2012 in Review

Let's see how I did with those resolutions:

Obtain Fellowship - Instead of making FCAS in one clean sweep, I decided to "grow as a person" by failing Exam 9 (I have lots to say about that but another time for that) and skipping Exam 8. No regrets, however, as I got myself a new job to go with my new credentials. I'll take promotion to consultant over passing an exam (almost) any day.

Read Articles - I've been better about this than I honestly thought I would. Maybe it's the pressure of being a consultant, but at this point keeping up on industry news has fallen nicely into my routine.

Wake up! - Starting my new job was a great excuse to get serious about my early to bed/early to rise resolution. Although my team is still mostly late-risers, I've been finding it relatively painless to arrive decently early.

Blog - Ha. See for yourself. Between exams, job hunt, and various personal trials, blogging just couldn't be a priority. I will strive for more balance in 2013, but something tells me that once a month blogging is an overly ambitious goal for an exam-taking consultant.

Research - Possibly my one real regret was not doing enough independent research this year. I have several ideas I'm excited about. Now to put aside the time to work on them.

Study Earlier - Less relevant since I skipped 8 this sitting, but I have already started on Exam 9 (before Halloween, in fact.) Bloom's (on which I have much to say) seems to demand a radically different approach to studying; developing a new method takes time, so I've made sure I have plenty of that.

Getting Things Done - Check. David Allen remains a life-saver for me.

Email - I am now the queen of email organization. Now to become the queen of email reading and responding.

Project Notes - Definitely a carry-over goal for 2013. New company, new projects, new practice, new everything. It's a lot to take in, and I've hardly had the time to breathe. That's unlikely to change in the next few months, but perhaps I can catch my breath some time in March. Oh wait, I'll be studying then. Eh, who needs O2?

VB - I ended up trading this goal for learning SQL. Some progress made, more to go, though I'm not sure I'll continue, since I'm unlikely to ever work at an insurer. Any thoughts, readers?

Candidate Liaison Committee - Mission accomplished. I very nearly panicked and aborted my trip to our annual in-person meeting at ISO's headquarters in New Jersey this month, but in the end I bucked up. I'm glad I did. The new members of the committee are enthusiastic and insightful, not to mention connected to me in surprising ways. We're fond of remarking on the smallness of the actuarial/insurance community, but it's still quite amazing to me how closely connected we all are.

All in all, I'm declaring 2012 a success. I started out the year feeling held back but ultimately came out on top with my ACAS, my new position at a new company, and a great deal of optimism for what's to come in 2013.

Finish strong, 2012.

P.S. I'm writing this in the middle of exam results. Congrats to those I already know passed, condolences to those that didn't (I now know all too well how that feels), and for those still waiting to hear, I hope your pain ends tomorrow. Mazel tov.

Radio Silence

I haven't had anything to say lately, but that will probably change once exam results are released. Stay tuned!

Adapt and Die: The Hidden Costs of Innovation

Quick: what’s one of the top five most common causes of insurer insolvency? If you’ve taken Exam 6, hopefully you remember that “rapid growth” is on that list, which seems strange at first. Growth is what investors come to market for. We treat it as a fundamental measure of economic health, whether it’s growth in the S&P 500 index or growth in GDP. For the insurer, however, idiosyncrasies of the insurance product turn growth into a mixed-blessing. Premium growth can be a sign that management is attempting to pay existing liabilities with new premium dollars, an unstable situation that could lead to insolvency. Growth is therefore not always a blessing in the insurance market.

Even for a non-insurance product, though, growth can turn out to be a curse. While companies must innovate and improve their products in order to stay competitive, fundamentally changing a product can ultimately cause a loss of market share if existing customers don’t take to the new product. Whenever a company tackles a radical new path and succeeds, analysts praise the bold vision. More frequently, however, you hear analysts declaring that the change was too bold, that it alienated the existing customer base, and that, in the long run, growth was not achieved. Product shifts have high rewards, but also high degrees of risk.

