C27 Policy data checks

Question 1

List five types of policy data checks.

Answer 1

Types of policy data checks
1. Data reconciliation
2. Consistency checks
3. Unusual values
4. Spot checks
5. Analysis of surplus and/or analysis of embedded value profit

Question 2

Outline how a data reconciliation check is carried out.

Answer 2

Data reconciliation check

 Involves reconciliation of current data with those used for previous investigation.
 Data grouped in some sensible way, eg by year of entry within each broad contract type.
 Using grouped data, the following check is made for each group:

data at previous investigation +
business come onto the books -
business gone off the books =
data at current investigation

Question 3

List four data items that can be checked for non-unitised business.

Answer 3

Data items that can be checked for non-unitised business

1. Number of contracts
2. Basic sum assured (or equivalent benefit depending on nature of contract)
3. Office premium
4. For with-profits contracts, amount of any attaching bonuses

Question 4

List four data items that can be checked for unitised business.

Answer 4

Data items that can be checked for unitised business

1. Number of contracts
2. Number of units allocated, sub-divided by unitised fund
3. Current premium payable
4. Current benefits available, eg amount of death cover

Question 5

List two movements data checks that should be made.

Answer 5

Movements data checks

1. Systems for producing movements data must be checked periodically to ensure:
   – they are working correctly
   – staff involved are following the agreed procedures.
2. Movements data should be checked against any appropriate accounting
   data, especially with regard to benefit payments.

Question 6

Give two examples of consistency checks for each of the following:

 non-unitised contracts
 unitised contracts.

Answer 6

Examples of consistency checks

Non-unitised contracts
1. Average sum assured or premium for each class of business should be sensible, and consistent with figure for previous investigation.
2. Ratio of basic sum assured (or equivalent benefit) to premium payable for each class of regular premium contracts should be sensible and consistent with figure for previous investigation.

Unitised contracts
1. Check numbers of units purchased by premiums and encashed to pay benefits are consistent with corresponding revenue account items.
2. Check internal unit movements, for example charge encashments, are consistent with surplus emerging during year.

Question 7

Give three examples of unusual values, including one that looks at grouping
items.

Explain what is meant by a spot check.

Answer 7

Unusual values and spot checks

1. Very large or zero unit values under unitised contracts, or benefit values
   for non-unitised contracts.
2. Impossible dates of birth or retirement ages or start dates.
3. After grouping the data, look for unusual features in their distribution such as an unusually high clustering of birth month.

A spot check involves comparing extracts of computer-held data with information in paper administration files. (Can be done on spot-check basis by randomly selecting policies.)