2005 EDUCATION SYSTEM REDESIGN

1
2005 EDUCATION SYSTEM REDESIGN

• Nebraska Actuaries Club
• September 28, 2004

2
WHO AM I AND WHY AM I HERE
3
Education Redesign

• Change the image of the actuary from

4
(No Transcript)
5
(No Transcript)
6
Education Redesign

• Change the image of the actuary from

7
Education Redesign

• the fictitious Nebraska actuary Warren R.
  Schmidt of About Schmidt fame to

8
Education Redesign

• real Nebraska actuary Warren R. Luckner ???

9
Education Redesign

• NO!!!

10
Education Redesign

• Nebraska financial icon Warren Buffet

11
Education Redesign

• General Motivation
• Improve the education of those who would be
  actuaries, and, ultimately, the quality of
  service they provide

12
Introduction to 2005-07 Redesign

• The Society of Actuaries formed a task force in
  2001 to reevaluate the education process with
  three key objectives in mind
• provide a syllabus that is more relevant to
  actuarial practice
• prepare actuaries for the future
• reduce "travel time" to completing the process

13
Design Process

• Working and Advisory Group Discussions (January
  to May 2002)
• Summer 2002 Report to the Membership
• Working and Advisory Group Discussions (September
  2002 - June 2003)
• BOG Discussion and Approval (June 2003)
• Summer 2003 Report to the Membership
• Member and Candidate Responses to Summer 2003
  Report

14
Design Process

• Update and Final Conversion Rules (March 2004)
• Draft PE Exams Syllabus Released (July 2004)
• VEE Process Announcement
• (August 2004)
• Final PE Exams Syllabus to be released in the
  late fall

15
Why change so soon?

• Several flaws in 2000 system identified.
• SOA market and member research indicated changes
  needed, particularly regarding relevance
• Changes are not as big as may be assumed

16
Key Changes

• PE more efficient, more relevant emphasis on
  core actuarial topics and addition of new
  reference material
• Course 5 and parts of Courses 6 and 7 replaced by
  more efficient and relevant FAP Course and FSA
  modules

17
Key Changes

• Other outcomes of the member feedback and BOG
  deliberations
• Nation and practice specific material
  reintroduced to FSA courses
• Formation of Risk Management section
• Incorporation of Enterprise Risk Management (ERM)
  into the examination process
• Extension to the current Course 8 Finance exam
• First offering set for November 2004

18
Education Redesign At a Glance

• ASA Education
• Preliminary Education (PE)
• Prerequisites 5 topics
• Validation by Educational Experience 3 subjects
• Examination 4 exams
• Fundamentals of Actuarial Practice (FAP)
• 8 interactive modules
• 1-6 exercises per module
• Examinations 2 exams
• APC (Associateship Professionalism Course)

19
Education Redesign at a Glance

• FSA Education
• Examinations 2 for each practice area
• Individual Insurance
• Health, Group Life Managed Care
• Retirement Benefits
• Investment
• Finance
• Enterprise Risk Management
• 4 or more interactive modules (some practice area
  specific
• Capstone module that crosses practice area
• FAC expanded to include communication skills

20
PE Prerequisites (Not Directly Validated)

• Calculus (tested indirectly in exams)
• Linear Algebra
• Introductory Accounting
• Elements of Business Law
• Mathematical Statistics (tested indirectly in
  exams, with a few topics directly tested CAS
  will test directly)

21
PE Validation by Educational Experience

• Three subjects that are best learned in a
  classroom or are important background but not
  core to actuarial science
• Economics (micro and macro)
• Corporate Finance (intermediate level)
• Applied Statistical Methods

22
PE Validation by Educational Experience

• Course minimum B- or equivalent alternatives
• Other opportunities for meeting this requirement
  are being identified
• CAS exams offered for transition period
• CLEP and AP exams for economics
• Distance learning options

23
PE Validation by Educational Experience

• Academic institutions have been contacted
• Initial list of pre-approved courses to be ready
  by December 2004
• Candidate applications will be accepted starting
  in January 2005
• Candidates must have credit for at least two
  exams prior to applying for VEE credit
• Experience could have occurred at any time in the
  past

24
PE Examinations

• SOA Exam P/CAS Exam 1 Probability
• Probability and supporting calculus
• Validated by a 3-hour examination
• Potential for computer-based delivery
• SOA Exam FM/CAS Exam 2 Financial
  Mathematics
• Theory of interest and introduction to financial
  economics
• Validated by a 2-hour examination

25
PE Examinations

• SOA Exam M Actuarial Models/CAS Exam 3
  Statistics and Actuarial Models
• Similar to current Course 3s
• Validated by a 4-hour examination
• SOA Exam C/CAS Exam 4 Construction and
  Evaluation of Risk Models
• Similar to current Course 4
• Validated by a 4-hour examination

26
Fundamentals of Actuarial Practice (FAP)

• Focus on education via computer-based modular
  instruction
• Opportunity to practice and receive feedback
  (activities and exercises)
• Actuarial control cycle as a framework

27
Control Cycle
28
FAP Course Modules

• Module 1 Role of the Professional Actuary
• Module 2 Core External Forces
• Module 3 Common Actuarial Problems/Assignments
• Module 4 Solutions to Selected Actuarial Problems

29
FAP Course Modules

• Module 5 Design and Pricing of an Actuarial
  Solution
• Module 6 Selection of an Actuarial Design and
  Model
• Module 7 Selection of Initial Assumptions
• Module 8 Monitoring Experience

30
FAP Course Exercises

• Mandatory with some choices available
• Some across practice areas some within practice
  areas
• Formal validation for accountability

31
FAP Course Examinations

• Two examinations
• First exam will follow completion of Module 5
• Second exam will follow completion of Module 8
• Multiple-choice
• Potential for on demand

