Course on Course on ProfessionalismProfessionalismASOP #23 – Data QualityASOP #23 – Data Quality

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Purpose

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

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ScopeScope

Applies to all areas of practiceApplies to all areas of practice Does NOT require audit of dataDoes NOT require audit of data If standard establishes requirements If standard establishes requirements

in addition to those imposed by law, in addition to those imposed by law, satisfy bothsatisfy both

Originally effective 12/31/1993; Originally effective 12/31/1993; updated effective for work products updated effective for work products for which data was provided on or for which data was provided on or after May 1, 2005 or projects started after May 1, 2005 or projects started on or after July 1, 2006on or after July 1, 2006

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Question 1Question 1

Which of the following statements are not Which of the following statements are not true regarding the scope of ASOP 23?true regarding the scope of ASOP 23? A. Applies to Property & Casualty actuarial workA. Applies to Property & Casualty actuarial work

B. Requires audit of data if known limitations in dataB. Requires audit of data if known limitations in data

C. Applies to Health Insurance actuarial workC. Applies to Health Insurance actuarial work

D. All of the above are trueD. All of the above are true

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OverviewOverview

Accuracy and validity of actuarial Accuracy and validity of actuarial analyses are dependent on the analyses are dependent on the quality of data usedquality of data used

Expectations that actuaries will use Expectations that actuaries will use appropriate data in their work and appropriate data in their work and will disclose material imperfections will disclose material imperfections in underlying datain underlying data

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Issues and Issues and Recommended Recommended

PracticesPractices

Completely accurate, appropriate, and Completely accurate, appropriate, and comprehensive data are rarely available comprehensive data are rarely available

An actuary performs an analysis with available An actuary performs an analysis with available data and sufficiently discloses material data data and sufficiently discloses material data limitations, and their implicationslimitations, and their implications

Data review may not always reveal Data review may not always reveal imperfectionsimperfections

This standard does not recommend that an This standard does not recommend that an actuary audit dataactuary audit data

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Selection of DataSelection of Data

Understand intended useUnderstand intended use Consider desired and possible Consider desired and possible

alternative data elementsalternative data elements Data considerations:Data considerations:

Appropriate for intended purpose, Appropriate for intended purpose, including whether sufficiently currentincluding whether sufficiently current

Reasonableness and Reasonableness and comprehensivenesscomprehensiveness

Known, material limitationsKnown, material limitations Cost and feasibility of alternativesCost and feasibility of alternatives Sampling methods, if usedSampling methods, if used

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Review of DataReview of Data

Definition of “review” added, pointing Definition of “review” added, pointing out that it is an informal examination out that it is an informal examination of obvious characteristics of the dataof obvious characteristics of the data

Applies whether the actuary prepared Applies whether the actuary prepared the data or received data from a third the data or received data from a third partyparty

Review for reasonableness and Review for reasonableness and consistency, “unless review is not consistency, “unless review is not necessary or is not practical”necessary or is not practical”

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Nature and Extent of Nature and Extent of ReviewReview

Make reasonable effort to determine Make reasonable effort to determine the definition of each data elementthe definition of each data element

Identify questionable data values Identify questionable data values with material impact; consider with material impact; consider attempts to improve dataattempts to improve data

Review of prior dataReview of prior data

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Question 2Question 2

With respect to selection of data, With respect to selection of data, which items should receive due which items should receive due consideration?consideration? A. Intended useA. Intended use

B. Known, material limitations of dataB. Known, material limitations of data

C. Cost and feasibility of alternativesC. Cost and feasibility of alternatives

D. All of the aboveD. All of the above

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Reliance on Reliance on Data Supplied by Data Supplied by

OthersOthers Accuracy and comprehension of data Accuracy and comprehension of data

is responsibility of the provideris responsibility of the provider Actuary may rely on data supplied Actuary may rely on data supplied

by others but should follow guidance by others but should follow guidance under 3.5: review of data under 3.5: review of data firstfirst (new (new clarification) clarification)

Okay, unless material errors or Okay, unless material errors or unreliability become apparentunreliability become apparent

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Use of DataUse of Data

Professional judgment prior to Professional judgment prior to use:use:

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

Is the data adequate to satisfy analysis Is the data adequate to satisfy analysis purpose?purpose?

Can data be corrected or additional data Can data be corrected or additional data provided?provided?

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Documentation/Documentation/DisclosureDisclosure

Refer to guidance from ASOP 41: Refer to guidance from ASOP 41: Actuarial Actuarial CommunicationsCommunications

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

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SummarySummary

An actuarial analysis is based upon a An actuarial analysis is based upon a thorough review of data, along with thorough review of data, along with practical knowledge of the field of practical knowledge of the field of practice and training in actuarial practice and training in actuarial theory, … theory, …

The accuracy and validity of the The accuracy and validity of the actuarial analysis are dependent on, actuarial analysis are dependent on, among other things, the quality of the among other things, the quality of the data useddata used

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Question 3Question 3

Which of the following are true?Which of the following are true? A. The source of data should be disclosedA. The source of data should be disclosed

B. Data with known limitations should not be B. Data with known limitations should not be used for actuarial analysisused for actuarial analysis

C. Data provided by a third party source C. Data provided by a third party source should be audited prior to its useshould be audited prior to its use