Course 5 Disputed Questions

[Anonymous]

Here is a current list of multiple choice questions that, in my opinion, had the wrong answer listing on the answer key. If I omitted any, please let me know. Also, if anyone disagrees please let me know. We should all send e-mails to the SOA.

Question #7

I Overhead Expense – Elimination 90 days (IHI p 42)
II Disability Buy Out – Elimination 1-3 years (IHI p 42)
III Presumptive Disability – Elimination may be waived (IHI p 38)

III < I < II

Answer D

Question #11

X – GAAP Financials
Y – Statutory Financials

I Match incidence of revenues and expenses - X GAAP (GI p 715)
II Value insurer on a going concern basis – X GAAP (GI p 715)
III More Conservative standard for liability valuations – Y Statutory (GI p 715)

X goes with I and II

Answer A

Question #20

It is clear that both answers are true. It seems like that Reason B may be a reason for Assertion A since depreciation is listed as a tool for managing the economy (SN 23 p 3). This is definitely a poorly designed question that should give credit for A or B

Question #34

It is clear that both answers are true. It seems like that Reason B may be a potential reason for Assertion A. This may also be considered a poorly designed question that should give credit for A or B

Any comments??

Question #40

X – Variable accumulation annuities
Y – Fixed Accumulation annuities

I Generally backed by an insurance company’s general portfolio – Y Fixed (LI p 632)
II Equity- indexed annuity – Y Fixed (hybrid between fixed and variable but classified as fixed LI p 645)
III Spread for pricing purposes is fixed – X Variable (LI p 643)

Y goes with I and II

Answer C (although item II is definitely a technicality)

[Health guy]

#34
Group health reserves are less significant b/c there is less risk involved due to the spread of risk. Generally, alternative funded groups don't even have a reserve with the IC.

[phila]

Question 11 - they screwed up. It must be A

Question 20 - A is a valid answer, they showed B

Question 34 - same deal

[Not Mike]

grayspring,

On #20, (I don't have the SN with me), does it say that tax depreciation is generally greater? I know that additional depreciation can be used to as a "social purpose" of taxation... I still have a hard time believing that "in general" tax depreciation is higher...

[Relaxed]

Wow!!!!!

According to the preliminary answer key, I got 21 right. If these 5 concerns you list are all valid, I got 24!

I think I'll send one of those letters to the SOA!!!

<font size=-1>[ This Message was edited by: Relaxed on 2001-11-06 09:59 ]</font>

[Anonymous]

Not Mike,

I know from my accounting classes that for tax purposes, assets are depreciated over a period that is defined such as 3,5 or 7 years. For other purposes, assets are depreciated over their future usefulness which is usually longer.

I am not sure where or if this was covered in the Study Note. I will look it up when I get home tonight.

[Anonymous]

Does anyone have any comments regarding Question #7? I outlined the error in an earlier posting.

[Steve White]

Q11.

Is the Group Insurance text your only relevant syllabus material on this topic, especially item III? The relationship for group insurance liabilities may be very different from the relationship for deposit-type liabilities (deferred annuities; universal life), and for most insurance companies the latter would be far more important.

Had I answered E to this (I didn't take course 5), I would be incensed at any suggestion that E was wrong. A may also be correct.

[phila]

To Steve White:

I am not sure what you are talking about.
Item III says, &quot;More conservative standards...&quot; - of course, this relates to Stat, whether it is group or ind valuation.

A is the only correct answer.

[Steve White]

To Phila,

No, not in actual practice.

The liability an insurance company must hold for a universal life policy under US GAAP accounting is the full account value.

The corresponding liability for that same policy under NAIC stat accounting is the account value less a CRVM allowance (but not less than the account value less surrender charge).

The GAAP liability is higher than the stat liability, hence is more conservative.

That may or may not be on the course 5 syllabus, but it is certainly how GAAP works.

(GAAP has a DAC asset not used in stat, so GAAP equity is typically higher than stat surplus, but the question asked about the conservatism of the liabilities, not the conservatism of the financials overall).

[phila]

OK, I see what you are saying; it was not in the syllabus, so I believe we could right to the SoA about it.
Steve, I think you have an access to post messages on the SoA Discussion Forum. Is that something you may be willing to do?
Thanks anyway.

[Steve White]

"Steve, I think you have an access to post messages on the SoA Discussion Forum. Is that something you may be willing to do?"

If you mean, would I post any of my own thoughts about this question on the SOA forum, then definitely no. I don't know what's on your syllabus.

If you mean, would I repost a message about this problem from someone who lacks posting privileges, probably not. This is certainly the sort of matter that should be handled through the normal defective question appeals process. I've reposted a few messages about the E&E process, but not challenges to defective questions.

