2006 General Meeting Assemblée générale 2006 Chicago, Illinois

1. Canadian Institute of Actuaries L’Institut canadien des actuaires 2006 General Meeting Assemblée générale 2006 Chicago, Illinois

2. Future Education Design OF-28 Chris Fievoli, Mary Hardy, Michel Giguere October 20, 2006

3. Purpose of Session • Bring membership up to speed on discussions pertaining to education of Canadian actuaries • Still in idea-generation phase • Nothing “carved in stone” • Still open to new concepts and suggestions

4. Agenda • Background (Chris Fievoli) • Overview of Foreign Actuarial Education Systems (Mary Hardy) • Overview of Education System for Other Professions (Michel) • Implementation Issues (Michel) • Perspectives (Mary, Michel, Chris) • Comments and Questions

5. Background • Stems from CIA investigations into future of profession • Task force chaired by Alex Brown • Identified future education as an issue to investigate • CIA has been talking about taking a greater role in the education of Canadian actuaries

6. Background • External Influences • New SOA system recognized Validation by Educational Experience • Criticisms of Morris Report • UK actuaries too “insular” • Lagging modern financial topics • Desire to avoid same criticisms being raised in Canada

7. Background • External Influences • New SOA system makes use of interactive modules • Improvement on traditional self-study • Canadian universities have developed strong actuarial programs • XX universities now offer actuarial courses and programs

8. Background • SOA view on “alternate route” • Considered by SOA board • Agreed in 2006 to defer decision until 2008 • Allow time for new system to stabilize • Canadian university system is ideally suited to this • Could be used as a “pilot project” • No desire to break away from SOA/CAS • Still view as a partnership

9. Background • Concern over travel time • Length of time to qualification may discourage potential applicants • Part of the problem is lack of overlap between university courses and SOA exams

10. 2003 Survey of Universities • 10 universities participated • Receptive to concept of developing programs to replace or complement Preliminary Education • Strong desire to maintain flexibility in program design • CIA would need to recognize differences • Several issues to iron out • i.e. passing grades

11. FEM Task Force • Future Education Model (FEM) task force set up in 2005 • Key points to consider: • How can we improve the education of actuaries in Canada? • Can we make more efficient use of the university system in Canada? • Can we build on the strengths of the current SOA/CAS/CIA volunteer system?

12. Vision of FEM Task Force • Develop process by which university courses could be used to exempt students from writing SOA preliminary examinations • Build necessary relationships between CIA and Canadian universities • Longer-term vision may be more ambitious • Will take it one step at a time

13. 2006 Actuarial Research Conference • Presentation was made at August conference • Generally receptive • Issues to work out • Program vs. course accreditation • Control over standards • Volunteer resources • Need for external reviews

14. Alternative Route – UK and Australian Examples Mary Hardy

15. UK system • UKAP=UK Actuarial Profession • 4 stages to qualify • Core Technical (CT) • Core Applications (CA) • Specialist Technical (ST) • Specialist Applications (SA) • Business Awareness and Communications

16. UK system • Exemptions available from some CT subjects based on University grades (like VEE) • Economics • Accounting • Statistics • Exemptions available from all CT based on Uni grades, selected universities.

17. UK system • Exemption ‘granting’ status for 30 Universities • 13 in UK, 5 in Oz, 7 in RSA, 3 in Ireland etc • In UK, 5 major programs offering full CT • Independent Examiner • Monitors each exam paper • Course-by-Course Exemption, • usually B+-ish requirement • Recommendations only

18. UK System • Still, only approx 25% enter profession with act sci degrees & exemptions • One university offers Specialist exemptions

19. Notes on the UK system • System moving towards accreditation • Some Unis will not be accredited • Better control • After >25 years, exemptions are still not popular with some employers and fellows

20. What did Morris say? The current model encourages: • Narrow skills rather than broad principles • Insularity • Discourages exchange of ideas • Prolongs qualification • Insular approach to syllabus development • Pre-occupation with exams, not learning

21. What did Morris suggest? • Profession, employers and universities cooperate towards… • Accreditation of university programs • Creation of post-grad conversion courses for non act sci undergrads

22. Australia • Few programs, in strong universities • Most new entrants take act sci undergrad • Similar demographics to Canada • Historically linked to UKAP

23. Australian system • 4 Accredited universities • Melb, NSW, ANU, Macq. • Accreditation based on courses, history, faculty. • Offer alternative to Pt I (CT) • Exams or exemptions also used • Pt II (similar to FAP) must be taken through unis (DE possible)

24. Australian system • No (apparent) member dissent • Why not!?

25. Implementation Issues Michel Giguere

26. Plan of my presentation • Other professions in Canada • Changes being contemplated • Course by course approach or accreditation of actuarial programs • How a new system could work

27. Other professions in Canada • Medical profession • Tight control over the « offer », namely for social reasons • Less likely to serve as a model • Accounting profession • Uniform final examination • Require a University degree • System of internships (after the University) • Leading to full recognition (like Fellowship)

