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Sample Actuarial Problems

Apply your math skills to actuarial exam questions.

Actuaries earn professional credentials by passing a series of examinations. This online exam is designed to give you an idea of the types of questions you might encounter on the preliminary actuarial examinations administered by the Casualty Actuarial Society and Society of Actuaries. The sample problems are actual questions from prior exams, but they do not cover all the topics or all levels of difficulty.

Answer the five multiple choice questions below, then click submit to see your results.

1

A company takes out an insurance policy to cover accidents that occur at its manufacturing plant. The probability that one or more accidents will occur during any given month is 3/5.

The number of accidents that occur in any given month is independent of the number of accidents that occur in all other months.

Calculate the probability that there will be at least four months in which no accidents occur before the fourth month in which at least one accident occurs.

2

A device runs until either of two components fails, at which point the device stops running.  The joint density function of the lifetimes of the two components, both measured in hours, is 

f (x,y)=x+y/8 for 0< x < 2 and 0< y < 2 .

What is the probability that the device fails during its first hour of operation?

3

Let T1 be the time between a car accident and reporting a claim to the insurance company. Let T2 be the time between the report of the claim and payment of the claim. The joint density function of T1 and T2, f(t1, t2), is constant over the region 0 < t1 < 6, 0< t2 < 6, t1 + t2 < 10, and zero otherwise. Determine E[T1 + T2], the expected time between a car accident and payment of the claim.

4

Claim amounts for wind damage to insured homes are independent random variables with common density function

where x is the amount of a claim in thousands.

Suppose 3 such claims will be made.

What is the expected value of the largest of the three claims?

5

An insurance company issues life insurance policies in three separate categories: standard, preferred, and ultra-preferred. Of the company’s policyholders, 50% are standard, 40% are preferred, and 10% are ultra-preferred. Each standard policyholder has probability 0.010 of dying in the next year, each preferred policyholder has probability 0.005 of dying in the next year, and each ultra-preferred policyholder has probability 0.001 of dying in the next year.

A policyholder dies in the next year.

What is the probability that the deceased policyholder was ultra-preferred?