Data/Technology 3 - Data Management Panel Discussion

CAS Ratemaking Seminar March 2005

Panelists

Jason L. Russ, Consulting Actuary, Milliman, Inc. Michael L. Toothman, Consultant Actuarial &

Risk Consulting Services Peter Marotta, Principal, ISO Gary Knoble, Vice President, The Hartford

Data Management and the Actuary

An ABCD Perspective

Michael L. Toothman

The Role of the ABCD

Consider complaints Counsel Actuaries Recommend disciplinary action Respond to requests for guidance Mediate issues

The Role of the ABCD

Consider Complaints

– Conduct Investigations

– Hold Hearings

The Role of the ABCDCounsel Actuaries

A primary role for the ABCD Possible result at several points in the

ABCD process– In lieu of an investigation– After the investigation– After a hearing

The Role of the ABCD

Recommend Disciplinary Action

Only the participating organizations have authority to discipline their members

Occurs in well under 5% of ABCD case

The Role of the ABCD

Respond to Requests for Guidance

– Over 50% of ABCD cases

– Key function of the ABCD

The Actuary’s Responsibility

Comply with Code of Conduct

Comply with Qualification Standards (both general and specific)

Comply with Standards of Practice

The Actuary’s Responsibility

Precept 1:

An Actuary shall act honestly, with integrity and competence, and in a manner to fulfill the profession’s responsibility to the public and to uphold the reputation of the actuarial profession.

Real Life Issues

ABCD classifies cases as Practice Conduct

Majority of cases are conduct issues

Very few cases have involved data quality

Code of Professional Conduct

Code of Professional ConductCode of Professional Conduct

Professional Integrity - Precept 1 Qualification Standards - Precept 2 Standards of Practice - Precept 3 Communications and Disclosure - Precepts

4, 5, and 6 Conflict of Interest - Precept 7 Control of Work Product – Precept 8

Courtesy and Cooperation – Precept 10 Advertising – Precept 11 Confidentiality – Precept 9 Titles and Designations – Precept 12 Violations of the Code of Professional

Conduct – Precepts 13 and 14

The Code of Professional Conduct identifies the professional and ethical standards required of actuaries who belong to the Academy. The SOA, ASPA, the CAS, and the CCA have adopted identical codes.

ABCD Case Resolution ABCD cases considered during 2003:

Type of Case Pending from 2002 and Earlier Received in 2003 Total

Conduct 12 3 15

Practice 5 5 10

Conduct & Practice 3 1 4

Requests for Guidance 1 31 32

Total 21 40 61

Cases by Practice Area Pending from 2002 and Earlier Received in 2003 Total

Casualty 2 8 10

Health 2 6 8

Life 5 7 12

Pension 12 19 31

Total 21 40 61

ABCD Case Resolution ABCD cases considered during 2003:

CASES CLOSED

Action by Individual ABCD membersReplied to requests for guidance 30Mediated 1

Disposition by Chairperson and Vice Chairpersons Dismissed 4(Referred to Investigators in 2003—4)

Disposition by Whole ABCD after investigationDismissed 3Dismissed with guidance 2Counseled 2Counseled after hearing 2Recommended suspension 1

Total 45

CASES IN PROGRESS (as of 12/31/03)

Pending investigation 7Pending hearing 1Pending receipt of more information 6Request for Guidance pending 2

Total 16

ABCD Case Resolution Since its inception in 1992, the ABCD completed its cases as follows:

Dispositions 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Total

Dismissed 12 24 9 11 8 11 13 10 5 20 16 7 146

Dismissed with guidance 6 10 3 __ 5 1 5 2 8 5 4 2 51

Counseled __ 2 8 1 6 2 5 __ 2 3 2 4 35

Mediated 3 1 1 __ __ __ __ 1 __ 4 __ 1 11

Recommended private reprimand

__ __ __ __ __ __ __ __ 1 1 __ __ 2

Recommended public discipline

__ 1 2 __ 3 __ 1 __ 3 __ __ 1 11

Replied to requests for guidance

8 8 8 10 28 31 22 31 36 21 47 30 280

Total 29 46 31 22 50 45 46 44 55 54 69 45 536

INSURANCE DATA MANAGEMENT ASSOCIATION

(IDMA)

Peter Marotta

Who Are We?

IDMA is a non-profit professional association advancing data

management through education

Timeline

Established March 14, 1984 First annual meeting December 10, 1985 April 1990 – first graduates received

professional designations January 2005:

• CIDMs: 119• AIDMs: 121

Mission and Purpose

Promote professionalism in the Data Management discipline, principally through education

Create and maintain a curriculum for developing data management professionals, test professional proficiency, and provide professional certification

Mission and Purpose

Provide a forum for the discussion of insurance data management issues

The focus of such discussions is on the satisfaction of insurance data needs in a manner that takes advantage of current technology and is efficient and consistent with data quality

Membership Statistical Agents Regulators Third Party Administrators Consultants Property & Casualty Insurers Life Insurers Trade Associations Technology Vendors Associations Societies

Functions Represented Accounting/finance Data administration Actuarial Operations/administration Claims Statistical Data processing Data quality Underwriting Product development

Products and Papers

Data Management Value Propositions Monthly data management bulletin (EDMIS) Data Quality Certification Model White Paper on Data Quality Recommended Steps for Legislators and Regulators to

Follow in Issuing Data Requests White Paper on Recommended Standards for Injury

Coding Inventory of Carrier Reports Co-sponsor, with the Casualty Actuarial Society (CAS),

an academic paper competition

Curriculum

The AIDM designation requires passage of four IDMA examinations

The CIDM designation also requires the passage of coursework from one of four organizations - CPCU, LOMA, SOFE or CAS

IDMA Courses: Insurance Data Collection and Reporting (IDMA I)

The course addresses the core of

most data managers' responsibilities,

the collection and reporting of

statistical and financial insurance data.

