It happens a lot. A couple of months ago, I took one of the higher level actuarial exams. I only have three left and then I'll be fully credentialed. And when I take an exam, people always ask me what it's like. Well, wonder no more. This exam consumed me for several months and cut down on my fiction productivity. So, I think this topic deserves a blog entry. Are you ready to get learned up?
Often, "Actuary" is listed as the number 1 job in America. It's low stress, high reward, and reasonable hours. You basically get paid to play with numbers and project the future and predict when people are going to die, and stuff like that. I enjoy my job ... well, that is except for the initiatory process known as the Actuarial Exams.
The first exam is easy. If you paid attention in your college math classes, there's a good chance that you'll pass on the first go. I scored a 10 on my first exam, which is as high as you can get.
Then the exams get progressively harder. I enjoyed my first four or five exams. They had a lot of math in them. But the last exam I took ... whoa Nellie! It has a little math in it, but also a lot of regulation and insurance history stuff. It's stuff every actuary needs to know, but IT'S SO BORING and IT'S NOT ALL MATH! This exam, now known as CAS #6, is my bane. I've now taken this exam three times and have failed each time!
But guess what ... it's perfectly normal to fail these exams. If at first you fail (and most do on the first try), you just "study harder" the next year and maybe you'll pass the next time.
But, you see ... I'm used to what I experienced in college. You go to classes. You read the material. You do homework. You turn in assignments. You take quizzes. And in the end, you take a final. If you get a sufficiently high score, you pass the class and you receive credit. In general, if you learn more than 70% of the material, you're ensured to pass.
With actuarial exams, it's completely different. You only get one chance a year to prove that you know the stuff. With some exams you get two chances a year. Each time, you pay $500-$600 for the opportunity to take the exam. You download the material and buy textbooks. You take the exam, which is graded on a curve. If you pass, then you get credit. If not, then you have to wait another year and pay up again.
When I went to college, I loaded up with an average of 18 credit hours. Think of your total set of readings for a typical semester. About how many pages was that? Now multiply this by three, and you'll get a good sense of how much material is on an actuarial exam. It's amazing how much they cram into a four hour test.
And if you memorize 70% of the material, you may or may not be okay once exam time comes. If you memorize 100%, you should probably be okay, but after spending hundreds of hours, I'm not sure 100% can be obtained. You'd have to know every footnote, and this is difficult for most human beings.
The exam creators also love to ask HARD questions. Their way of thinking ... if someone can answer a hard question, then they really know the material enough to pass. But if you ask HARD questions, then you can't ask very many of them on a four hour exam. This last sitting, there were around 30 questions.
The problem with this is twofold ...
#1) You can't cover much of the syllabus. Let's say 40% tops. So, if someone memorizes 70% of the syllabus, there's 30% that he doesn't know. So in a worst-case scenario, the exam questions could cover the 30% he doesn't know and 10% that he does know. Thus, he only gets 25% of the questions correct. My numbers are a little exaggerated, but it really does happen that an exam just happens to jive with your mindset, and the next year it doesn't. These little mismatches are just enough to push one into a FAIL score. As it was, on the last exam I took, there were scores of problems and questions I was prepared to answer, and they just weren't tested.
#2) HARD questions are indeed fun to answer if there happens to be enough time to answer them, and I love a good puzzle, but I've seen some heavily concocted scenarios that would never happen in real actuarial life ... such as "We know the final answer and we want you to back into this unimportant number over here." There was one question on this last exam on a subject that I thought I was adequately prepared. But when I was asked to think backwards, my exam-frenzied mind froze and I was only frustrated that I was unable to instead show how to do the thing "forwards" like real-life actuaries. I also then realized that this specific exam was not geared to my mindset and that I was screwed.
And finally comes the grading, which is done by professional volunteers. The process is heavily safeguarded and everything is double-checked and triple-checked. However, there are some fundamental characteristics of the whole structure that doom several to fail several times, even though they may actually have a good grasp of the material. (Once I failed an exam when I felt like I should have passed. The next year, I hardly put in any study time at all -- less than 100 hours, and I passed the exam with flying colors.)
Each candidate has each of their questions graded separately and independently. Then an overall "qualifying" score is calculated. Finally, the scores are tallied. Actuaries whose scores are right on the border line are graded again just to be sure. Then anyone above the qualifying score passes.
It almost always works out that if you were to graph all of the final candidate scores, it would show a large number of actuaries right around the "qualifying" score. Most of them end up slightly under that score. And that's too bad. If the passing score is 67 out of 100 points, then you'll have one actuary with 66.75 points who fails, and one with 67.25 points who passes. But if you compare their answers, you won't find much of a difference in the quality of those answers. So, what did the passing actuary do any differently than the failing actuary?
And this is where luck comes in. In other words, even if you know enough of the material to function as a competent actuary, you may have a bad day of testing and lose out on your opportunity to demonstrate that knowledge. Or you may have performed well, but happened to be just a fraction of a point too low to pass after everything is tallied.
The best a struggling actuary can do is to try again the next time. I've seen several intelligent mathematicians leave the profession because of the difficulty of the exams. I've seen some who don't really know the material earn a pass because they just know how to do well on exams (through blind memorization and happening to practice the right problems).
So, there you have it. My description of the exam process. I really wish there were some other vehicle to learn the material and pass it off, but for now, that's all that's available. I'll try again next year. Maybe I'll get up to 80% memorization and that'll be enough. Maybe I'll try some more of that blind memorization. We'll see...
Until then, you can enjoy this YouTube video that I believe best captures the essence of what it's like to take a higher-level actuarial exam ...