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Data/Tech 4: WORKERS’ COMPENSATION DATA

QUALITY ISSUES

CAS Ratemaking Seminar

March 10-11, 2005

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Discussion Topics

The importance of data quality The impact of poor quality on the WC

system The need for all parties involved to

understand the importance of good data quality and the issues impacting the quality of data

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Discussion Topics (cont.)

The state of data quality in the industry Data quality successes and challenges Underlying processes and procedures used

by insurers and their trading partners that can negatively or positively impact data quality

Industry best practices around the collection and reporting of data

Potential improvements and next steps

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Panelists

Art Cadorine, Principal WC Services, ISO Pete Marotta, Principal Data Management

Consulting, ISO Ia Hauck, Director & Actuary, Actuarial &

Economic Services, NCCI Bruce Tollefson, President MN WCIA Tim Wisecarver, President, PA & DE CRB

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Data Quality Best Practices

Guiding Principles:

Data is a corporate asset Data should be fit for the use intended Data should flow from underlying

business processes Data quality should be managed as close

to the source as possible

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Key Characteristics of Data Quality

Accuracy Validity Timeliness

& Timing Completeness/

Entirety

Reasonableness Avoid Redundancy Accessibility &

Availability Privacy

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Workers Compensation Insurance Organizations (WCIO) A voluntary association of statutorily

authorized or licensed rating, advisory, or data service organizations that collect workers compensation insurance information

Provides a forum for exchange of information about workers compensation insurance

Develops standards for the electronic transmission of information between insurers and rating/advisory organizations

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Setting the Stage 2003 direct premiums written $50 billion (A.M. Best) Over 4 million policies a year Statutory coverage Auditable line Long tail line Data reporting unique to WC

Aggregate financial data Unit Statistical Reports (USR) Detailed claim data Injury (FROI/SROI) and proof of coverage

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Types of Workers’ Compensation Data Collected Financial Data

Annual Cycle, Little or No Classification, Policy or Claim Detail

Policy Information Coverage, Exposure & Pricing Analysis, Triggers Unit

Statistical Reports Unit Statistical Reports

Policy and Claim Level Detail, Experience Rating, Classification Pricing

Individual Case Reports Quality Edits on Large Losses

Special Calls

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State of Data QualityChecks and Balances

Workers Compensation “Check and Balances”—All stakeholders have an interest in the completeness, accuracy, and timely reporting of data:

Insurance Companies—Loss Costs/Rate Filings Employers—Affordable and Available Coverage Workers—Safe Workplace, Benefits and Medical Coverage Data Collection Organizations—Credible and Reliable Estimates,

Forecasts and Analyses Agents—Timely/Accurate Experience Ratings State Regulators—Rate Adequacy, Employer Coverage

These individual interests contribute to the overall health and quality of the data that fuels the WC system

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State of Data QualityControl Measures

The Workers Compensation data reporting system provides an extensive complement of control measures that contribute to the overall level of quality Data Reporting Standards, Rules and Training Timeliness Control Programs Online Reporting Tools Editing Processes Follow-Up Programs for Timeliness and Quality Issues Data Quality Monitoring and Validation Tests Incentive Programs Test Audit Programs NAIC Model Regulations State Regulatory Audits of DCOs and Carriers

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State of Data QualityIndustry Standards, Tools and Training

Workers Compensation Organizations promote Data Standards, Tools and Training that lead to Data Quality

Standards WCIO Data Specifications Manual Statistical Plans User’s Guides Rating Plans

Provide… Business Rules Common Data Definitions Standardized Reporting Formats Common Codes Editing Processes

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State of Data QualityIndustry Standards, Tools and Training

Reporting Tools Web-based Reporting Applications Editing Packages

Provide… Streamlined Reporting Processes Pre-edit Capabilities

Training IDMA Data Management Courses WCIO Data Reporting Handbook DCO Sponsored Training and Workshops Industry Communications (Bulletins/Circulars)

Provide… Professionalism and Certifications Continuing Education Tailored Curriculums—New Staff, New Tools, Industry Developments, etc.

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State of Data QualityResults

State examinations of DCO’s confirm the overall accuracy of Workers Compensation data, the effectiveness of data quality programs, and:

All stakeholders involved in the “checks and balances” positively influence the timeliness and quality of our data

Established control measures contribute to the overall level of quality

Industry Standards, Tools and Training must continue to promote and reinforce the importance of data quality

The Future—We need to continue to build on this data quality commitment, always looking to raise our collective expectations

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Many Data Hand Offs Employers Agents/brokers TPAs Insurers State Funds Reinsurers Data Collection

Organizations (DCOs) Accident Boards Federal regulators

Other 3rd party vendors Policy admin. vendors Auditors Medical service providers Case mgmt. services Law firms Medical bill reviewers Others

Mergers and acquisitions Transfers of books of

business Transfers of books of claims

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Areas of Concern for Data Quality The Vast Majority of Required Data is Reported

Timely and Without Consequential Data Quality Issues

Where Problems Do Occur, They Reside in the Following General Areas: Unreported Data Late Reported Data Invalid Data Incorrect Data Questionable Data

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Unreported Data

Carrier Insolvencies

Unrecoverable Loss of Carrier Records

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Late Reported Data

Carrier System IssuesMerger/AcquisitionOther

Risk or Unit Specific Issues

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Invalid Data

Codes (Classification, Injury Description, etc.)

Exposure Reported for Code Not Allowing Exposure

Invalid Classification Combination(s) Unaudited or estimated payrolls

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Incorrect Data

Rating Value Errors Incorrect Premium Calculations for

Statistical Codes Anniversary Rating Date Errors Accident Date Outside Policy Term

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Questionable Data

Allocations of Exposures and/or Losses by Classification

Large Units with Zero Reported Losses Claims with High Medical Losses, but

No Indemnity

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DISCUSSIONS, CONCLUSIONS &

QUESTIONS