University of Wisconsin–Milwaukee

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COLLOQUIUM

Master's Thesis

Statistical Analysis of the Society of Actuaries Preliminary Examination Model

 

James K. Switzer

University of Wisconsin-Milwaukee
Under the Supervision of Professor Vytaras Brazauskas
Wednesday, April 28th, 2010, 11:00am EMS W434

The Society of Actuaries (SOA) have developed a very rigorous preliminary exam process for students seeking associateship and fellowship designations. The examinations are administered under a strict time limit and consist mainly of multiple choice questions. The first two exams, specifically, Exam P/1 and Exam FM/2, are offered through Computer Based Testing centers allowing the SOA to create different exams of similar difficulty for each examinee. These two preliminary exams will be the focus of this thesis.

For a candidate to successfully pass each preliminary exam, the candidate must exhibit a high level of knowledge of the material and the ability to apply the concepts quickly under a strict time limit. We investigate probability of a candidate passing the examination under the current model for various skill and quickness combinations. It is shown candidates can obtain the same score with different levels of quickness and knowledge. We will then suggest an alternative system that will reduce the focus on the quickness of the candidate and increase focus on the level of knowledge of the material. This will be completed using credibility theory; a popular technique used in the insurance industry to determine the premium of a policyholder based on experience.

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