The Actuary and Enterprise Data Strategies CAS MAY 2006 Part I: Why EDS and What Roles Should the...

The Actuary and The Actuary and

Enterprise Data StrategiesEnterprise Data Strategies CAS MAY 2006CAS MAY 2006

Part I: Why EDS and What Roles Part I: Why EDS and What Roles Should the Actuary Play?Should the Actuary Play?

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AgendaAgenda

Strategic Data PlanningStrategic Data Planning The Shifting Focus of Insurance The Shifting Focus of Insurance

InformationInformation Impact of this Shift on the ActuaryImpact of this Shift on the Actuary Questions and CommentaryQuestions and Commentary

PanelistsPanelists

Pete Marotta, ISOPete Marotta, ISO Gary Knoble, USABFS Gary Knoble, USABFS Bruce Tollefson, MN WC Rating BureauBruce Tollefson, MN WC Rating Bureau Christine Siekierski, WI Comp. Rating Christine Siekierski, WI Comp. Rating

BureauBureau Art Cadorine, ISOArt Cadorine, ISO

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Strategic Data Strategic Data PlanningPlanning

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Data - A Corporate AssetData - A Corporate Asset

Data, like all corporate assets, requires Data, like all corporate assets, requires managing to ensure the maximum benefit managing to ensure the maximum benefit is achieved by the organization.is achieved by the organization.

Well-managed, high-quality data aids good Well-managed, high-quality data aids good corporate governance by providing corporate governance by providing management with a cohesive and management with a cohesive and objective view of an organization’s activity objective view of an organization’s activity and promotes data transparency.and promotes data transparency.

Poorly-managed data can result in faulty Poorly-managed data can result in faulty business decisions.business decisions.

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PWC 2004 StudyPWC 2004 Study““Data is pivotal to how most companies Data is pivotal to how most companies make money in today’s marketplace – make money in today’s marketplace – and for many companies data is and for many companies data is actually the product they are providing actually the product they are providing to the marketplace – yet it is not yet to the marketplace – yet it is not yet being treated as the crucial asset it being treated as the crucial asset it clearly represents.”clearly represents.”

Global Data Management Survey 2004, Global Data Management Survey 2004, PriceWaterhouseCoopersPriceWaterhouseCoopers

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Data and Strategic PlanningData and Strategic Planning

Data supports corporate decision-making: Data supports corporate decision-making: In providing a cohesive and objective view In providing a cohesive and objective view

of corporate activities.of corporate activities. In viewing the external landscape.In viewing the external landscape. In predicting the future.In predicting the future. In developing the corporate strategic plan.In developing the corporate strategic plan. In identifying process improvements and In identifying process improvements and

other efficiencies.other efficiencies. In measuring results.In measuring results.

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PWC 2001 StudyPWC 2001 Study““Data is the currency of the new Data is the currency of the new economy.”economy.”

““Companies that manage their data as Companies that manage their data as a strategic resource and invest in its a strategic resource and invest in its quality are already pulling ahead in quality are already pulling ahead in terms of reputation and profitability terms of reputation and profitability from those that fail to do so.” from those that fail to do so.”


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PWC 2001 Study FindingsPWC 2001 Study Findings

1/3 of business fail to bill or collect 1/3 of business fail to bill or collect receivables as a result of poor data receivables as a result of poor data managementmanagement

4 out of 10 businesses have a documented, 4 out of 10 businesses have a documented, board approved data strategyboard approved data strategy

Where data strategies exist, they tend to Where data strategies exist, they tend to consist of a series of polices on areas such consist of a series of polices on areas such as privacy and security, rather than as privacy and security, rather than addressing true strategic issues, such as addressing true strategic issues, such as the value of datathe value of data

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Enterprise Data Strategy: A Enterprise Data Strategy: A DefinitionDefinition

A plan that establishes a long-term direction for A plan that establishes a long-term direction for effectively using data resources in support of, and effectively using data resources in support of, and indivisible from, an organization's goals and indivisible from, an organization's goals and objectives.objectives.

