Chapter 13 - Data

Question 1

What are the criteria that data must be in order for outcomes to be as accurate as possible

Answer 1

• Relevant
• Credible
• Available
• Reliable

Question 2

What are the drawbacks to using population data

Answer 2

• The accuracy and reliability of national statistics may be questionable
• It may not always be available electronically or in the appropriate format
• The population experience may be somewhat out-of-date before it becomes published
• The national experience may not be particularly relevant to the subset of lives that will be accepted for insurance

Question 3

What are the advantages of industry data

Answer 3

• It represents insured experience
• It is generally of sufficient volume to be statistically credible
• It reflects local companies and has been compiled by experts

Question 4

List the main sources of data

Answer 4

TRAINERS

Tables
Reinsurers
Abroad (data from overseas contracts)
Industry data
National statistics
Experience investigations on the existing contract
Regulatory reports and company accounts
Similar contracts

Question 5

What is pure risk

Answer 5

It is the anticipated cost of claims for the future period for which the policy is to be in force

Question 6

What causes the insurer to not be able to use external data ( data is not relevant)

Answer 6

• Approaches to underwriting and acceptance
• Policy conditions
• Claims management
• Distribution method and channels
• Target market

Question 7

List the key risks associated with using data

Answer 7

I RAP GIF

• data are INACCURATE or incomplete, leading to erroneous results or conclusions
• past data is not sufficiently RELEVANT for the intended purpose because data isn’t precisely comparable across companies
• the data might not be in a form that is APPROPRIATE for the intended purpose
• the data may be collected for a PURPOSE, so it’s not appropriate for a different purpose
• chosen homogenous data GROUPS may not be optimal due to:
  
  • the group being too small for analysis
  • if the data groups merged, it may not be sufficiently homogeneous
• INSUFFICIENT volume of data, which makes it not credible
• past data might not reflect what would happen in the FUTURE due to:
  HARD FROG
• HETEROGENEITY within the group
• past ABNORMAL events
• significant RANDOM fluctuations
• past data may not be up to DATE
• FUTURE trends not being reflected sufficiently in past data
• changes in the way that the data was RECORDED
• OTHER changes e.g. medical, economic
• changes in the balance of any homogeneous GROUPS underlying the data

Question 8

Possible reasons for heterogeneity when using industry wide data

Answer 8

GPS RN P

• companies operating in different GEOGRAPHICAL or socio-economic sections of the market
• POLICIES sold by companies differ
• SALES method may differ
• coding use for RISK factor may differ
• NATURE of data storage might differ
• companies will have different PRACTICES

Question 9

4 other problems with using industry data

Answer 9

LEND

• LESS detailed and flexible than internal data
• EXTERNAL More out-of-date than internal data
• NOT all organizations contribute, and those that do may not be representative of the market
• DATA quality depends on the quality of the data systems of all its contributors

Question 10

What are the differences between companies that may cause relevance of data to be less

Answer 10

D PACT

• DISTRIBUTION methods and channels
• POLICY conditions
• APPROACH to underwriting and acceptance
• CLAIMS management
• TARGET market