Two ongoing product shifts come to mind: Facebook and the Casualty Actuarial Society. Facebook pushes major changes on its users so frequently that the company’s name has become synonymous with unnecessary and unwanted “improvements.” As a less extreme example, the CAS constantly keeps two items on its agenda: solidifying the current base of actuarial services, and expanding the actuary’s role into new areas.

Facebook is a particularly good example of the risk posed by a changing product, because a social networking site, of whatever kind, can really only be one product at a time (at least, so it appears thus far). You’re either a dating site, or a “find friends from high school” site, or a business networking site, or a place to post pictures of cats. Over its history, Facebook has tried to be nearly all of these things, but at any given point in time, it has only been one.

At the start, Facebook was exactly what it sounds like: a facebook. In fact, at the time, it was referred to as “the Facebook,” and that was it. It wasn’t a verb or a place where things happened. It was a virtual Rolodex and little else. Being “Facebook friends” with someone had no moral significance. I ended up “friends” with every person I went to high school with, essentially just to keep track of where everyone was going to college. It had all the personal significance of a PDA.

Then came “poking” and “messaging.” I still don’t know what poking is about, but messaging quickly became cruising for dates if you friended any “friends of friends” (at least if you were foolish enough to list yourself as “single”). Feeling like I’d been tricked into joining an online dating site, I started avoiding the site, checking in only when I needed to find someone’s contact information, which was fine by me, given that the whole reason I joined was to absolve myself of the responsibility of keeping an address book.

The whole paradigm shifted, however, when “status updates” and “News Feed” were introduced. Facebook stopped being about enabling individuals to connect when they felt like it and instead became a platform for individuals to inject themselves into the spheres of others, almost forcibly. The Rolodex became a forum combined with Reddit, and that’s fine, too. But in executing this change, the original purpose was lost. I didn’t want to send such personal information, whether it’s where I’m having dinner or who I’m (not) voting for, to every person in my Rolodex. Further News Feed subjected me to similar information about others, information I was most often not eager to see (there are only so many pictures of food I can take).

This is when “Facebook purges” began. I couldn’t be Facebook friends with just anyone if I was going to be sharing photos and personal thoughts with all of them. It started with “no friends from work,” expanded to “no friends who creep me out,” and ultimately rose to the level of “no friends who cannot spell.” The set of Facebook friends contracted and contracted, shrinking closer and closer, until finally it became identical to the set of actual friends.

The original Rolodex model is completely gone, but in its place is a new product. At the end of it all, did Facebook grow? It would be sacrilege to answer “no.” The degree of investor confidence in Facebook is astounding. However if we take the limited view of Facebook’s original product, we have to answer “no.” The Facebook I joined before heading off to college is in bankruptcy, and has been for some time. This isn’t a problem if the new Facebook creates more value than the old Facebook (and it probably does), but it should give us pause to see such a radical shift. The kind of 180 that Facebook has made is not common. From a production perspective, it’s comparable to Coca-Cola ending production of regular Coke after introducing Diet Coke. From a risk perspective, it’s comparable to starting a totally new company, with a little bit of risk mitigation due to the inertia that will keep existing customers around temporarily.* It’s certainly not the obviously safe bet most investors seem to think it is.

For now, Facebook sits in this new equilibrium as a place where actual friends interact in ways that friends normally would, only faster and more easily. But Timeline is coming, and that means the product is changing once again. If the past is any indicator, that means the current model will soon have to go, in which case anyone joining the upcoming IPO will be investing not in a tried-and-true product with known demand, but in yet another speculative product, the market for which is unknown. Add to this growing privacy concerns and employers demanding access to employees’ Facebook accounts, and I see a very uncertain future.

As for the CAS, as I mentioned earlier, the organization is constantly looking for ways to grow the actuarial market. Most recently the CAS started offering the Chartered Enterprise Risk Analyst credential. While still an actuarial credential, CERA does expand the actuary’s focus into broader business concerns. The CAS’s interest in these general business risks is evident in the exam process, where Enterprise Risk Management topics are covered through papers written by non-actuaries and published in major business journals.