An Enterprise data strategy requires both business An Enterprise data strategy requires both business and technology input to:and technology input to:– Facilitate IT planning.Facilitate IT planning.– Support the overall business plan.Support the overall business plan.– Promote and maintain clearly and consistently Promote and maintain clearly and consistently

defined data across the corporation.defined data across the corporation.

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Components of an Enterprise Components of an Enterprise Data StrategyData Strategy

Organizational level:Organizational level: Data StewardshipData Stewardship

– Senior level oversight of corporate data.Senior level oversight of corporate data.– From an enterprise-wide perspective.From an enterprise-wide perspective.

Data Architecture – What to Run, Where to Run, Data Architecture – What to Run, Where to Run, How to Run – Software and Hardware:How to Run – Software and Hardware:– Ownership: Customer and DataOwnership: Customer and Data– Data LocationData Location– Software v. ServiceSoftware v. Service– Product DefinitionProduct Definition

Data and Process ModelsData and Process Models

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Components of an Enterprise Components of an Enterprise Data StrategyData Strategy

Data level : Data level : Data Element ManagementData Element Management

– Data Definition and AttributesData Definition and Attributes– Code Value and Data Set ManagementCode Value and Data Set Management– Data Mapping ManagementData Mapping Management

Data Quality and TransparencyData Quality and Transparency Data StandardsData Standards

– Business and Efficiency DrivenBusiness and Efficiency Driven– Internal and ExternalInternal and External

Data Privacy and SecurityData Privacy and Security– Compliance with Privacy Polices and Compliance with Privacy Polices and

RegulationsRegulations– Data from Reputable SourcesData from Reputable Sources– Data Security Data Security

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Who Should be Involved with Strategic Data Who Should be Involved with Strategic Data Planning?Planning?

The data users, data definers and data enablers, The data users, data definers and data enablers, includingincluding

Business units Business units ActuariesActuaries Information TechnologyInformation Technology Finance and AccountingFinance and Accounting ClaimsClaims Government AffairsGovernment Affairs Sales and MarketingSales and Marketing ResearchResearch Data ManagementData Management

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Strategic Data PlanningStrategic Data Planning Strategic Data Planning is primarily a Strategic Data Planning is primarily a

business, not an IT function.business, not an IT function. IT critical to any enterprise data strategy.IT critical to any enterprise data strategy. Actuaries are uniquely positioned in an Actuaries are uniquely positioned in an

organization - data savvy as data definers organization - data savvy as data definers and users, senior business level visibility, and users, senior business level visibility, etc. – to be prime movers in Strategic Data etc. – to be prime movers in Strategic Data Planning.Planning.

Per the 2004 PWC Survey: 2/3 of Per the 2004 PWC Survey: 2/3 of respondents with a data strategy place the respondents with a data strategy place the

responsibility on ITresponsibility on IT

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PWC 2004 Study FindingsPWC 2004 Study Findings

1/3 of have no company-wide 1/3 of have no company-wide data strategydata strategy

42% of businesses have a 42% of businesses have a formally documented, board formally documented, board approved data strategyapproved data strategy

23% of businesses have a data 23% of businesses have a data strategy not formally or board strategy not formally or board approvedapproved

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Enterprise Data Strategy and IT: Enterprise Data Strategy and IT: Architecture Supports Business StrategyArchitecture Supports Business Strategy

Business Strategy

IT Architecture

Infr

astr

uct

ure

Ap

pli

cati

on

Dat

a

A set of guiding principles that define why and what we do

A set of guiding principles that define how we do what we do

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Actuaries and Data Managers: Actuaries and Data Managers: Roles in Strategic PlanningRoles in Strategic Planning

Management of Management of – data acquisition and quality assurance, data acquisition and quality assurance, – data storage, anddata storage, and– data disbursement data disbursement

processes to ensure that enterprise data willprocesses to ensure that enterprise data will

satisfy the needs of internal and external data users,satisfy the needs of internal and external data users,

that is, the data to meet corporate strategic that is, the data to meet corporate strategic

objectives.objectives.