28. Other professions in Canada (cont’d) • Engineering profession • Acreditation of University programs • Much closer agreement as to the contents of the programs (because no uniform final examination) • Existence of a joint Board (professionals and academics) to define the required contents and the extent of the review process • Leading to full recognition (like Fellowship)

29. Other professions in Canada (cont’d) • Actuarial profession • Current system: • System independent of universities, except for VEE credits on subjects seen as peripheral • New system: • Not likely to establish a tight limit on offer • Not likely to establish a uniform final examination (redundancy of efforts) • Not likely to lead to full recognition (i.e. preliminary examinations or associateship rather than fellowship)

30. What changes are being contemplated ? • Changes contemplated would take into account the quality of existing Canadian actuarial programs • New approach would likely focus on Preliminary Examinations (first four exams) • Other steps could be taken later, depending on experience

31. What changes are being contemplated ? • The new system would make a better use of the universities in the education of actuaries • This would create a partnership between the universities and the profession • The old system would still exist for those who do not have a ready access to the Canadian Universities, or prefer the traditional route

32. How this proposal would work ? • There are basically two ways such a proposal could work for the Preliminary Examinations: • Course by course exemption system or • Acreditation of a bachelor degree or major in actuarial science

33. Course by course system • Could look alike the current VEE system • Need to define contents of courses and learning objectives • Need to define uniform passing marks or grading • Need to establish which courses meet these criteria • Periodic review • Seek SoA / CAS mutual recognition

34. Course by course system (cont’d) • Some pros and cons • Avoids duplication of testing • Greater use of universities • Closer to VEE, easier to sell • Technical or micro-system • Students can « repeat » missing parts • Universities somewhat « adapting » to the profession (less likely)

35. Acreditation system • Would look more like other professions system • Joint acreditation Board regrouping academics and professionals • Need to define topics to be covered (vs contents of courses) and learning objectives • Need to review quality of Faculty, level of difficulty of program

36. Acreditation system (cont’d) • Need to define overall grade for acreditation (vary by University or standardization of grading) • Need to establish which University programs meet these criteria or what they must change • Periodic review • Seek SoA / CAS mutual recognition

37. Acreditation system (cont’d) • Some pros and cons • Recognizes the value of university education (uses their expertise) • Focuses more on variety and quality of support, tools and gradual learning • Better insurance of overall quality (more macro than micro) • Different from the past; we went through a tougher route; not retaining only the quickest; less pressure

38. Course by course or acreditation ? • Considering the point of view of academics (more flexibility to define good programs within defined framework) • Considering the approach of other professions (recognition or testing of programs) • Considering we are looking at Preliminary Examinations only • The FEM Task Force could be leaning towards proposing an acreditation approach in opposition to a course by course exemption

39. Next steps • Resources and steps required • Staff a joint board (profession and university) • Define objectives, structure, processes, thresholds • Create review tools and review committee • Sell to the profession, to the EEC, to the CIA Board

40. Next steps • Timeline • Two years ? • Students entering actuarial programs in Sept. 2009 ? 2008 ?

41. Point of view • Value of a University formation • Requirement of a University formation • Course by course ? • No, thank you • Value of a B-

42. Point of view • Better technical actuaries or better business actuaries ? • Probably both; it’s your choice • More actuaries ? • Probably; maybe better equipped • A little story about the strength of current University actuarial students

43. An Academic Perspective Mary Hardy

44. University* view of accreditation • Students can focus • Learning style for Uni exams for SOA exams • Retain good candidates • Who otherwise leave for eg finance • Increased curriculum freedom • Textbooks • Nimble syllabus * OK, not necessarily every university…

45. Trends in SOA Life Cons Exams When was this question asked? Find the net single premium at age 55 for a deferred continuous annuity of $1 per year commencing at age 65, with a death benefit before age 65 equal to the benefit reserve at death. Answer: 1959

46. How about this one? For a deferred whole life annuity-due on (25) with annual payment of 1 commencing at age 60, you are given: (i) Level benefit premiums are payable at the beginning of each year during the deferral period. (ii) During the deferral period, a death benefit equal to the benefit reserve is payable at the end of the year of death. Calculate the benefit reserve at the end of the 20th year. Answer: 2004

47. Typical SOA question The random variable X has survival function: Two values of X are observed to be 2 and 4. One other value exceeds 4. Calculate the maximum likelihood estimate of θ.

48. Typical University Question might add… (b) Prove MLE is asymptotically unbiased (c) Explain why the MLE might not be the best estimator for this data (d) Given prior, calculate Bayesian estimate (e) Discuss advantages and disadvantages of Bayes cf MLE

49. University learning should … • Be higher level cognitive • Offer more realistic problems • Closely link assessment and learning • Offer more collegial environment, exchange of ideas • Be up-to-date in knowledge and technology • Bring in relevant research

50. Accreditation would.. • Attract the best students to the profession • Qualify them efficiently • Using relevant, lasting, up-to-date teaching and materials • Exploit the strong university base in Canada • Strengthen the profession and the industry