32
Why eLearning Solutions?

• Engaging the learner
• Interactive
• Flexibility, accessibility, convenience for
  candidates
• Easy and fast update cycles
• Easy worldwide distribution

33
FSA Education

• Critical content rigorously examined
• Other relevant content covered via educational
  modules and formally validated exercises
• Advanced applications also covered in educational
  modules
• Maintain FAC in education component
• Include communication skills in FAC

34
FSA Examinations

• Two exams for each practice area
• Each exam similar in size to Course 8
• Optimal level of consistency across practice
  areas with some flexibility
• Continue control cycle framework
• Design and Pricing of Products/Plans Exam
• Company/Sponsor Perspective Exam

35
Positive Impacts on Travel Time

• PE structure offers efficient alternatives (e.g.,
  prerequisites and validation by educational
  experience)
• PE and FAP exams more frequent administration,
  potential for on demand administration

36
Positive Impacts on Travel Time

• Innovative design of FAP course enables learning
  and reduces need to retake
• Candidates can begin FAP modules while studying
  for PE exams
• Candidates can begin FSA modules while studying
  for FSA exams

37
Implementation Plan

• Preliminary Education 2005
• FAP Course 2006
• FSA Education Component 2007

38
Conversion Rules
39
Conversion Rules
40
Conversion Rules
41
Conversion Special Considerations

• All who have partial PD credits, such as from the
  year 2000 conversion, will be given time to
  complete PD and then use it for conversion.
• Credit for certain pre-2000 examinations which
  became unassigned PD credit may be used for
  completing validation by educational experience
  requirement

42
Final Administrations for Current System

• Final Courses 1-4 exams November 2004
• Final Course 5 exam November 2005
• Final Course 6 exam May 2006
• Final Course 8 exam November 2006
• Final Course 7 seminar Near end of 2006
• Final PD Executed PD plans accepted through
  June 2007

43
Status

• Design teams are moving the process forward.
• The FAP Course team is completing the prototype
  module.
• Design teams for the FSA tracks are refining
  learning objectives and allocating them to the
  examinations and modules.
• EA exams will be mapped to specific FSA level
  components.

44
Implications Academic Programs

• VEE issues
• Identifying and submitting appropriate academic
  courses
• Undergraduate, Graduate
• Econ (macro intro? micro intermediate?)
• Finance intermediate?
• Applied Statistics Biometry course? Econometrics
  course? Actuarial course?
• When take courses
• When apply for credit

45
Implications Academic Programs

• PE Examinations issues
• Academic courses to take for content background
• Problem labs
• What exams to take when

46
Implications Company Programs

• Others know better
• PE not much change necessary?
• ASA FAP different structure how support?
• FSA not much change except modules how
  support?

47
Comments and Questions

• Comments and questions can be sent at any time to
  eq2005_at_soa.org
• Comments and questions specific to VEE can be
  sent to vee_at_soa.org
• Questions now (or at social hour, dinner)?

48
Questions and Answers

• What alternatives do I have if I didnt take
  Applied Statistics (or one of the other VEE
  subjects economics, corporate finance) in
  college?
• When can I submit for VEE?
• If I can demonstrate that I satisfy the VEE
  requirement, do I still have to take the new
  Exams P, FM, M and C?

49
Questions and Answers

• The CAS and SOA will only approve coursework from
  recognized colleges and universities. Does this
  mean that only courses from schools with
  actuarial science programs will be approved?
• What credit do I receive from my E.A. (Enrolled
  Actuaries) designation?

50
Questions and Answers

• I have credit for Course 8P but not Course 8R. Do
  I qualify for conversion credit for the new Exam
  DP?
• I have PD credit from the last conversion. How
  can I use that credit?
• If I obtained my ASA before 2000, do I need to
  take the APC?

51
Questions and Answers

• I took Course 120 in the previous system but
  didnt earn enough credits to earn credit for one
  of the current preliminary exams (1-4) so my 15
  units for Course 120 was converted to PD credit.
  I also didnt take Applied Statistics in college.
  Can I use my Course 120 credit to satisfy the VEE
  requirement for Applied Statistics?
• I took Course 220 in the previous system but
  didnt pass Course 230 so I didnt receive credit
  for Course 6 via conversion. Is that credit worth
  anything?

52
Questions and Answers

• Ive got lots of questions on the Fundamentals of
  Actuarial Practice (FAP) Course.
• a. How much will each module cost?
• b. How often will each module be available?
• c. Can I take the modules even if I havent
  passed all of the preliminary exams?
• d. How much time will each module take to
  complete?
• e. How often will the FAP examinations be
  offered?
• f. Will the modules be available before 2006?
• g. Do I have to complete the modules before
  taking the corresponding exam?
• h. My Course 5 credit gives me credit for FAP
  Modules 1-5 and the first FAP exam I dont have
  credit for the current Course 7. Will the second
  examination cover material from the first five
  modules?

53
Questions and Answers

• Im currently an ASA. What happens if I have
  credit for Courses 1-7 going into 2006 and I take
  and pass Course 8 in November 2006? How can I get
  my Fellowship if you are discontinuing the PD
  requirement?
• I used PD as a component to fulfill my ASA
  designation. I do not have any conversion credit.
  If I dont pass Course 8 by 2007, what conversion
  credit do I get?

54
Questions and Answers

• I have credit for Courses 1-6. If I pass Course 7
  in late 2006, can I use the FSA level modules in
  combination for credit for Course 7 to get my
  FSA?
• Right now, I have several possible exam choices
  to make to earn my ASA. If I have credit for
  Courses 1-4, can I take the FSA modules and an
  FSA level exam to finish my ASA?