ERM certainly seems like a blossoming field, but there is still a trade-off to pursuing it. What more traditionally actuarial papers did the ERM-related papers replace? What topics related to our tried-and-true areas of expertise have been omitted from the education of new actuaries? Although we hold some monopoly power when it comes to statutory opinions, we don’t enjoy demand as inelastic as that of doctors or lawyers, nor does the CAS have as much legislative influence as the American Medical or BAR associations. While we’re plotting our expansion into non-actuarial territory, who is planning to invade our traditional areas?

As a profession, we’re taking a risk by moving into new areas, but as the Society of Actuaries likes to remind us: risk is opportunity. Without risk, there is no reward (or at least not much of a reward.) With the exam process doing a possibly too good job of restricting supply, maybe now is actually the perfect time to take a demand-side gamble. Our risk expertise should enable us to sort out the good gambles from the bad, after all. The opportunity cost, however, cannot be ignored, especially with the SOA ready and waiting to gobble us up. The time we spend sharpening our non-actuarial tools is time we don’t spend developing our traditional skills.

Speaking of opportunity cost, we could all take our membership dues and buy Facebook shares instead. Just a thought.

*I’m skeptical of how much this can help Facebook when its users are not the ones paying money. Unless a user is active on Facebook, it’s likely that Google has much better data on that person than Facebook does.

The Market for Professionalsim

I’ve often heard lawyers joke that law school applications should include the question “Do you realize that becoming a lawyer requires you to actually practice law?” because so many law school graduates end up not wanting to be lawyers. It seems like a common thing for people to start down a path because it’s there, or because it seems like a good idea, or because that’s what successful people do. Observe the many people in the current generation with majors in either unemployment or employment they hate.

I suspect this problem is less pronounced for actuaries. For one thing, it’s still fairly uncommon to major in being an actuary (in fact, I strongly disapprove of such a thing, but that discussion is for another day.) Whatever you chose to study on your way to becoming an actuary is likely useful across a variety of fields. Additionally, actuaries work in the field whilst obtaining their qualifications; in fact work experience is one of the required qualifications. Few obtain Associateship or Fellowship without knowing what they’ve gotten themselves into in terms of the day-to-day life of being an actuary.

Despite this, and despite working for or with actuaries for nearly five years, I have found that I didn’t quite recognize all of what I was getting myself into when I started down this path. I knew what the work would be like and how grueling the exam process would be, but I never really stopped to think about what it would mean to join a profession, a legal monopoly with rules, standards, governance, and disciplinary authority, whose approval I am required by law to maintain in order to practice in my chosen field.

On the one hand, there wasn’t much reason to think about this earlier since the law gives me no choice. On the other, I’m still entering this union and must uphold its rules. This, to me, was the primary value of the Course on Professionalism, which I completed last December in Atlanta. Although much of the Course was of dubious value to me, it does force you to take a breath and recognize that Casualty Actuarial Society (CAS) and American Academy of Actuaries (AAA) membership should not be taken lightly.

Being a member of a profession has always meant more than just doing your job in accordance with certain standards. The professional’s entire life is subject to the standards of his profession. For instance an attorney is subject to review by the BAR if he files for personal bankruptcy. You represent your profession even when not acting in the capacity of a professional. The line between your personal life and your professional life isn’t fine- it’s non-existent.

Of course neither the CAS nor Society of Actuaries (SOA) are known for being overly-meddlesome, but, as the attorney representing the Actuarial Board for Counseling and Discipline (ABCD) made quite clear at the Course, even the non-actuarial, non-job-related actions of AAA members can be cause for disciplinary action if they reflect negatively on the actuarial profession. The specific example given was of an actuary’s name ending up in the newspaper because of a DUI. While the attorney stated that he knew of no such cases to date, he did say that it would be within the ABCD’s jurisdiction to pursue such a case.

The legal potential for draconian interference in the personal lives of actuaries exists, then. Culturally, however, is such interference likely? On the one hand, historically the actuarial organizations have concerned themselves only with actuarial and work-related matters. On the other, there are certain elements, represented by the lunch speaker at the Course, that would like to push the historical boundaries.

