Exam 5 Question #30 Poll (not just for Exam 5 takers)

[Mapie]

I'm curious. I have seen that some people think this question might have been biased towards New Yorkers. If there is a bias, I am inclined to think that the longer one has been working in the actuarial field, the better able one is to answer this. It's one thing to be able to list all of the considerations, but experience can help when you try to apply them to a given situation.

So, tell me...

Did you think it was biased towards New Yorkers?
How long have you been working in the field?
Do you think it was biased towards people working in the field for longer periods of time?

And, this has nothing to do with this question, but my co-worker and I were discussing this, and we were wondering if we were the only ones who have done this: Did anyone else skip Exams 3 and 4 and go right to the CAS specific exams? (We both did; we're getting Exams 5 and 6 under our belts before we tackle 3 and 4.)

Quick refresher of question #30:
The Statement of Principles Regarding Property and Casualty Insurance Ratemaking lists numerous considerations involved in the ratemaking process. State and briefly discuss three of these considerations that have been impacted by the recent rise in worldwide terrorist activity.

[Mapie]

Here are my answers:

I don't think it was biased.
I have been working in the field for five years.
I think people who have been working in the field for a while have an advantage in this question.

I skipped 3 and 4. I'll be tackling one of them next spring (I hope, I hope.)

(By the way, I thought this question was the best question I have seen on an actuarial exam. I hope there are more like this in the future.)

[mckenna]

Absolutely not. The question was open-ended enough that anyone who was familiar with the considerations and could put together a good argument could receive full credit. There are many questions that are actually a lot more biased. For example, I've been doing auto ratemaking for two years and that helped with the auto questions. The Hurricane modeling question would definitely be biased towards someone who has worked towards Hurricane modeling.

I've been working for two years in auto/cycle ratemaking.

I didn't skip 3 and 4.

[Klaymen]

a

[Klaymen]

I wouldn't be concerned about bias. The entire industry is now concerned with the potential impact of terrorism insurance, and the questions that arise in work and on this test are quite relevant. There was a 1.5-pt test question involving terrorism on Exam 7 as well.

Job experience can make it easier to understand the concepts behind an exam. Working for a personal lines carrier prevented me from seeing the details of retro rating and understanding the articles on the reserving exam as well as I do now. I seem to recall some statement in the CAS syllabus (I don't know if this is a few years ago) noting that relevant work experience may be an asset to candidates taking that exam. Job experience certainly isn't a necessary condition, however.

[Mapie]

Anonymouse,

I completely agree that job experience is not a necessary condition. I definitely agree that job experience can make it easier to understand the concepts behind the exam.

I guess the reason I made this post is I thought this question (question 30) was so good. I read this question on the exam and thought, finally! A question that really tests my abilities as an actuary, and not my ability to memorize lists and formulas. I was really excited about the question, and I guess I was surprised to see that not everyone was as pleased with this kind of a question. For years, students have complained that the tests do nothing to test our ability to be a "good" actuary. And when the tests start to move in that direction (and I think the lack of paper references in the questions is also a move in this direction), there is a new set of complaints.

[proudmom13]

I agree with that. When I read the question, I was surprised, but I thought it was a great question. Not to mention that if you picked just any three of the 18 considerations and came up with a somewhat reasonable justification, these should be easy points. I believe there should be more questions like this. So what if I can rattle down all 18 considerations? If I can't apply them and think about them in a given context, what's the point?

Also, I don't think that the question was biased. Just because the attacks took place in NY doesn't mean (I hope!) that the rest of the country and the world were not affected.

I have worked as a homeowners actuary for almost two years now, and I agree that some other questions have a lot more bias. I had a harder time, in general, with questions related to auto insurance.

I don't remember who asked, but I also skipped 3 and 4. I thought Part 5 would be a welcome change of scenery. Hopefully I'll be sitting for 3 next Spring though...

[Skibum]

This has nothing to do with the NY question, but I'm a business major who skipped 1, 3&4. I have 2, 5, & 6, and I feel pretty good about 7, which I just took. I need some advice on whether to concentrate on 1 next, or 3/4. I have quite a bit of simulation/loss distribution experience from my consulting job, but not much calculus (9 credits long ago). Any hints?

[Mapie]

I wish I could offer some help. I have 1 and 2, but not 3 and 4. However, I would think that a working knowledge of calculus would be helpful when studying for 3 and/or 4. For example, you will need to know integrals and such when looking at continuous loss distributions. So, I would think you might be better off getting a good review of calculus, taking 1, and then tackling 3 and 4.

[Mel-o-rama]

When I first read the terrorism question, I felt there was some kind of bias, but I couldn't put my finger on it. Since someone else thought it was biased, that may in itself indicate that there is a bias.

So, to be a devil's advocate, I'd say that this question was biased. I don't think it was biased in the favor of New Yorkers since the terrorism was felt worldwide. The insurance company I work for is not in New York, but it was hit pretty hard along with other companies.

However, I do think this question is biased towards the majority of actuaries who had experience that arose from having to deal with the recent terrorism. Unfortunately for some of us who work at larger insurance companies, we haven't had that much direct experience in coping with terrorism since there were actuaries higher up who do so for us.

To those who think this question isn't biased, let me ask you this: had the question been asked in 2000, before any major terrorist attacks had happened, would you have been able to answer the question?

And to those of you who may answer that we actuaries should be keeping up on current events, let me ask you: What are we being tested on - the syllabus or current events?

I think the question is biased.