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Actuaries and Data Managers: Actuaries and Data Managers: Roles in Strategic PlanningRoles in Strategic Planning

How data management adds value -How data management adds value - Many of the Enterprise Data Strategy Many of the Enterprise Data Strategy

components are managed or supported by components are managed or supported by actuaries and data managersactuaries and data managers

Data management promotes systems Data management promotes systems alignment and interoperability - critical alignment and interoperability - critical success factors to IT, and consequentially success factors to IT, and consequentially corporate, strategiescorporate, strategies

Provides consistent and documented Provides consistent and documented perspectives about dataperspectives about data

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Enterprise Data Strategies: GoalsEnterprise Data Strategies: Goals

Facilitate alignment and traceability Facilitate alignment and traceability of significant IT investments to their of significant IT investments to their respective business driversrespective business drivers

Provide a process and a set of tools Provide a process and a set of tools to facilitate Business and IT planning to facilitate Business and IT planning and decision-makingand decision-making

Maintain a common and consistent Maintain a common and consistent view of data that is shared company view of data that is shared company wide wide

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A Framework that articulates the scope, structure, and A Framework that articulates the scope, structure, and level of detail of Enterprise Data level of detail of Enterprise Data

A Governance Process that produces and manages a Set of A Governance Process that produces and manages a Set of Tools and Artifacts that constitute the deliverables of the Tools and Artifacts that constitute the deliverables of the Enterprise Data Process. Such as:Enterprise Data Process. Such as:– A Target StateA Target State– A Roadmap A Roadmap – A Set of Data Qualities To Guide The RoadmapA Set of Data Qualities To Guide The Roadmap

A Organization to implement and conduct the process of A Organization to implement and conduct the process of Enterprise Data Management Enterprise Data Management

What Is Needed To Accomplish These GoalsWhat Is Needed To Accomplish These Goals

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Enterprise Data Strategy: Enterprise Data Strategy: ImplementationImplementation

Identify current and planned core organizational Identify current and planned core organizational functions and supporting business strategies functions and supporting business strategies – The objective of corporate strategy is to create clear The objective of corporate strategy is to create clear

direction with sustainable competitive advantages – our direction with sustainable competitive advantages – our value proposition is better than our competitor’svalue proposition is better than our competitor’s

– Technology can be an advantage, but technology is also Technology can be an advantage, but technology is also reducing differentiation among competitorsreducing differentiation among competitors

– Is data part of these sustainable competitive Is data part of these sustainable competitive advantages? If so, data strategies must be aligned with advantages? If so, data strategies must be aligned with business and IT strategiesbusiness and IT strategies

Determine the data needs/constraints associated Determine the data needs/constraints associated with the above functions with the above functions

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Enterprise Data Strategy: Enterprise Data Strategy: ImplementationImplementation

A typical strategic planning process includes the A typical strategic planning process includes the following steps - following steps -

Determine the strengths, weaknesses, Determine the strengths, weaknesses, opportunities and threats relating to the above opportunities and threats relating to the above data needs/constraintsdata needs/constraints

Identify the actions needed to address the above Identify the actions needed to address the above SWOTSWOT

Determine any interrelationships of these actions Determine any interrelationships of these actions Integrate and validate proposed actionsIntegrate and validate proposed actions Prioritize these actionsPrioritize these actions Develop a plan for implementing these actionsDevelop a plan for implementing these actions

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Results of a Successful Results of a Successful Enterprise Data StrategyEnterprise Data Strategy

Provide a process and a set of tools to Provide a process and a set of tools to facilitate Business and IT planning and facilitate Business and IT planning and decision-makingdecision-making

Maintain a common and consistent view of Maintain a common and consistent view of data that is shared company wide data that is shared company wide

Facilitate alignment and traceability of Facilitate alignment and traceability of significant investments to their respective significant investments to their respective business driversbusiness drivers

Actuaries are central to each of the above.Actuaries are central to each of the above.

