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Want to be an actuary? Odds are, you’ll fail the test

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Re: Want to be an actuary? Odds are, you’ll fail the test

#331

Post by civilized »

seibelj wrote: post #306
namdnay wrote: post #273

Earlier quoted context omitted.

> Licenses that anyone can get, but are purely graded on a curve in order to protect existing members. Finally we get to the actuarial licenses! Similar licenses would be Michelin star restaurants and wine sommeliers. Only a very small community appreciates these licenses, but the value to those that have them is high via the artificial scarcity. In order to keep them fair they offer the test(s) to anyone, but grade…

I would argue that there should be way more Michelin-star restaurants than exist, but they artificially cap the supply to keep them rare. It's a form of the same thing.

I think there's an incentive system at work that I'm not sure I've seen articulated before. If the people controlling a rating system want the best ratings to be rare, they will often have to resort to a combination of opacity, arbitrariness, and fine distinctions that are largely meaningless to the consumers of the ratings. Because True Quality can't be reliably recognized by some ratings committee... and yet, they must rate.

Re: Want to be an actuary? Odds are, you’ll fail the test

#332

Post by actuary »

seibelj wrote: post #258
civilized wrote: post #173

Earlier quoted context omitted.

The exams have two ultimate objectives: 1. Perpetuate the actuarial guild 2. Shovel money from aspiring actuaries and insurance companies into the SOA's coffers They aren't really, and aren't really meant to be, a marker of general, transferable intellectual skills or achievement outside the insurance industry. So it's not surprising that no one other than the parties involved (the SOA, aspiring actuaries, and insura…

This is the same model of all licenses, which is inherited from the guild system common throughout all of human history (the government (monarchs, oligarchies, democracies) protect favored industries from competition). I put them on a spectrum: - Licenses that anyone can obtain by showing the requisite skills. This is the least nefarious, and the clearest example would be driver's licenses. In a perfect world anyone…

Actuarial credentials aren't licenses. In the United States, they confer no privileges aside from the ability to sign a particular statement on the condition of a company's loss reserves. This is something that few actuaries will ever need to do.

Actuarial credentials are instead a market-based signaling mechanism, akin to a specialized technical degree. All signaling mechanisms are imperfectly correlated to whatever it is they're signaling for, but in my own experience, it's usually a good bet that an actuary who holds a credential will be more capable than one who doesn't. The market agrees and pays credentialed actuaries a premium. If credentials stopped being an excellent predictor of ability, there would be nothing stopping the market from disfavoring them. Note that there's one highly successful insurance company (Progressive) that has made this call and hires very few actuaries. Most companies wouldn't be able to follow their operating model, but that's a different conversation.

And if the actuarial societies and insurance companies are trying to preserve scarcity of actuarial credentials, they're doing a poor job of it. The test-taking process continue to be well-supported by insurance companies. Junior actuaries typically have all exam expenses paid and are given an additional 25 to 30 extra days off per year to study for exams. The number of credentialed actuaries has exploded (I think more than doubled) in the past decade. There are no quotas and no economic barriers after you get your first job.

I do like your comparison with Michelin-star restaurants. Michelin stars are a signifier of quality. The letters after my name are too.

Re: Want to be an actuary? Odds are, you’ll fail the test

#333

Post by datavirtue »

romwell wrote: post #57
d136o wrote: post #39

In this [1] interview by Barry Ritholtz, Markel CEO essentially told the origin story of an insurance giant. Basically a family member was a lawmaker, passed a law that drivers of the newly invented cars (maybe horse buggies?) must be insured. They simultaneously started a company that sold insurance. Over time they learned to make money from investing their customers capital. It blew my mind at how candid he was abo…

Side story about how satisfied people can be with the mandated insurance. I was on coast-to-coast road trip when I got into an accident in TX. Someone was trying to pass me on the left in a turning lane, veered into the incoming lane, and then hit my vehicle's front wheels from the back. The police ticketed the other driver, and told me that insurance will surely take care of that on my side. "Wow, it's worse than we…

It's easy to get a lawyer on contingency for this. Don't talk to the insurance company beyond: "I'll settle for $20k now", "Can't do that." Hang up and start calling lawyers (price just went up). They are going to want to hang injuries over them...so start getting massages and feedback from a chiropractor.

You have to play the game to get compensated unfortunately. The lawyers and chiropractor know how to do the dance. Most people just get discouraged by the offending insurance compay and take it in the ass. You should be paid for your time talking to lawyers and going to get massages and dealing with all the logistics of repair, inconvenience of the accident etc.

"They can" because you let them... most people don't value their time and do the the same. Great business, insurance.

Another way of looking at it is that you could recover all of the money you have ever paid out for auto insurance in one settlement--zeroing out your contribution to the scam.

Grind them into dust for every last penny you can pry out of their hands because they do the same to you and all of us. Forget the propaganda about "raising everyone else's rates." That's a joke. This is an industry that punishes loyal customers by raising rates every year until you notice. Then they hope you leave. They are very sensitive about people shopping around each year and always talk about discounts for people who were at their last insurance company for x consecutive years. Scam indeed.

Re: Want to be an actuary? Odds are, you’ll fail the test

#334

Post by whatshisface »

jjnoakes wrote: post #329
whatshisface wrote: post #321

Earlier quoted context omitted.

By how much? Logically, the fair amount to raise rates would be the amount that compensated for their increased risk of doing it again. There you are, doing a risk analysis. (If you had them directly pay for the damage they caused, that wouldn't be insurance, that would be a middle man for restitution.)

