A fire department asks three questions: what drove last year's costs, which incidents will be costly next year, and where to station a new engine. Each question points to a different analytics type, and naming the right one earns the point.
The three perspectives. Think of them as a timeline plus a decision. Descriptive looks backward. Predictive looks forward. Prescriptive acts.
KEY: The clean separator is the verb. "Summarize" or "describe" is descriptive. "Predict" or "forecast" is predictive. "Maximize," "recommend," or "decide" is prescriptive.
The perspectives build on each other. Prescriptive analytics usually consumes a predictive model's forecast, then searches decision options to optimize an objective. Predictive often rests on descriptive summaries that reveal candidate predictors.
FROM THE EXAM: "State whether descriptive, predictive, or prescriptive analytics applies to this business problem. Explain your decision." Source: SOA Exam PA, April 2025, Task 1(c). Copyright Society of Actuaries.
The prompt above followed a scenario about "understanding the past drivers of high costs." Past drivers means descriptive.
Common mistakes
- Restating definitions without choosing. When asked which type applies, name exactly one. Reiterating all three earns zero even if each definition is correct.
- Confusing predictive with prescriptive. Forecasting a value is predictive; recommending an action to optimize a goal is prescriptive. "Maximize," "choose," or "decide" signals prescriptive.
- Ignoring the data dictionary. A business question that never references actual fields (like price or cost) loses partial credit.
Bottom line
- Descriptive analytics answers "what happened?" by summarizing past data.
- Predictive analytics answers "what might happen next?" by forecasting an unknown outcome.
- Prescriptive analytics answers "what should we do?" by recommending a decision among options.
- Prescriptive problems ask you to choose or optimize an action, not just forecast a value.
Exam shortcut
Read the verb: "summarize/describe" is descriptive, "forecast/predict" is predictive, "recommend/maximize/choose" is prescriptive. When asked which type applies, write the single word first, then one sentence of justification tied to the scenario. For any prescriptive value problem, immediately check that a price or cost variable is present or listed as needed data; its absence is the graders' favorite trap.
The full lesson (about 1,187 words, 8 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- 1a
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