If you haven’t heard, this speaker caused quite a stir over his comments about Actuarial Outpost and Facebook. To summarize the pertinent portion his remarks very briefly, he described a CAS effort he was involved in to assert authority over the Actuarial Outpost forum and in general lamented the unprofessional manner in which some actuaries behave online. He even stated that he once decided not to hire someone on the basis of the applicant's Facebook profile picture, which showed the applicant involved in “some sort of Satanic ritual.”

It’s impossible to tell this story without taking a brief aside to address the absurdity of it. If you’re internet-savvy enough to be reading a blog, you probably noticed straight-off that it’s just silly to draw conclusions about a person’s beliefs from their profile picture. What’s more likely: that this applicant actively sacrifices goats or that his profile picture came from a Halloween party or a film or something? If you’re one of the unfortunate souls described earlier who went to law school, you probably also noticed that refusing someone a job because of his religion is illegal. It gets worse, however, because the job was with a state department of insurance; if any employer has a moral obligation to be indifferent to religious preferences and to keep out of social media, that employer is the government.

Formally, the CAS and AAA certainly do not endorse illegal hiring practices, nor do they encourage internet-stalking of prospective employees. However the policies and behavior of professional organizations stem from the beliefs and practices of their membership. Beyond that, certain members- those who are more involved and more vocal -will have greater influence than others.

Online privacy is a hot-button topic all over these days (and one we know the CAS has taken an interest in), and it’s no surprise: the internet and social media represent a significant shift in the way we engage with others and present ourselves, both personally and professionally. It’s no surprise that many people find that disconcerting. The old rules of etiquette, privacy, and even professionalism simply don’t translate to this new world. In general my own belief is that people shouldn't care about things that don't affect work performance and that employers certainly shouldn't seek private information about current or prospective employees. If you make your personal information public, however, you can and should be held accountable. I believe this perspective is pretty standard among the internet crowd, and maybe that causes us to take it for granted. But as my anecdote shows, privacy principles are far from settled in the broader culture. If those of us with similar "live and let live" ideals don’t represent our views on privacy in organizations like the CAS, we risk losing the culture battle within such organizations to people like the Course lunch speaker.

It may sound overly dramatic, but this is a call to action. The last month has seen a lot of drama in the sphere of professional actuarial organizations (and that’s a sentence that likely won’t ever be typed again.) With the CAS leadership seriously rethinking the exam process* and the SOA announcing that it will now offer a competing property-casualty professional designation, the time to shape the future of actuarial professional standards is now.

My biggest gripe with professional organizations- that they typically face little to no competitive market pressures -is no longer true for P&C actuaries. Soon we will have a choice of organizations to align ourselves with, which means we also have to decide what it is we want from a professional organization. Even those who aren’t currently members can exert influence in this unique situation. It would be a shame if this opportunity were to pass and leave us only with the status quo. One issue to consider is what I’ve been discussing here: how involved do you want your professional organization to be in your personal life? There are many other issues on the table, though, and I hope we all (even those who aren’t actuaries yet) take the time to evaluate our priorities in the comings months. Your commitment to your professional organization will likely last longer than the average U.S. marriage, after all. Make it count.

*The CAS recently announced key changes. Starting in 2013, Exams 5 and 6 will be offered twice a year. Additionally those sitting for Exam 9 this May will be given an extra hour to complete the exam. The CAS is also hiring consultants to review the exam process in light of the low pass rates in 2011.

My First Future Fellows Article

The hectic reserving season has only just ended, so I won't be producing a real post this month. However you can peruse the article I co-authored in the latest issue of Future Fellows. You can view the publication online here: http://casact.org/newsletter/index.cfm?fa=ffmain

I did bring up the issue of exam start times and sleep (my pet project) with the Candidate Liaison Committee. It wasn't met with much enthusiasm; there are concerns about late exam end-times that might require lunch breaks. However I intend to continue promoting later start times, because I really believe it will help candidates.

Speaking of things that will help candidates, I'm learning more about the appeals process through my involvement with the CLC. I hope to post something extensive on that soon. We've discussed having a Future Fellows article on the subject as well. From the feedback I've been getting, it sounds like people really need some clarification on that process. I hope to provide that for you soon. Until then, keep studying!