[Mapie]

Mel-o-rama,

Your question puts a finger on exactly why I think the question is not biased. Do I think I could have answered the question had the terrorist events not happened? I think it might have taken me a few extra minutes to think about it, but yes, I do. I think, given any situation (real or hypothetical), we should be able to relate the considerations to the situation. Most actuaries had probably not thought about terrorist activities and how they would impact ratemaking prior to the events of September 11th. But, they did think about it after it happened. New situations, new coverages, changes occur. Actuaries have to be able to think about such things and what impact they will have on ratemaking. That is why this was such a good question. It truly tested our ability to think like actuaries.

[Lucy]

It sounds like an excellent question to me.

I think it was biased in favor of people who have experience, especially in favor of people who's experience helps them to apply the priciples to real situations. In my opinion, this is a good bias, nearly as fair as a bias in favor of people who have studied the material.

These tests aren't intended to just be games or hoops to jump through, they are supposed to prepare people to practice in the real world, and certify that people are qualified in some way. In fact, I think one problem with many old exam questions is that they are remote enough from actual practice that experience in that area might not help you.

If you couldn't have answered the question just from the readings, then the question would have been unfair (although arguably, the syllabus rather than the exam would have been at fault.) But I believe you CAN answer this question without experience - although you might need to think a little longer.

[Mapie]

In my opinion, this is a good bias, nearly as fair as a bias in favor of people who have studied the material.

Lucy,
Thank you for saying in one sentence what took me several paragraphs to try to express, and still fell short of articulating it. :D

[frummie]

Did you think it was biased towards New Yorkers? No. When I took part 5, once a week I would do what Feldblum said: Make an outline, fill it in. I worked on the considerations once a week. So once you have the considerations down, you should be able to answer the question.

How long have you been working in the field? 18 years

Do you think it was biased towards people working in the field for longer periods of time? No. I do think it helps to have worked in the field for some part 5 questions. This particular question, though, no.

I took the old part 4 before transition and didn't pass, so I've skipped it and passed 5 in 2001, and I just took part 7 and will take part 6 for the third time in fall. So I now have 1, 2 and 5. (yes, in 18 years :oops: ) :duh:

[Mapie]

frummie,

No need for blushing cheeks.

I'll be taking Exam 6 this fall with you. Third time for me too!

[Mel-o-rama]

The exam was pretty long. I skipped the terrorism question because I knew I could get those three points faster elsewhere. I ended up not having time to return. Had I tried to answer that question I wouldn't have been able to answer another question that I ended up answering. So in my case I guess the terrorism question was biased against itself.

But I will admit that when I first saw the question, I saw "terrorism" and I immediately went to the next question. Time permitting, I could have answered that question. I could have answered it more quickly if it had asked for three considerations and for examples (as other questions on the exam did).

A final thought: It's true that we actuaries should be internalizing these exams and use what we learn in our jobs. We should also take any advantage from our experience to help us pass these exams. It is true that a "good actuary" would be able to answer the terrorism question. But does all this mean that the purpose of the exams should be to test our ability to absorb the material and apply it to our work? I always thought the purpose of the exams was to test our knowledge of the syllabus.

In order to answer the terrorism question, one not only needs to know what three of the considerations were, they also need to have an understanding of how terrorism can affect an insurance company. You may correct me if I'm wrong, but I don't remember terrorism being on the syllabus. I guess what I'm really trying to say is that this is more a question of being on the syllabus more than it is a question of being biased.

[Loki]

I have been in the industry for 18 years as well. I took Part 1 (the first time) in the fall of 1984. I've switched to underwriting then back to actuarial a few times and am finally going to finish. I'll blow those travel time studies away, as will you!

I had some exams that I lost credit for and I just started taking exams again last fall when I passed part 6. Now I have 1,2 and 6. Hopefully I will have good news on 5 in 4-5 weeks.

On everyone's point about experience helping on the exam. I definitely think it does. When studying for parts 5 and 6 I found that the concepts were intuitive to me so I didn't really have to memorize details like "the drawback of this method is that it doesn't include partial payments" or how to do on-level. Those things just made sense to me. But this doesn't mean that those with more experience don't have to study the material. The questions tend to be so focused on particular methods, specific lists, etc that there is a lot of studying involved. Is this fair? I think so. As has been said, the exams process should be testing ability to apply concepts in real life situations.

Is the terrorism question fair? Yes. Terrorism affects many major lines of business (from auto phys dam to property to wc) and it should always be a consideration when pricing business.

Each student's particular work experience will give them an advantage in some area on the exams. So we will all have our turn in areas where we are more experienced than the average student.

[Maine-iac]

Not biased to New Yorkers. The events in NY, and other terrorist events worldwide have not had an impact on our small, primarily rural book of business directly at all. But they have certainly affected our reinsurers, and that has had a significant indirect effect on our business, so I would say we are all aware of the issues to some degree or other.

In the upper exams, there is always a "bias", for lack of a better word, for those who have done material work in one or more of the areas tested (pricing, reserving, reinsurance, etc.) The material you need to answer the questions is in the study notes, it will just all sink in more quickly and easily if you have worked with the stuff. You'll win on some exams and/or questions, and lose on others.

It would be a bias, but not an unfair one, I think. If I took an upper level physics course at my local college, a physics major would have an easier time of it than I would, as would a practicing physicist, but that would not be unfair to me. But since you asked only about bias, you may not be claiming unfairness, so I will stop rambling here. :)