Reasonableness Check

Discussion in 'CP2' started by Ken, Jul 27, 2021.

  1. Ken

    Ken Made first post

    Hi everyone.

    I am kind of loss in understanding what is reasonableness check - though I guess the data/result has to be sensible in some senses? I do not have any particular model in my mind now, but appreciate if someone can provide me with some examples of reasonableness checks based on any kind of model problems.

    Thank you.

    Regards,
    Ken
     
  2. Sarah Byrne

    Sarah Byrne ActEd Tutor Staff Member

    Hi Ken

    A reasonableness check is any check you carry out that verifies the result of a calculation step looks 'reasonable' given the other information we have available to us. For example, this could be considering how the result of a scenario compares to other results we have calculated, or comparing a premium for a policy to some information given in the question. You should also reasonableness check any charts you produce in the exam.

    A useful way to consider if a result/chart is reasonable is to think 'what do I expect it to be/show'. You will have to consider the the situation and all information to come up with your estimate or expectation. You should document the result of the check in your audit trail whether it appears reasonable or not - it will help show the examiner you understand the situation in the question.

    I hope this helps. If you do plenty of past paper questions as part of your CP2 preparation you should get a feel for plenty of examples of reasonableness checks.

    Sarah
     
  3. Studystuff

    Studystuff Very Active Member

    Hi Sarah - I have a follow up question on Reasonableness checks. I was confused up on until recently about the difference between auto checks and reasonableness checks. I now see how auto checks are more data based eg checking if test scores are below a min and max, whereas reasonableness scores are more verification of a result e.g lower test scores in a school with poorer teaching.

    My question however relates to the location of reasonableness checks, passed on passed papers these mostly just seem to be written as comments in the audit trail. However I just got a mock corrected by acted and I lost 5 marks for not including sufficient reasonableness checks in my model (even though my audit trail is full of them). Should I include these "reasonablessness checks" as comments in my S/S as well as in my audit trail? This seems a bit counter intuitive to me as if your spreadsheet was updated with different data/parameters your s/s would be filled with comments that are no longer relevant ?

    Thanks for taking the time to read this!
     
  4. Studystuff

    Studystuff Very Active Member

    anyone?
     
  5. ntickner

    ntickner Very Active Member

    I think losing 5 marks for not having them in the model is a bit harsh. There usually are only 5 marks for reasonableness checks in total! You should at least get half marks for anything only in one place that should be in both.

    It's most important that they're in the audit trail - you'll certainly lose out more if they're just in the model, as they're really aimed at the senior actuary, who's only going to look at the audit trail. But it depends on what sort of checks they are. If they're of the 'the graph looks reasonable because line A is going up and line B is going down, which we expect because .... ' type, then being just in the audit trail is probably ok*. If there's a bit of a calculation involved to do a back-of-the-envelope calculation to compare to the proper model result, then you'd want to have this calc done in the model as well, and commented on there.

    *To be safe, you could just copy/paste any comment you make in the audit trail to an appropriate spot in your model, and format it nicely so it makes it obvious what you've done. That doesn't take really any time at all.
     

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