Insurance Data Quality (IDMA 2)

The course update focuses on very specific

topics concerning data quality and how to

maintain quality. The syllabus includes texts

from two leaders in the field – Thomas C.

Redman and Larry P. English, and materials

from the CAS and IDMA.

Systems Development and Project Management (IDMA 3)

The course presents and analyzes in

detail the many aspects of successful

project management: staffing,

implementation, leadership and other roles,

“Project Authority”, time management,

scheduling techniques, dealing with

problems cultural and otherwise, and

effective strategic planning.

Data Management, Administration, and

Warehousing (IDMA 4) This course explores data flexibility and shareability concepts which are aimed atincreasing the availability and usefulness ofData, as well as, an introduction to basic concepts and principal tools for maximizingthe usability and value of data. The Bill Inmon concept of the Corporate InformationFactory is explored. In this 2003 update, newfocus and attention are given to data standards.

Data Management for Insurance Professionals

This overview course is highly recommended for a broad audience including new hires, IT personnelwho want to deepen their knowledge of the business side of data management, anyone whomanages data in the industry, and anyone whoneeds to use or communicate data – from actuaries to underwriters. It is clear, well organized, well written, illuminating, and structured for easystudy. Student proficiency is tested via a 100-question, multiple-choice exam, and the successfulstudent will earn a diploma.

Data Management Value Proposition

(see Appendix for details)

Reduces cost of collecting, storing and dispersing data

Improves data quality, establishes standards

Provides quality controlsProtects privacy and confidentiality

Contact Information

Headquarters:545 Washington Boulevard, 22-16Jersey City, NY 07310-1686

Website: www.idma.org Executive Director: Richard Penberthy

– Email: rpenberthy@idma.org – Phone: 201-469-3069– Fax: 201-748-1690

INSURANCE DATA MANAGEMENT ASSOCIATION

(IDMA)

IDMA: Data Management Value Proposition

Value: Data Quality

Good data management improves data:

• Validity—Are data represented by acceptable values?

• Accuracy—Does the data describe the true underlying situation?

• Reasonability—Does the data make sense? How does it compare with similar data from a prior period?

• Completeness—Do you have all the data you need?

• Timeliness—Are the data current?

Allowing the data user to have more confidence in, and a better

understanding of, the data being used.

IDMA: Data Management Value Proposition

Value: Better Decisions

Better decisions result from better data. Better priced risks—rates, increased limits, etc.—means improved

bottom line, greater customer satisfaction, improved customer retention, increase in number of customers

Improved ability to explain, defend (and testify as necessary) decisions with better data behind the decision, documented controlled data management processes in place helps to prove the value of data being used

Improved data integrity, data utility As data is and can be sliced ever more finely, attention to quality,

privacy and confidentiality is critical. Data management skills can ensure that.

IDMA: Data Management Value Proposition

Value: Better Decisions (continued)

The user’s time is freed up for more focus on core professional responsibilities, decisions and analysis when data quality is assured under the guidance of the data manager.

Putting data management under the responsibility of a data management professional allows both disciplines to do what they do best and are best trained to do.

In many cases, skilled data managers can assume handle functions such as responding to special calls.

Predictive modeling is improved when better data are available, allowing for better existing products and better new product development.

Data Management and the Actuary

The Value of the Data Manager to the Company Actuary

Gary Knoble

IDMA Data Management Value Proposition

Value to Actuaries– Better Decisions– Data Quality– Internal Data Coordination– Compliance

Internal Data Coordination

Reduces cost and time of data collection, storage, and dispersal

Promotes interoperability of data and databases – data integration

Manages data content and definitions Advocates data standards Ensures quality and communication

between sources

Enterprise Data Initiative

Mission:– To provide direction and oversight to the

Actuarial and business communities concerning data, data management (including quality), data analytics, including sourcing, manufacturing, and delivery.

– To insure data integrity and availability in actuarial work products and business requirements.

Vision

Today Lack of enterprise

vision Lack of

communication between divisions

Independent resourcing for initiatives

Tomorrow Actuarial vision to

influence enterprise vision

Communication across divisions

Shared resources

Vision (cont.)

Independent budgets Data planning in

business units without Actuarial representation

Data sources built for individual needs

Redundant data

Budget coordination Actuarial presence in

all business data planning

Data sources built from common plan

Minimize redundancy

Vision (cont.)

Redundant sources Lack of standards Lack of meta data Lack of business rules Lack of knowledge

transfer

Authoritative source Standards Meta data repository Documented rules Knowledge transfer

through documentation and rules

Vision (cont.)

Disparate processes for managing data

Uncoordinated vendor relationships

Inconsistent technologies

Different tools in silos Lack of reconciliation

Core processes

Standard vendor management

Consistent technologies

Coordinated tools Authoritative

reconciled sources

An Approach

Framework for GovernanceRules/Operational PoliciesChange data processTechnology infrastructureMeasure results