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Data coordination, interchange and Data coordination, interchange and acquisitionacquisition– Designed to maximize utility and efficiencyDesigned to maximize utility and efficiency

Data utility and decision supportData utility and decision support Process improvementsProcess improvements Measurement of resultsMeasurement of results

Each of the above relate to actuarial Each of the above relate to actuarial activities.activities.

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Ease of doing businessEase of doing business Speed to marketSpeed to market Facilitate R&DFacilitate R&D Customer ServiceCustomer Service ComplianceCompliance

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The Shifting Focus of The Shifting Focus of Insurance Information Insurance Information

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Regulation Regulation From Annual Statement to Market Conduct From Annual Statement to Market Conduct

Annual Statements to NAIC Databases Annual Statements to NAIC Databases – Financial Data Repository (FDR) Financial Data Repository (FDR) – National Insurance Producer Registry (NIPR) National Insurance Producer Registry (NIPR) – Fingerprint Repository Fingerprint Repository – On-Line Fraud Reporting System (OFRS) On-Line Fraud Reporting System (OFRS) – Uninsured Motorist Identification DatabaseUninsured Motorist Identification Database

From financial data used to monitor solvency From financial data used to monitor solvency to financial, statistical data and analytics used to financial, statistical data and analytics used to monitor solvency to monitor solvency

From US driven regulations to EU and From US driven regulations to EU and internationally driven regulations internationally driven regulations

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PricingPricing From traditional underwriting and pricing - using From traditional underwriting and pricing - using

traditional data sources (risk data, industry traditional data sources (risk data, industry statistics) to predictive modeling and analytics - statistics) to predictive modeling and analytics - using non-traditional data sources using non-traditional data sources (demographics, GIS, 3rd party data, non-(demographics, GIS, 3rd party data, non-insurance data, non-verifiable data sources, etc.) insurance data, non-verifiable data sources, etc.)

From a stable risk control and claims environment From a stable risk control and claims environment to a dynamic environment of new hazards - mold, to a dynamic environment of new hazards - mold, terrorism, computer viruses, cyber terrorism, etc. terrorism, computer viruses, cyber terrorism, etc.

From risk-specific risk management to enterprise From risk-specific risk management to enterprise risk management risk management

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DataData From a data quality focus on validity, From a data quality focus on validity,

timeliness and accuracy to a data quality timeliness and accuracy to a data quality focus on transparency, completeness and focus on transparency, completeness and accuracy accuracy

From data available on a periodic basis to From data available on a periodic basis to data available real-time data available real-time

From statistical plans and edit packages to From statistical plans and edit packages to data dictionaries, schema and data dictionaries, schema and implementation guides implementation guides

From sharing data for the common good to From sharing data for the common good to protecting data for the common good protecting data for the common good

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TechnologyTechnology

From centralized highly controlled From centralized highly controlled technologies to ASPs, the, Internet, technologies to ASPs, the, Internet, XML, LANs, PCs, etc. XML, LANs, PCs, etc.

From IT as an business enabler to IT From IT as an business enabler to IT as a business driveras a business driver

From mainframes to LANS and high From mainframes to LANS and high powered PCs powered PCs

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Impact of this Shift on Impact of this Shift on the Actuarythe Actuary

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The Actuary and DataThe Actuary and Data Historically the actuary has been at the center of Historically the actuary has been at the center of

enterprise data activities – enterprise data activities – – Policy form developmentPolicy form development– RatemakingRatemaking– PricingPricing– ReservingReserving– Etc.Etc.