By all means, write to contest the questions you feel are defective. Don't rely on someone else's complaint. It's not going to be decided by popular vote, but the volume of complaints could (IMO) influence a decision as to whether a question is ambiguous. Also, two candidates protesting the same question will not phrase their arguments exactly the same way, and perhaps your argument would be the one to sway the committee to accept an alternate answer.

Good luck.

<font size=-1>[ This Message was edited by: Steve White on 2001-11-06 12:05 ]</font>

[Toronto]

I think the Soa doesn't even understand what it's testing. Why all the mistakes and errors? <== because it's too much material. Why do they do this to us? <== Because they want us to be bigger geeks than they are. My theory is that actuaries who graduate now are much more qualified than those who graduated 10 years ago.

10 years ago you would get a question like what are the features of a term product? Now you get questions like, What are the taxing methods use in the US and Canada for ... In other words, the Soa is in control of our destination not us ourselves.

[RedSoxFan]

I also typed in the other thread..
I'm a CPA and I'm baffled how A could be incorrect (for question 11). I may see arguments for III being considered not false, but how could I or II be incorrect?
So are we all going to write in letters about the questions? What is the deadline for that? Like two weeks after the exam?

<font size=-1>[ This Message was edited by: leegreenwoodiscool on 2001-11-06 16:10 ]</font>

[Anonymous]

What about #29? To me the Reason cannot be true because the EAN method does not use average entry ages. Aggregate methods do. I think this can be interpreted to be saying that under EAN you would use average entry ages, which is not because how could you average the entry ages if you are calculating normal cost for each individual, as the EAN method does? I suppose you could average them, giving the effect described in the Reason, but then you aren't using EAN, are you?

[Anonymous]

I am also confused by #32.
The Reason is false according to the given answer key, but here is why I think it can be interpreted as true:
Expected benefits can be interpreted to refer to the benefits expected from service accrued to a particular date, which will obviously vary under, let's say, methods with and without a salary assumption scale for a final average Plan. Does anyone have any comments?

[RedSoxFan]

So, is everyone going to send in a complaint letter/ email? We need to make sure everyone is going to do it so we have maximum effect.
Could someone kindly post the email address and or mailing address for convenience? (so we all don't have to look it up).
by the way, which ones are we going to complain about? can we come to some consensus? i'm going to complain about #11 at least, but I'm willing to complain about others too if there is an organized effort.

<font size=-1>[ This Message was edited by: LeeGreenwoodIsCool on 2001-11-07 17:00 ]</font>

[Anonymous]

I'm going to complain about 7,11,20.

The e-mail address is ombudsperson@soa.org. It is on the SOA website under "do you have a question about exams?"

[Anonymous]

I sent an email to the SOA.

I would encourage everyone to do the same.

[RedSoxFan]

when we send our email, how much effort should we put in to disputing the question?

[MetsMan]

When disputing a question, all of the effort should be used in setting out the facts of your argument. You must include what you think is wrong or inconsistent and make specific references to the information in the syllabus.

Questions are sometimes removed from the exams, so good luck.

[RedSoxFan]

I sent my email in last Friday. Has anyone heard back? I haven't gotten anything, not even a "We have your email, and I forwarded it to the appropriate person". Also, I know in the catalog, etc. that we're supposed to have our complaint in writing at their offices within two weeks.. I got it there within two weeks, but does an email suffice? It makes it seem thats ok on the SOA website, but can't be too sure.

[Boink]

How much did you include in your e-mail, in terms of documenting the errors ? e.g. pages from the syllabus which conflicted with their answers, etc. ?

I was debating whether to send in a note without the backup vs. getting something in and then responding if asked.

Of course, time is running out and I haven't looked up page references yet.

[Anonymous]

If anyone has any complaint about the test, they should send an email SOON.

I sent an email describing why I thought certain answers were incorrect. I received a reply stating that I would be notified of any decision.

[RedSoxFan]

I argued for my position on the question. I produced specific page references and quotes from the texts in support of my position. I was thorough, but I didn't say more than I needed to. I had a tone of wanting fairness. The page references that grayspring included at the beginning of this thread were very helpful.. thanks!

Grayspring - how soon did they get back to you? I'm thinking about sending a follow up email to make sure they got it.. if you got a confirmation and I didn't.. I just want to make sure my voice is heard.

[phila]

By the way, it is my recollection that on the actual exam, the replacement ratio problem was worth 6 points; the published version showed 5. Am I wrong?

[aNoNo]

I just e-mailed by complaint to SOA Ombudsperson regarding the answer key for multiple choice questions 7, 11, 20 and 34.

7 and 11 should be slam dunks.

20 and 34 took a little more explanation but hopefully the case was made.

I still find it odd that the SOA posted a PRELIMINARY answer key on the web site. How do you administer multiple choice questions without knowing the answers ahead of time? Strange!

Thanks to Grayspring for the citations from the syllabus.

<font size=-1>[ This Message was edited by: aNoNo on 2001-11-13 20:34 ]</font>