By some amount proportional to the damage caused, of course. The more times you cause damage, and the higher the damages, the higher your rates go over time. I think my point is pretty clear without me coming up with a precise formula: instead of predicting rates, just adjust them based on history instead. After all, someone likely to cause repeated damage in the future is also likely to have caused it in the past. T…

>The more times you cause damage, and the higher the damages, the higher your rates go over time.

But by how much? If it's enough to fully offset the cost of the damage, that's not insurance, but a payment plan. If it's less than the cost of the damage, then you have to decide what it's going to be.

Re: Want to be an actuary? Odds are, you’ll fail the test

#335

Post by dhosek »

knodi123 wrote: post #36
dhosek wrote: post #26

Earlier quoted context omitted.

That was my answer as well: My reasoning: Let x be the probability of purchasing disability coverage, thus the probability of purchasing collision is 2 x from conditions b and c, we know that 2 x ∙ x = .15 so we can calculate the probability of neither applying as 1-(2 x + x )+2 x ∙ x = .18 + .15 = .33 I can see the trap of forgetting to add 2 x ∙ x in the calculation (since we don't want to double count the case whe…

> with free answer exams, they can still get partial credit Rarely had a prof that had the patience for that, vs. a simple red X. Not arguing, it's just my anecdote of frustration.

I taught a lot of high school/junior high math for college students back in the day and typically the midterm exams and quizzes would get partial credit and the final was multiple choice. We had very specific rubrics for partial credit grading and this was typical of the classes that I took as well.

Re: Want to be an actuary? Odds are, you’ll fail the test

#336

Post by User23 »

civilized wrote: post #290
User23 wrote: post #246

Earlier quoted context omitted.

Term life insurance is basically just a put option on your life with an expiration a couple decades out. Whole life on the other hand is actually buying equity in your presumptive future earnings. It's considerably more capital intensive, but less expensive overall in most cases.

I don't know anyone outside of a heavily commissioned life insurance agent who thinks whole life is a good deal. You're flushing massive amounts of money down the toilet in the form of agent commissions and other fees. It's just another tax shelter for the wealthy, after they max out more attractive alternatives. This article sums it up for me: https://www.nerdwallet.com/article/insurance/is-whole-life-i...

You're not wrong, but from the very good article you linked:

> I think only the top 20% of income earners should consider whole life. Term insurance is cheaper and is almost always the best type of insurance for 80% of the nation.

Many of the readers of this site fall into that 20%. If you're working at SV rates and aren't maxing out your 401(k) you're assuredly doing it wrong. If you are and want to save more, then whole life is an option worth researching.

Re: Want to be an actuary? Odds are, you’ll fail the test

#337

Post by jjnoakes »

whatshisface wrote: post #334
jjnoakes wrote: post #329

Earlier quoted context omitted.

By some amount proportional to the damage caused, of course. The more times you cause damage, and the higher the damages, the higher your rates go over time. I think my point is pretty clear without me coming up with a precise formula: instead of predicting rates, just adjust them based on history instead. After all, someone likely to cause repeated damage in the future is also likely to have caused it in the past. T…

> The more times you cause damage, and the higher the damages, the higher your rates go over time. But by how much ? If it's enough to fully offset the cost of the damage, that's not insurance, but a payment plan. If it's less than the cost of the damage, then you have to decide what it's going to be.

Again, I'm not going to come up with an exact formula. The point stands without one.

You can calculate using any history you like. Weigh past damages based on time between, or time in the past. Be creative.

Re: Want to be an actuary? Odds are, you’ll fail the test

#338

Post by ikr678 »

thaumasiotes wrote: post #279
heisenbit wrote: post #275

Earlier quoted context omitted.

Drug costs are mostly a function of development and marketing (there are exceptions where production dominates). Development cost is dominated by cost of human trials. It is not clear that drugs (particularly for non animals not destined for human consumption) should be as expensive as human drugs. And that is before getting to to unusual gap between US drug prices and international drug prices.

> It is not clear that drugs (particularly for non animals not destined for human consumption) should be as expensive as human drugs. Are they different drugs?

Sometimes yes, but it's the testing and regulatory approval costs that should in theory be lower for animals.

Re: Want to be an actuary? Odds are, you’ll fail the test

#339

Post by m00n »

civilized wrote: post #182
aqualinux wrote: post #172

Earlier quoted context omitted.

The incumbent insurance companies maintain their position in the market through having large amounts of capital which lets them ultimately offer lower premiums than a new competitor entering the market which may have less capital. This means the legacy insurance companies don't need to prioritise investing in innovation to maintain their position, hence the old companies stay around.

Also, insurance just doesn't have much interesting space for innovation. In life insurance, for example, products other than simple term insurance really shouldn't exist. They're mostly just Rube Goldberg tax sheltered savings accounts for the wealthy. In theory there ought to be some opportunity in the area of incentivizing people to improve their health behaviors. But carriers have been much slower to move on that…

Regarding life insurance product offerings: disability insurance is often advised by consumer protection groups for young professionals, who crucially depend on future income.

Regarding savings products, nothing wrong IMO, with tax subsidizing a "consume later" mentality, if the products are cost-effective.

Re: Want to be an actuary? Odds are, you’ll fail the test

#340

Post by m00n »

stbtrax wrote: post #3

From experience from a few close friends: Actuarial science is always in the lists of top jobs but it's a terrible career. It's quite limiting and doesn't pay particularly well. The companies are all old and stagnant and the amount of time put in to studying for exams is taxing. It'd be much better ROI to put that time into studying for sw-eng roles. That is, unless you're particularly interested in memorizing math f…

The actuarial profession is quite broad, in my experience.

For the teams I worked with, memorization of formulas was to their daily work as whiteboard coding would be to the daily work of a sw-eng.

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