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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