense (eligible expenses are billed to the client). For example, if 3 people at $300/hour work 10 hours each on the project, then the client is billed $9000. The risk is on the client, although consulting firms try to avoid going over budget as it’s bad for their reputation.
Fixed Expense Project – This means the client is billed a fixed fee (eg: $25000) for a project with specific scope and deliverables. This reduces the risk of running over budget for the client and is getting more popular for firms to offer in a competitive market.
Client – The client refers to the company that hires the actuarial consulting firm
Billable Hours – Billable hours is a measure of how many hours is charged to a client. A consultant (or any other staff) who works on a project for a client records their hours worked as billable. Even if the project type isn’t based on time spent, it is a good measure of how profitable the consulting project is to the firm. For example, if two projects each brings in $5000 in revenue, but one only requires 10 hours of work by 1 employee and the second requires 20 hours of work by the same employee, the first project is more profitable all else being equal.
Billable Hours Target – Each staff member has a target for billable hours. This is either an hour per time period such as 1400 billable hours per year or a percentage such as 70% billable. At the junior level, the % billable is important. At more senior levels, greater importance is placed on bringing in new business vs working on projects.