Friday, September 26, 2014

Data Quality

This research summary was first published in the IIB Bulletin, 2014, Vol. 1, Iss. 2, pp-11-12; Co-author: Vishnu Vardhan Pallreddy
https://iib.gov.in/IRDA/Articles/IIB%20Bulletin%20Q2%202014-15.pdf

Background
Insurance Information Bureau of India (IIB) was provided with the mandate to collect data from all licensed Non-Life Insurers in 2009. Since then, IIB has developed applications for online submission of data by the Insurers, has made progress in receiving data on a more timely and complete manner.
However, data quality remains a big challenge and concern. Efforts are being undertaken to address this. It will always remain an important item. The following sections talk about various aspects of data quality.

Quality
“Data are appropriate if they are suitable for the intended purpose of an analysis and relevant to the system or process being analysed” – Section 2.1, Actuarial Standard of Practice (ASOP) No. 23 [1].

“Data quality is often perceived as a mundane issue with less recognition and attention devoted to it than other issues, such as actuarial models and methodologies. However, data exists to fulfil a need: the need for optimal decisions” [2].

“Data quality should therefore, be an integral part of the operational considerations of all companies involved in insurance” [3].

“Overview – Data that are completely accurate, appropriate, and comprehensive are frequently not available. The actuary should use available data that, in the actuary’s professional judgment, allow the actuary to perform the desired analysis. However, if material data limitations are known to the actuary, the actuary should disclose those limitations and their implications.” – Section 3.1, ASOP No. 23 [1].

Selection
The following are some selective excerpts from the Section 3.2 of ASOP No. 23 [1]:
a. consider the data elements that are desired and possible alternative data elements; and
b. select the data with due consideration of the following:
1.       appropriateness for the intended purpose of the analysis, including whether the data are sufficiently current;
2.       reasonableness and comprehensiveness of the necessary data elements, with particular attention to internal and external consistency;
3.       any known, material limitations of the data;
4.       the cost and feasibility of obtaining alternative data, including the ability to obtain the information in a reasonable time frame;
5.       the benefit to be gained from an alternative data set or data source as balanced against its availability and the time and cost to collect and compile it.”


Reliance
The following are some selective excerpts from the Sections 3.3 and 3.4 of ASOP No. 23 [1]:

Reliance on Data Supplied by Others—“The accuracy and comprehensiveness of data supplied by others are the responsibility of those who supply the data. The actuary may rely on data supplied by others, subject to the guidance in section 3.5 (Review of Data). In doing so, the actuary should disclose such reliance in an appropriate actuarial communication.”

Reliance on Other Information Relevant to the Use of Data – “The validity and comprehensiveness of such information are the responsibility of those who supply such information. The actuary may rely on such information supplied by another, unless it is or becomes apparent to the actuary during the time of the assignment that the information contains material errors or is otherwise unreliable. The actuary should disclose reliance on information provided by another in an appropriate actuarial communication.”

Quality Review
The following are some selective excerpts from the Section 3.5 of ASOP No. 23 [1]:

Review of Data - A review of data may not always reveal existing defects. Nevertheless, whether the actuary prepared the data or received the data from others, the actuary should review the data for reasonableness and consistency, unless, in the actuary’s professional judgment, such review is not necessary or not practical.

a. Data Definitions - The actuary should make a reasonable effort to determine the definition of each data element used in the analysis

b. Identify Questionable Data Values - The actuary should review the data used directly in the actuary’s analysis for the purpose of identifying data values that are materially questionable or relationships that are materially inconsistent.

c. Review of Prior Data - If similar work has been previously performed for the same or recent periods, the actuary should consider reviewing the current data for consistency with the data used in the prior analysis.

If, in the actuary’s professional judgment, it is not appropriate to perform a review of the data, the actuary should disclose that the actuary has not done such a review and should disclose any resulting limitation on the use of the actuarial work product.”

Use
The following are some selective excerpts from the Section 3.7 of ASOP No. 23 [1]:

 “Use of Data - Because data that are completely accurate, appropriate, and comprehensive are frequently not available, the actuary should make a professional judgment about which of the following is applicable:

a. the data are of sufficient quality to perform the analysis;”

b. the data require enhancement before the analysis can be performed, and it is practical to obtain additional or corrected data that will allow the analysis to be performed.

c. judgmental adjustments or assumptions can be applied to the data that allow the actuary to perform the analysis. If the actuary judges that the use of the data, even with adjustments and assumptions applied, may cause the results to be highly uncertain or contain a material bias, the actuary may choose to complete the assignment, but should disclose the potential existence of the uncertainty or bias, and, if reasonably determinable, their nature and potential magnitude;”

d. if the actuary believes that the data are likely to contain material defects, the actuary should determine, if practical, the nature and extent of any checking, verification, or auditing that may have been performed on the data. Then, if, in the actuary’s professional judgment, a more extensive review is needed, the actuary should arrange for such a review prior to completing the assignment; or”
e. if, in the actuary’s professional judgment, the data are so inadequate that the data cannot be used to satisfy the purpose of the analysis, then the actuary should obtain different data or decline to complete the assignment.

Communication and Disclosure
The following are some selective excerpts from the section 4.1 of ASOP No. 23 [1]:

Communication and Disclosure - When issuing communications under this standard, the actuary should comply with ASOP No. 41 [4]. In addition, the actuary should disclose the following items:”
a. the source(s) of the data;”
 “b. whether the actuary reviewed the data and, if not, any resulting limitations on the use
of the actuarial work product;”
 “c: the extent of the actuary’s reliance on data and other information relevant to the use
of data supplied by others;”
 “d:any material judgmental adjustments or assumptions that the actuary applied to the data, or are known by the actuary to have been applied to the data, to allow the actuary to perform the analysis;”
 “e: any limitations on the use of the actuarial work product due to uncertainty about the quality of the data;”
 “f: any unresolved concerns the actuary may have about the data that could have a material effect on the actuarial work product;”
  
References:
1.       Actuarial Standard of Practice No. 23: Data Quality, Actuarial Standards Board, revised edition. American Academy of Actuaries, 2011.
2.       Actuarial I.Q. (Information Quality), CAS Data Management Educational Materials Working Party, 2008.3.       Data Quality in the Insurance Market, ACORD Corporation & Watertrace Management Consulting, 2011.4.       Actuarial Standard of Practice No. 41: Actuarial Communications, Actuarial Standards Board, revised edition. American Academy of Actuaries, 2010

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