Update: CAS Releases Exam Responses and the President Addresses Low Pass Ratios

In case you missed it, candidates who scored a 4 or 5 on fall 2011 Exams 6 or 8 can request their ungraded responses from the CAS: http://casact.org/members/index.cfm?fa=viewArticle&articleID=1866&CFID=19255387&CFTOKEN=72268585

If you wish to submit a request, you must do so by March 7th, 2012, so don't delay.

Also Patricia Teufel, CAS President, released the following letter shortly after I published by commentary on the 2011 exams: http://www.casact.org/cms/pdf/Open_Letter_Regarding_Fall_2011_CAS_Exam_Results.pdf

It's a lot more candidate-friendly than the Exam Committee's letter. There's even a way to give her feedback directly. Check it out, when you have a few minutes.

Also I finally received my official letter from the President. I'm genuinely ACAS now. Hurray!

So Close...

...but still not official until I receive my signed letter in the mail. Thanks, Course on Professionalism, for making that crystal clear!

Forgive my poor formatting. I blame Blogger.

2011 Exam Results

If you sat for an upper-level CAS exam in 2011, the probability that you’ll be sitting for that exam again in 2012 is 73.1%. Out of 3,195 exams administered in 2011, only 858 met the Exam Committee’s standards for a minimum qualified candidate. With the exception of the half exams 5A and 5B, every exam’s pass ratio was below the 12-year average (2000-2011). Any way you slice it, these results are frustrating, but are they as surprising as they appear at first glance?

The Exam Committee recently published commentary on the unusually poor 2011 pass ratios, which can be found here. I was somewhat surprised by what the Exam Committee chose to say. In my view, there are two major questions to be answered:

1.       Are 2011 pass ratios really as unusual as they appear? Are they consistent with prior years or are they outliers?

2.       If the 2011 pass ratios are significantly lower than usual, what is driving the change?

The article by the Exam Committee doesn’t really address either of these questions, except insofar as they declare that they consider all of the 2011 exam results “outliers” and discuss grading and pass-mark-setting methods as possible drivers. In other words, they’re on the defensive. Their article is mostly a justification of their grading policy rather than a considered analysis of these seemingly unusual results.

The article strikes me as statistically a bit sketchy, as well. For instance why even bother to address the pass rate on Exam 7 when only nine people sat for it? Compared to a typical year that has around 1,000 exam-takers, it’s hardly a surprise that results from a population of nine appear anomalous. Throughout the article, quantification is generally lacking.

To satisfy my own curiosity, then, I crunched some numbers. I looked at the number of exams taken, number of exams passed, raw pass ratio, and effective pass ratio from 2000 through 2011 for each exam. I mapped new Exam 8 to old Exam 9, new Exam 9 to old Exam 8, new Exam 6-US/CAN to old Exam 7-US/CAN, new Exam 7 to old Exam 6, and new Exam 5 to old Exam 5. I also mapped new Exam 5A (the ratemaking half of Exam 5) to old Exam 5 for comparison purposes. Unless otherwise specified, I included all years 2000 through 2011 in the results discussed below, with the exception of new Exam 7 for which credible data is not available due to the extremely low number of test-takers in 2011.

Eventually I will put all of the metrics I looked into on this site, but for now here are the most interesting highlights:

All full-length exams had pass ratios below the average.

2011 was objectively a below-average year, with the notable exception of the two half-exams, 5A (ratemaking) and 5B (reserving), which, compared to the old Exam 5 and the old Exam 6, respectively, showed extraordinarily high pass rates.

Three of the full-length exam pass ratios are statistical outliers.

The pass ratios for new Exams 8, 6-US, and 5 are the only ones that fall outside of two standard deviations of the mean. Using Chauvenet’s criterion, these three also qualify as statistical outliers. Notably the results for the half-exams 5A and 5B are also statistical outliers, but on the high end.

New Exam 6-US results were the worst.

Excluding Exam 7, the pass ratio for Exam 6-US was the worst, nearly 3 standard deviations below the mean.

