Course on Professionalism - Casualty Actuarial Society

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Course on Professionalism

ASOP #23 – Data Quality

Purpose

 Give guidance in:      Selecting data Relying on data supplied by others Reviewing data Using Data Disclosures with regard to data quality 2

Scope

    Applies to all areas of practice Does NOT require audit of data If standard establishes requirements in addition to those imposed by law, satisfy both Originally effective 12/31/1993; updated effective

for work products for which data was provided on or after May 1, 2005 or projects started on or after July 1, 2006

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Question 1

 Which of the following statements are not true regarding the scope of ASOP 23?

 A. Applies to Property & Casualty actuarial work  B. Requires audit of data if known limitations in data  C. Applies to Health Insurance actuarial work  D. All of the above are true 4

Overview

  Accuracy and validity of actuarial analyses are dependent on the quality of data used Expectations that actuaries will use appropriate data in their work and will disclose material imperfections in underlying data 5

Issues and Recommended Practices

    Completely accurate, appropriate, and comprehensive data are rarely available An actuary performs an analysis with available data and sufficiently discloses material data limitations, and their implications Data review may not always reveal imperfections This standard does not recommend that an actuary audit data 6

Selection of Data

   Understand intended use Consider desired and possible alternative data elements Data considerations:      Appropriate for intended purpose, including whether sufficiently current Reasonableness and comprehensiveness Known, material limitations Cost and feasibility of alternatives Sampling methods, if used 7

Review of Data

   Definition of “review” added, pointing out that it is an informal examination of obvious characteristics of the data Applies whether the actuary prepared the data or received data from a third party Review for reasonableness and consistency, “unless review is not necessary or is not practical” 8

Nature and Extent of Review

   Make reasonable effort to determine the definition of each data element Identify questionable data values with material impact; consider attempts to improve data Review of prior data 9

Question 2

With respect to selection of data, which items should receive due consideration?

 A. Intended use  B. Known, material limitations of data  C. Cost and feasibility of alternatives  D. All of the above 10

Reliance on Data Supplied by Others

   Accuracy and comprehension of data is responsibility of the provider Actuary may rely on data supplied by others but should follow guidance under 3.5: review of data first (new clarification) Okay, unless material errors or unreliability become apparent 11

Use of Data

  

Professional judgment prior to use:

Will use of imperfect data produce material bias or highly uncertain results?

Is the data adequate to satisfy analysis purpose?

Can data be corrected or additional data provided?

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Documentation/Disclosure

 

Refer to guidance from ASOP 41: Actuarial Communications

Include in actuary’s report:  Source(s) of data   Whether or not data reviewed Materiality of biases due to imperfect data   Adjustments or modifications made Extent of reliance on data supplied by others    Limitations on use of work product Any unresolved concern about the data Conflicts with law or regulations 13

Summary

 An actuarial analysis is based upon a thorough review of data, along with practical knowledge of the field of practice and training in actuarial theory, …  The accuracy and validity of the actuarial analysis are dependent on, among other things, the quality of the data used 14

Question 3

 Which of the following are true?

 A. The source of data should be disclosed  B. Data with known limitations should not be used for actuarial analysis  C. Data provided by a third party source should be audited prior to its use 15

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