More recent activities – More recent activities – – Predictive modelingPredictive modeling– ASOP No. 23ASOP No. 23– Reserve opinionsReserve opinions– Third party dataThird party data– Sarbanes Oxley, Basel II, Solvency IISarbanes Oxley, Basel II, Solvency II

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RegulationRegulation

Supports ComplianceSupports Compliance

Increased emphasis on:Increased emphasis on:– Protecting the privacy and confidentiality of the Protecting the privacy and confidentiality of the

enterprise dataenterprise data– Compliance with rating and reporting laws and Compliance with rating and reporting laws and

regulationsregulations– Communication with regulatorsCommunication with regulators– Solvency and the measurement of solvencySolvency and the measurement of solvency– International regulationsInternational regulations

The need for transparencyThe need for transparency

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Decision MakingDecision MakingSupports Making Better Decisions Supports Making Better Decisions

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

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

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

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

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

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Decision MakingDecision Making

Supports Making Supports Making Better Decisions Better Decisions

The actuary’s time is freed up for more focus on core The actuary’s time is freed up for more focus on core professional responsibilities, decisions and analysis when professional responsibilities, decisions and analysis when data quality is assured under the guidance of the data data quality is assured under the guidance of the data manager. Putting data management under the manager. Putting data management under the responsibility of a data management professional allows responsibility of a data management professional allows both disciplines to do what they do best and are best both disciplines to do what they do best and are best trained to do.trained to do.

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

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DataDataSupports Data Quality Supports Data Quality

Good data management improves data:Good data management improves data: Validity—Are data represented by acceptable values?Validity—Are data represented by acceptable values? Accuracy—Does the data describe the true underlying Accuracy—Does the data describe the true underlying

situation?situation? Reasonability—Does the data make sense? How does it Reasonability—Does the data make sense? How does it

compare with similar data from a prior period?compare with similar data from a prior period? Completeness—Do you have all the data you need?Completeness—Do you have all the data you need? Timeliness—Are the data current?Timeliness—Are the data current?

allowing the actuary to have more confidence in, and a better allowing the actuary to have more confidence in, and a better

understanding of, the data being used. This assists the understanding of, the data being used. This assists the

actuary in his/her professional responsibilities.actuary in his/her professional responsibilities.

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DataData

Supports Internal Data CoordinationSupports Internal Data Coordination

Reducing the cost and time associated with of data Reducing the cost and time associated with of data collection, storage, and dispersal, making data available collection, storage, and dispersal, making data available more quickly.more quickly.

Promoting the interoperability of data and databases, Promoting the interoperability of data and databases, allowing for better data integration thereby giving the allowing for better data integration thereby giving the actuary more options for how data can be used.actuary more options for how data can be used.

Managing data content and definition across the Managing data content and definition across the organization which promotes consistency across business organization which promotes consistency across business units and across time – internally and externally.units and across time – internally and externally.

Ensuring the quality of the enterprise data, enterprise Ensuring the quality of the enterprise data, enterprise communication among the various data sources communication among the various data sources

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PWC 2004 StudyPWC 2004 Study““A formalised data quality management A formalised data quality management strategy that has been approved by the strategy that has been approved by the board provides a clear statement of board provides a clear statement of business objectives for managing data … business objectives for managing data … It also sets a framework to match those It also sets a framework to match those objectives to policies, processes, and an objectives to policies, processes, and an organisation structure that will ensure that organisation structure that will ensure that the quality of critical business information the quality of critical business information is being managed.” is being managed.”


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References, Resources & StudiesReferences, Resources & Studies Celent “ACORD XML Standards in US Celent “ACORD XML Standards in US

Insurance”: www.celent.com or www.acord.orgInsurance”: www.celent.com or www.acord.org IDMA: www.idma.orgIDMA: www.idma.org PWC “Global Data Management Survey 2004” PWC “Global Data Management Survey 2004”

and “Global Data Management Survey 2001” : and “Global Data Management Survey 2001” : www.pwcglobal.comwww.pwcglobal.com

Gartner Research: www4.gartner.comGartner Research: www4.gartner.com TDWI “Data Quality and the Bottom Line”: TDWI “Data Quality and the Bottom Line”:

www.dw-institute.comwww.dw-institute.com CIO Magazine: “Wash Me: Dirty Data …” 2-15-CIO Magazine: “Wash Me: Dirty Data …” 2-15-

01 edition, www.cio.com01 edition, www.cio.com

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