Other Considerations

While the general education structure did not radically change from 2000 to 2010, the CAS did make a significant change to their grading policy starting in 2006. From 2000 to 2005, the Exam Committee targeted a specific pass ratio when setting exam pass marks. From 2006 on, however, they revised this policy in an effort to pass all candidates who demonstrated sufficient knowledge of the material and fail all those who did not. One would expect, therefore, to see greater variability in pass ratios after 2005.

In comparing the actual standard deviations for each exam for years 2000-2005 and 2006-2010 (excluding 2011 due to the radical change in exam material and structure), I found that variance did in fact increase in most cases. Old Exams 5 and 8 actually have shown less variation in pass ratio since the grading policy change. Old Exam 9 showed the greatest change, with the standard deviation increasing 120.8%.

Since there is a significant difference in variability after 2005, I applied Chauvenet’s criterion to the years 2006-2011 in order to test whether 2011 would still be considered an outlier. The 2011 results for Exam 6-US remained an outlier as did the results of the full Exam 5. All other results, however, do not qualify as outliers.

Data Analysis Summary

While the results of the 2011 sittings are irregular, once we account for uncredible data (new Exam 7) and the change in grading policy in 2006, the label “outlier” becomes questionable for most exams. 2011 had the lowest number and percentage of passing candidates in the last twelve years, but that in and of itself is not enough to make it a statistical outlier. After all, some year has to be the lowest (and let’s hope 2011 was it.) In my opinion, the only exam that looks like a real outlier is Exam 6-US.

Primary Drivers

Now for the second key question: what factors drove the unusual exam results in 2011? First we need to consider, a priori, what we expected to see in 2011. Three factors stand out in my mind as most relevant: who is taking the exam, how much the exam has changed from prior exams, and how long the exam is.

In the section on Exam 5, the Exam Committee’s article uses the big difference in candidate performance between the full exam and the two half exams to support the thesis that overall performance varies widely between groups of candidates. Personally I don’t see why a belief that candidate quality would vary significantly over time is controversial. Consider for instance that the number of candidates has increased over time, and average quality of an elite group nearly always decreases as group size increases.

We could test this theory If we could assign candidates to “classes.” Unfortunately I don’t have sufficient data to explore this question properly. I did, however, look at the pass ratios by exam by year to see whether performance tended to move in the same direction for all exams in a given year. They do appear to be correlated.

I’ve heard varying opinions as to whether having previously taken a particular exam makes you more or less likely to succeed on subsequent attempts. I’ve never seen data to support one view or the other, but my guess is that a candidate who fails on her first attempt at one exam is likely to fail on her first attempt at another, and that her probability of passing on the second attempt is about the same as the general population.

Finally, while I don’t have data by “attempt number,” we can deduce some useful information about the 2011 exam-takers due to the change in examination structure. Here’s what we can guess:

Exam 5 (full exam) – This is either your first time taking an upper-level exam, or you previously failed old Exam 6 (and never took old Exam 5), or you previously failed both old Exam 6 and old Exam 5. Either way, your performance is likely to be below-average, especially since the repeat-sitting advantage is diminished when the exam changes significantly, as Exam 5 did. In addition this exam is four hours long. Expect poorer than average results.

Exam 5A (ratemaking half) – You previously passed old Exam 6, and either previously failed old Exam 5, or never took it before. Either way, you’ve previously succeeded on an upper-level exam. The exam has changed from the prior, but it’s only two hours long. Expect better than average results.

Exam 5B (reserving half) – You previously passed old Exam 5, but either failed or didn’t sit for old Exam 6. Since 5B is essentially a much easier version of old Exam 6, even failing 6 before would likely be an advantage. It’s also only two hours long. Expect better than average results.

Exam 6-US/CAN – This could be your first upper-level exam, or you failed old Exam 7-US/CAN. The syllabus changed significantly, as it has several times in the past, but otherwise there is no particular reason to consider it more difficult than usual or the candidates any less prepared. The exam is four hours long. Expect average results.

Exam 7 – The nine candidates who sat for this exam had to have previously failed (or didn’t take) old Exam 6 and are either skipping Exam 5B or are attempting to take both Exam 7 and Exam 5B in the same sitting. The latter is much more likely. Tackling six hours of exam (Exam 7 is four hours long) in a single sitting is probably not the best idea. Additionally the syllabus changed significantly. Expect poorer than average results.

