Steve Martin's Ill-Health Quotation (2015 past paper written)

Whilst I agree that one of the purposes of the communication should be an apology to Mr Martin for the failings in the previous communication, I don't agree with the approach taken in either the examiners report or ASET.
If I had complained about the poor communication I wouldn't want a length paragraph explaining why it was wrong at the end, I would want a short apology, and then just the information I require. The proposed solutions feel like excuses, which would annoy me!

Does anyone agree, or disagree?
Can you tell me why Mr Martin needs to be made aware of the cause of the error, or why he would care particularly about it happening to anyone else?

 

Alan, I totally agree with your assessment and can only express my view in return: the CA3 exam has credibility issues, is in crisis and has been for many years. Those with direct experience in redress matters (like me) will know that the less said about the error the better except to provide an apology, reassure customer all is now fine and here's your redress amount. By volunteering too many details about the error, its origin and so on you are causing more worry, confusion and even risk adverse publicity. Hardly no one will write back to the company requesting such detail of the error: they just want it sorted. For the IFoA to deny FIA to people by failing them on this CA3 exam if they took this real world approach just shows how unfair and out of touch this assessment is.

 

Is there a calculation error in this question? I can't seem to figure out why there is a 53k difference between the change in future fund projection percentage...

I sat this exam in Nov 2015 and got an FC and I am figuring out the reasons why. I feel more comfortable communicating information if I fully understand it. Seems like there wasn't enough time to do that for this exam.

On a more positive note, the recent exams seem more reasonable as they are less tailored towards life insurance!

 

... do you get £21k instead?

 

...any acted tutors want to confirm it should be £21k?

 

I'm no Analysis of Surplus expert, but the question gives you the £53k figure and tells you to assume that it is correct, so there's no need to worry?

 

I refer you to the Actuaries Code, section 5.3:

5.3 Members will take such steps as are sufficient and available to them to ensure that any communication with which they are associated is accurate and not misleading, ...​

​

 

We need to explain £127k.

Policyholder says £127k difference. He gets this from comparing the figures quoted for projected fund at age 65:-
£215,577-£88270.93 = £127,306.07

However this is not comparing like with like as the £88k is in current money terms. Comparing at 1.2.20 the difference would be:
£215,577-£88270.93*1.03^5 = £113,246.80.

That explains the £14,000 in the question. We have £113k left to explain.

The £60k in the question got calculated as:
£25,000 * [1.09^20 - 1.06^20] = £59,932.
i.e. the shortage in fund value by 1.2.15 due to disappointing investment returns.

This leaves £53k to explain.

So, what is the £53k?

Referring to the examiners report, it says :

Recent changes in legislation require that a return of 5% a year is used for future projections. The 2015 projection therefore is based on returns at this level, which is much lower than the 9% assumed in 1995. This accounts for around £53,000 of the difference between the two projections.​

I don't believe this communication of the £53k is correct.

Even a basic reasonableness check here would suggest something is wrong: projecting £80k over 5 years at 5% instead of 9% would not cause you to miss out on £53k. Actuaries should know things like that. A policyholder would be suspicious of such a claim.

Back to the £113k, expanding out this formula we get
£25,000*[1.09^25 - (1.06^20)*(1.05^5)] = £113,246.80

Changing the projection rate from 5% to 9%:
£25,000*[1.09^25 - (1.06^20)*(1.09^5)] = £92,213.

This accounts for around £21k, not the £53k stated in the Examiners report.

Therefore £53k seems to be incorrectly described in the question & the examiners report.

 

I did get 21k.

The question does tell us to assume that it is correct, but how can we explain the difference in calculation if we can't understand the difference ourselves?

 

I reckon the whole point is that actually you don't need to explain the difference in calculation. The audience won't want the intricate details. They tell you to assume that the numbers are correct so that you can concentrate on the communication rather than the technical calculations. You can also ignore tax, legislation etc - it's not real life, it's an exam scenario.

