Chapter 30: Data

Question 1

Main uses of data

Answer 1

F - financial control
I - investment
R - risk management
E - experience analyses
S - statutory returns
P - premium rating, 
A - accounting 
 and administration
C - determining contributions
E - experience statistics

P - product costing,
I - management information
M - marketing
P - setting provisions

Question 2

2 Main sources of data

Answer 2

• publicly available data

- internal data

Question 3

Poor data can be due to… (2)

Answer 3

• poor management control of data recording or its verification processes
• poor design of the data systems

Question 4

The actuary’s data quality assertions will regularly be checked by looking at (11)

Answer 4

(headings are artificial)
RECONCILIATIONS
- of member numbers
- of benefits and premiums
- of beneficial owner and custodian records where assets are owned by a 3rd party
- movement data against accounts

CONSISTENCY

• of contribution and benefit levels with the accounts
• of average sum assured or premium compared with previous investigation
• of asset income data and accounts
• between start and end period shareholdings

OTHER

• validity of dates
• full deed audit for certain assets (eg property)
• records picked at random for spot checks.

Question 5

Issues causing heterogeneous data in industry-wide data collection schemes

Answer 5

• companies operate in different geographical or socio-economic sections of the market.
• the policies sold by different companies are not identical
• sale methods are not identical
• companies will have different practices, eg underwriting, claim settlement
• the nature of the data stored by different companies will not always be the same
• the coding used for the risk factors may vary from organisation to organisation

Question 6

4 Additional problems with large data collection schemes

Answer 6

• data may be less detailed / flexible
• data may be more out-of-date
• data quality may be poor
• not all organisations contribute

Question 7

Assertions to be examined

Answer 7

• that a liability or asset exists on a given date
• that a liability is held or an asset is owned on a given date
• that when an event is recorded, the time of the event and the associated income or expenditure are allocated to the correct accounting period
• the data is complete (ie there are no unrecorded liabilities, assets or events)
• that the appropriate value of an asset or liability has been recorded.

Question 8

4 Causes for the lack of ideal data

Answer 8

• Data have not been captured at a sufficiently detailed level.
• There may be insufficient data to provide a credible result.
• Poor systems
• Practically difficult / impossible to capture good data

Question 9

Main aim of risk classification

Answer 9

To obtain homogeneous data.
The reduction of heterogeneity within the data for a group of risks makes the experience in each group more stable and characteristic of that group, and enables the data to be used more appropriately for projection purposes.

Question 10

3 Primary Uses for Data

Answer 10

• Strategic decision making
• Day-to-day Running
• Monitoring

Question 11

Uses for data: Day-to-day running

Answer 11

• Administration
• Investment
• Setting provisions (in financial statements)
• Marketing

Question 12

Uses for data: Monitoring

Answer 12

• Premium rating & (benefit scheme) funding
• Internal management
• Experience statistics
• Financial Control
• Accounting (Financial Statements & Tax returns)
• Statutory returns

Question 13

What do we mean by “good quality data”

Answer 13

• Complete
• Necessary level of detail
• Accurate
• Up-to-date
• Audit trail (crutial)

Question 14

Checks on data:

Checks

Answer 14

• Detailed Audit
• Reasonability Checks:
---- Averages
---- Impossible values
---- Outliers
---- Consistency over time
---- Check Asset data vs Liability data
• Spot checks
---- Particularly on the "big ticket" items
---- random

Question 15

Checks on data:

Valuations

Answer 15

Assets:

• • At the start of the period
• • Movements during the period
• • At the end of the period

Liabilities:

• • At the start of the period
• • Movements during the period
• • At the end of the period

Question 16

Proposal and claim form requirements

Answer 16

A well designed proposal form will contain
….. unambiguous questions
to help ensure correct answers are collected from policyholders.

The information on both the proposal and claim forms should be easy to enter into the system.

The system must be able to link across proposal and claims records.

Question 17

Proposal form contents:

Life insurers

Answer 17

The proposal form should capture the relevant underwriting information.

Question 18

Proposal form contents:

General insurers

Answer 18

The proposal form should capture the relevant rating factors