By Anthony Cappelletti and Scott Lennox
By the time this is published, the SOA’s fall 2020 exams will have been administered. This was the first time for fellowship exams to be administered in a computer-based-testing (CBT) environment at Prometric Testing Centers. The SOA has already published plenty of information on CBT for fellowship exams to assist candidates, so that information won’t be repeated here. That information can be found in several places on the SOA’s General Information page for Education & Exams. What we want to do here is talk about how the CBT environment specifically affects the General Insurance (GI) fellowship exams.
The GI track includes the following four fellowship exams:
- Introduction to General Insurance (INT);
- Ratemaking and Reserving (RR);
- Financial and Regulatory Environment (FRE)[1]; and
- Advanced Topics in General Insurance (ADV).[2]
The multiple-choice ASA exams have been offered in a CBT environment at Prometric Testing Centers for many years as has been the case for the multiple-choice INT exam. But offering written answer FSA exams this way was not pursued in the past. When the SOA introduced the Predictive Analytics (PA) exam to the ASA requirements, the exam was designed to have both practical and educational value. To truly learn and demonstrate knowledge of PA, one needs to work on real models. There is no way to do this in a multiple-choice exam or with paper, pen and a calculator. The SOA worked with Prometric to develop a CBT environment in which PA exam candidates would use Microsoft Word, Microsoft Excel and the R programming language via RStudio to solve a problem using PA and to write a report on their analysis. The PA exam was a success.
This development opened the door to using this environment for the written-answer FSA exams. Now, generally speaking, the FSA exams under CBT would remain the same style as those offered in the past except that candidates would now have Microsoft Word and Microsoft Excel to answer questions instead of a pen and paper. Calculations are still needed as they are in the day-to-day work that actuaries do, but we can now take advantage of CBT with calculations in a spreadsheet that better reflect what is done in one’s employment rather than keeping everything simple due to the limitations of using pen and paper with a calculator.
We believe that the CBT environment has provided an opportunity to improve the educational value of the GI exams. Because each GI exam is unique, we consider each exam individually.
RATEMAKING AND RESERVING (RR)
This exam is a 5-hour written-answer exam that covers many of the details and techniques for GI ratemaking and reserving. Many of the techniques used in GI ratemaking and reserving require analyzing years of historical data. A pen and paper testing environment is limiting. For example, a GI reserving question was limited to a development triangle with only three or four years of data. This is because the calculation would be extremely time-consuming and somewhat repetitive when done on a calculator and then transcribed to a page. With CBT, a development triangle might now have six or seven years of data. This doesn’t necessarily mean more calculations as Microsoft Excel formulas can easily be copied, but a larger development triangle allows for a higher cognitive level of testing so candidates can better articulate their understanding of such things as the patterns in development factors. The goal is to take advantage of the computer being able to do the heavy lifting for the calculations so more focus can be applied to the understanding and interpreting the results.
FINANCIAL AND REGULATORY ENVIRONMENT (FRE)
This exam is a 5-hour written-answer exam that covers a variety of topics including financial reporting, solvency monitoring, regulation of general insurance and responsibilities of the actuary. CBT will change the type of questions because the FRE exam has a case study that includes a great deal of data for a fictitious general insurance company. Past case study questions required candidates to use this data for their answers. However, because candidates would have to manually enter the required data in their calculators and then transcribe results to paper, the amount of data and the calculations required for an answer were limited. Now with CBT, case study questions on the FRE exam can better reflect real-world problems because entering data in calculators and on paper is not required. Case study questions can now use more years of financial reporting data and more than one line of business. Case study data is preloaded in the Excel spreadsheet and candidates need only reference the cells for the data in their calculations. Repetitive formulas (whether by year or line of business) can be easily copied and pasted. If a candidate makes any errors, graders will be better able to see where the error was made—Was a wrong cell referenced? Was the formula incorrect?
The majority of the FRE exam involves answers to questions that do not involve any calculations. This means that for FRE in a CBT environment, candidates will be required to answer most of the exam questions in Word. Candidates may find it easier to type in Word rather than writing on paper. This is also more reflective as to what a candidate would do in the real world. Nearly all business documentation is done electronically. But that is not the only benefit of using Word over handwritten answers. Handwriting neatly under the pressure of a time-limited exam is a challenge. Candidates with sloppy handwriting may have concerns that some of their answers may be unreadable by the graders. This is a valid concern. While graders make every effort possible to read extremely messy handwriting, there are instances when the handwriting is just too messy to be deciphered. Candidates who take extra time to write neatly may not have enough time to answer every question fully. Furthermore, whether the handwriting is neat or messy at the beginning of an exam, it usually deteriorates toward the end of a 5-hour exam. Typing in answers in Word will ensure that answers from the first to the last question of the exam are all legible. The benefit of using Word written answers also applies to exams RR and ADV, but to a lesser extent than FRE because RR and ADV include more calculation questions.
ADVANCED TOPICS IN GENERAL INSURANCE (ADV)
This exam is a 2-hour written-answer exam that covers a variety of advanced topics on general insurance ratemaking, reserving, reinsurance and risk. Many of the techniques included within the ADV exam syllabus involve complex calculations. Being limited to pen and paper with a calculator made testing the calculations a challenge as they had to be simplified. Now, under CBT, questions can take advantage of the fact that candidates will have Excel to perform calculations. Furthermore, datasets will be preloaded in the spreadsheet so candidates will not have to type out numbers to perform calculations. These questions will better reflect what can be done with the techniques from the ADV exam.
FINAL NOTE
While we have stated how CBT will improve the GI exams, the first sitting in the fall of 2020 will not fully exploit the concepts described above. This is because we do understand that this will be a candidate’s first time writing a fellowship exam in a CBT environment. There will also be no prior CBT fellowship exams to use as a study aid, although a few sample questions were provided.
We are reviewing feedback from candidates from the exam survey after they have written the fall 2020 GI exams. We strive to create exams that allow a candidate to demonstrate their knowledge of the subject matter while at the same time being both practical and educational.
Anthony Cappelletti, FSA, FCIA, FCAS, is a staff fellow for the SOA. He can be contacted at acappelletti@soa.org.
Scott Lennox, FSA, FCIA, FCAS, is a staff fellow for the SOA. He can be contacted at slennox@soa.org.
[1] There are currently two versions of the FRE exam: FRE-U.S. and FRE Canada. At this time, the SOA only administers FRE-U.S. As an option, a candidate may choose to get credit for FRE-Canada by passing the Canadian version of Casualty Actuarial Society Exam 6. In order to be qualified to sign the NAIC Property/Casualty (P/C) Statement of Actuarial Opinion (SAO), the NAIC requires an FSA in the GI Track to have passed the U.S. version of the FRE exam (and the ADV exam instead of the ERM exam).
[2] A candidate in the GI Track has the option to substitute the ADV exam with the ERM exam from the CFE Track. With successful completion of the ERM exam, an FSA in the GI Track will receive the CERA designation. However, in order to be qualified to sign the NAIC P/C SAO, the NAIC requires an FSA in the GI Track to have passed the ADV exam and the U.S. version of the FRE exam.