Exam 8 – Either this is your first attempt or it’s been 1.5 years or more since you sat for old Exam 9, reducing the advantage of a repeat-sitting. The exam is shorter than in the past at three hours long and contains mostly the same material, which should make it easier than some of the others. [CORRECTION: I was mistaken about the order of the exams under the old structure. It would have been just one year between sittings, not 1.5, and therefore you would expect average results, not poor results.] Expect poorer than average or average results.

Exam 9 – Either this is your first attempt or it’s been just six months since you sat for old Exam 8. This could be an advantage, and in any case isn’t likely to be a detriment. The exam is also shorter now at three hours long and contains roughly the same material. [CORRECTION: I was mistaken about the order of the exams under the old structure. It would have been one year between sittings, six months, and therefore you would expect average results, not better-than-average results.] Expect average or better results.

Expectation versus Reality

Comparing the actual results to our predictions makes some things clear and others more mysterious. The unusually high pass ratios for Exams 5A and 5B make intuitive sense, as do the low pass ratios for Exam 5 and Exam 7. But Exam 6, the biggest outlier with the lowest pass ratio, wasn’t expected to change all that much. Exams 8 and 9 also had lower pass ratios than one might have expected, even if they aren’t clear outliers. What’s going on?

I can only offer three theories:

1. The CAS efforts to reduce travel time by offering lower exams more frequently has resulted in candidates sitting for upper exams with less work experience under their belts. Personally I’ve often wondered how I could possibly learn everything I need to know for an upper-level exam if the material were 100% new to me. More work experience not only gives you more exposure to the concepts that turn up on exams, it also gives you anecdotes to draw upon when answering exam questions. This is a significant, perhaps indispensible, advantage.

2. Candidates have come to rely almost exclusively on secondary materials created by exam prep courses rather than the actual exam papers. Because there are relatively few courses to choose from, many candidates are taking the same course and will therefore have similar strengths and weaknesses. If a popular prep course’s curriculum turns out to be inadequate, more candidates will fail than would if everyone studied independently. This could explain the poor results for Exam 6, as I considered the accounting materials from TIA, a popular prep course, woefully inadequate.

3. The upper exams are getting harder. They’ve been telling us this was coming for a long time. Maybe it’s finally here. The days of straight-forward questions and regurgitation of lists is behind us. Only that doesn’t mean you get to do less memorizing. On the contrary, you have to do everything you did before and then a little more to answer today’s more conceptually challenging, application-based exam questions.

The only other significant change I'm aware of in terms of the exams themselves is the new method used to determine exam length and difficulty. An article appeared in the most recent Future Fellows describing the new practice, which you can find here. In short, recent Fellows who performed extremely well on their exams are being used to testdrive exams. Given the considerable and consistent complaints about exam length these past two sittings, it's possible that these former candidates are harsher judges than the subject matter experts who used to be the primary determiners of exam length.

What to Do about It

If you moved quickly through the lower exams, it will help to recognize that you’re at a disadvantage in terms of work experience. It should also help to remember that the upper exams are not like the lower exams. They require more independent work. I can’t speak for Exams 8 and 9, but for 5 through 7 I found that reading the actual papers – several times – was key. You can’t rely on someone else’s interpretation of the syllabus or the readings, not when the stakes are so high and the exams keep changing. Unfortunately, though, that’s really it. There’s no magic trick that will guarantee you pass every time.

Take advantage of what influence you do have with the Exam Committee, whether it’s through your friendly neighborhood Candidate Representative or exam surveys or other means. Be sure to be professional, however. Even a valid point will be ignored if presented inappropriately. The CAS keeps a close eye on Actuarial Outpost and other forums, so be mindful of that as well.

If you find this conclusion unsatisfying, we’re in perfect agreement. It really amounts to “Well, that’s how it is,” Just keep swimming,” etc. Still, knowledge is power, even when it’s knowledge that you’re powerless, right? Right.

Best of luck to everyone! Here’s to a better 2012.

