Comments regarding practice exam 1

AnLaPeAnLaPe
edited April 2022 in PRACTICE EXAM

Hi,

I just finished the new exam, here are some comments:

  • Questions 11a and 23a ask for the same thing (acceptable range for MfAD )
  • There is a small typo in 27a for actuary D ("Se owns")
  • I found the wording/notation for 24b (which looking it up is the same used in some parts of the wiki article for the LRC text) quite confusing and not consistent with the source text.

The question use "coverage units @ beginning of quarter"

  • This seem to imply that it's a measure taken at the beginning of the quarter
  • It would also imply that next quarter's coverage units @ beginning of quarter would be the coverage units @ end of quarter of the previous quarter
  • Looking at how it is used in the solution and the wiki article, that is not what is meant.

The source text use "coverage units in the reporting period"

  • Specifically, I believe this represents CUs "used-up" during the quarter i.e. the quantity of insurance service that was provided in the quarter
  • Therefore, Remaining CU @ beg - CU "used-up" in quarter = Remaining CU @ end
    • This also leads to a very intuitive form of the formula, by rewriting it as
      % amortized = CU in period / Remaining CU @ beg
    • Basically, if X% of the beginning remaining insurance service was provided during the quarter, then X% of the beginning CSM will be released

Also for coverage units @ end of quarter, it should probably specify that it's "remaining" coverage units, otherwise it is not clear if the company is counting up from 0 (i.e. counting the units of service provided).

Hopefully this all makes sense.

Thanks for this practice exam, it was good practice :smile:

Comments

  • grahamgraham

    Thx! I fixed the typo and added a note in the wiki about the notation I used in the coverage units problem. I like you intuition about how the coverage units calculation works.

  • AnLaPeAnLaPe

    @graham some comments regarding exam 2:

    • 3c: Is this mentioned in one of the FSCO papers currently on the syllabus or is it from the FSCO UBI paper that was removed from the syllabus? I see it is very similar to F2016-6 which is identified as relating to the removed paper in the wiki.
    • 9b: I'm not sure a split experience rating plan is a valid answer, in the source it is mentioned as a method to stabilize premiums, not probable yield. I guess an argument could be made that such a plan could be used for the probable yield calculation, but based on the solution for 2017S-8, I'm not sure it would be accepted
    • 10b: Is this meant as a bloom's taxonomy type question? I was able to find some of them, but the comment in the answer regarding their MCT seemed very specific and I don't recall reading anything about that. The ICBC Autoplan is barely mentioned at all in the current syllabus, but from what I gather, there used to be a text related to this plan, is this where this is from?
    • 15a: Wouldn't the margin be the ERCx1.25?

    Typos:

    • 3: Typos on the solution (historcial, expeirence, associatd)
    • 5: Typos in solution (Aruguments, immigranhts, ensurethey)
    • 9b: Typo in solution (baisc)
    • 16b: Typo in question (tranfer)
    • 18b&c: Typo on the answer (inerest, leve, epxenses)
    • 20a: Typos in answer (determinies, managemenht, asessment)
    • 21: Typo in solution (lossdevelopment)
    • 22b: Typo in solution (isnurance)
    • 26: Typo in question (vlauing)

    Thanks for the exam!

  • grahamgraham

    Thanks for the feedback. I will look into this over the next few days.

  • grahamgraham

    3c:

    • I've changed part c from UBI to something else.

    9b:

    • You're right that risk-splitting is not specifically listed as a stabilizing method in the source, but I think you could still argue that it's a valid answer.
    • Splitting of basic coverage makes the data less volatile and if the probable yield is calculated based on this data (and some sort of special analysis for the excess data), the probably yield should be more stable. But if you're not comfortable with that, you will definitely get full points by listing the others.
    • Note that "transition rules" was also not specifically mentioned in the list of stabilizing methods given in the source text, but I think it's a valid answer.

    10b:

    • Yes, this was meant as a Bloom's Taxonomy question but the BC Autoplan reading was removed so I've now changed part b.

    15a:

    • This is now corrected.

    Thanks for the feedback! (Typos are corrected as well.)

  • BastienBastien
    edited April 2022

    Hi,
    I agree with @AnLaPe's comment about Exam1Q24b (thanks for the explanation).
    Personnally, I would rather see the source text wording of "Coverage unit in period" (used-up) in the wiki rather than "Coverage unit at beginning" which adds confusion and is unlikely to appear in such way during the exam.

  • grahamgraham

    I think you're probably right about that being confusing. If both of you took the time to post about it then there are probably others who thought the same thing. That's just the way it made sense to me when I first read the LRC paper but in retrospect I should have stuck more closely to the wording in the source text.

    I will make a note to change how it's presented in the wiki, but I'm not sure I want to do it before the exam. That might just cause extra confusion.

  • felixc5felixc5

    for PE 2 Q6, i recall reading that prejudgement interest is no longer on the syllabus can someone please confirm?

  • AnLaPeAnLaPe

    I think you are right, the Harris text does very briefly touch on the subject, but there does not seem to be enough details to fully answer the question.

    This question is based on 2019S-7, for which as you said the wiki notes that the pre-judgment interest part is outdated.

  • grahamgraham

    Thx, I've changed the question about "pre-judgment interest" to "vicarious liability".

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