The 53k is calculated as 25000*((1.06^20*1.05^5-1.09^25)-(1.06^20-1.09^20)).
This approach is needed alongside the other two items, rather than the calculation that gives 21k, because the impact of past investment returns in the first item of the analysis is stated as at the current date, i.e. it does not allow for any roll forward to the maturity date. The first item is then more easily understood, as it shows them how much difference the lower than expected past investment returns have made to their fund today.

In an analysis like this, there are no rules about how each step is defined, the order in which they are performed and how “second order” impacts are categorised.

 

If the question tells us to assume it is correct yet we verify it and find that it is not... then this puts us at conflict with the actuaries code 5.3

 

Thank you, Pede. I would never have got to that answer in the exam, but you are right in saying we don't need that amount of detail. Teaches me just to 'communicate' even if I don't fully understand the calculation.

 

... which is not an acceptable position to be put in by examiners.

 

I think you need to stop overthinking things. Just do as you are asked in the exam and assume the numbers are correct. The exam is trying to test your communication skills, not your ability to review the work of others. If you spend less time focusing on the small details, and more time giving a clear and simple communication to the recipient, you are more likely to pass the exam.

The Institute are not trying to trick you, so don't try and second guess things. Keep it simple and explain things in a way the average person will understand. Don't use technical language, don't go into details about how things are calculated and don't tell them things they don't need to know.

 

If the situation is flawed then one is in conflict with actuaries code 5.3 if communicating it as correct. The Institute should not be penalising people who respectfully point of flaws in their questions and answer on that basis - but they do, despite as you say it's meant to test communication skills.

Glad to hear, are you a spokesman for them? My criticisms relate to the quality control issues that result in flawed situations or exam questions not even in accordance with syllabus. People pay £450 each: there's no excuse for such poor standards. Then the treatment individuals receive post-exam when these flaws are pointed out is thoroughly disrespectful and un-academic.

Look at the examiners report on this. I consider the comments of the opening poster valid.

 

This is an exam, not a real life customer. Do what is required to pass.

Rather than complaining about how unfair the exam is, why not put the effort in to find out why you are failing? Get people to judge your presentational skills. Post videos online (rather than asking colleagues who may be uncomfortable pointing out your weaknesses). Post examples of your written answers and ask people where you could improve.

The exam is passable, as evidenced by the large number of students who qualify every year. Find out what they are doing differently to you and try to improve.

 

Dillon, why don't you supply for us the competence standards for this exam? That would be really helpful. As people have lost marks due to things like voice and movements not the examiners' liking. I am curious how such things are essential competencies required to work as a qualified actuary. I'm curious how individuals such as Stephen Hawking or Charles Krauthammer would do in this assessment? I'm curious how none of this is required for those who use the mutual recognition agreements to get Fellowship.

 

I'm not saying the exam is perfect. My point is that spending all of this time complaining about it isn't going to help you pass the exam. Why not save your energy and use it to work out what you need to do to pass the exam?

Sure, you can offer advice to the institute on how you think it can be improved, but that's not going to help you in the short term.

 

Dillon, can you supply the competence standards for the CA3 exam? Can it be shown to anyone who's failed (or passed) this exam what competencies they've fallen short (succeeded) on? Can these competencies be described as essential for working in this profession? Why don't you go to the IFoA and ask these reasonable questions for us. BTW - CP3 won't happen.

 

Let me just make it clear:

I fully agree with you that the CA3 exam could be improved.

I don't however believe that the best way to deal with that is to spend my time complaining about it on the acted forums.

Why not just play their game? Give them what they are asking for and pass their exam. Even if you don't agree with what they want.

Why not qualify then try and get more involved with the institute? Maybe you can volunteer, mark exams, help influence the curriculum.

Spreading the negative attitude around doesn't help anybody. If anything, it means more students are going into the exam for the first time thinking about how bad it is and how hard it is going to be to pass. This is surely going to affect their performance.

 

I agree. This is why individuals are exercising their legal rights by challenging them in the courts this year.