References:

Data on historical pass ratios by exam: http://casact.org/admissions/examstatsum.pdf

Exam Committee commentary on 2011 pass ratios: http://casact.org/admissions/roth_PassRatio.pdf

Exam Committee commentary on pass ratios for full versus partial exams: http://www.casact.org/cms/index.cfm?fa=viewArticle&articleID=1611

How pass marks are set: http://www.casact.org/admissions/index.cfm?fa=passmarks

2007 article on changes to exams: http://casact.org/admissions/Changes_in_Exams_Article.pdf

Also a note of caution when looking for answers on the CAS web site: I came across a number of articles related to exam policies on the site that were clearly outdated. Pay attention to the date material was published. When it comes to exam questions, I wouldn't give too much credence to anything published before 2006. Note also that the idea of a target pass ratio of 40% and a target pass mark of 70% comes from a wish expressed by the Board at one point, not  from the Exam Committee. It is not the official practice of the Exam Committee to target 40% of exam-takers scoring 70% or higher on each exam.

CAS Website Update

One of my personal missions when joining the Candidate Liaison Committee of the CAS was to campaign for a revamping of the CAS website. Happily I learned during my first meeting with the Committee that a site redesign is already under way. Over the course of 2012, the CAS website will be substantially improved. In fact one of the first major improvements is up today: new and improved exam pages.


Other exam-takers may have experienced the same frustration I've felt with the way exam-related materials are scattered around the Admissions/Exams section of the site. No longer! Now each exam has its own page with links to relevant information and materials for that exam. No more hunting for past exams and pass marks! No more wondering how to purchase that Study Kit! The new layout has essentially everything you need in one location.


I hope everyone who's currently sitting for exams finds this change helpful. As always, I'd love to hear your feedback. Are there any specific changes to the CAS site you'd like to see?

Resolutions to Be a Better Actuary

I’m actually not the New Year’s resolutions-type. Why wait until an arbitrary date to commit yourself to improvement? Instead I make resolutions as they become necessary. This year, however, the two happen to coincide. Here, in no particular order, are my resolutions for my professional life in 2012:

-Obtain Fellowship in the Casualty Actuarial Society. I have filed the necessary paperwork to become an Associate, and I already have credit for Exam 7. Just 9 and 8 left!

-Read one industry news article every working day and one research paper each month (outside of papers for exams).

-Go to sleep earlier and wake up earlier. My office is full of late-risers, but I’ve been working more and more with East Coast folks, not to mention traveling east quite a lot. It’s time to shift my schedule a bit- that, and learn to cope with jet lag.

-Write my blog posts in advance and schedule them to post at 0900 EST on the first Tuesday of every month. Although I barely had to post in 2011, I was late twice, and I’m late again at the start of 2012. Not again!

-Produce two brief research papers, and publish them here.

-Beginning studying earlier. I originally said New Year’s Day for Exam 9, but that didn’t work out. Instead I will assemble my materials today and read my first paper by Saturday. For Exam 8, I will start after the July 4^th weekend.

-Re-read and thoroughly implement David Allen’s Getting Things Done. If you haven’t read this book, I highly recommend it. It’s relevant to far more than just business.

-I’ve said a number of times that I would buy my team at work copies of Getting Things Done if I passed my next exam. This year I will commit to doing this after I pay my taxes.

-File, archive, and otherwise properly keep track of emails. I’m tired of being the person who always has to ask someone else if they have that email or that attachment or some important bit of information. I’ve already filed my email back through September.

-Keep thorough notes on my projects. I’ve often dealt with inheriting projects from people who left the firm. Without adequate documentation, it’s a miserable process.

-Learn Visual Basic. There are a lot of career-improvement things I could commit to, but more and more I find myself thinking it would be really useful if I were fully comfortable with VB code. So this is the year for that project.

-Last, but not least, enjoy my time on the Candidate Liaison Committee. It’s been a great experience so far. I’m wrapping up my first co-authored article now, to appear in the next Future Fellows. If I do obtain Fellowship this year and can no longer serve as a candidate representative, I will try to remain on the committee in another capacity.