Chapter 32: Policy data checks

Question 1

List 5 types of policy data checks (5)

Answer 1

Data reconciliation checks’

Consistency checks

Unusual values

Spot checks

Analysis of surplus and/or analysis of embedded value profit

Question 2

For what purposes might data reconciliation checks be useful? (2)

What are the steps involved in the data reconciliation? (5)

Answer 2

Data reconciliation checks might be quite useful where

1. an investigation is being carried out on a regular basis
2. a reconciliation of current data with those used for previous one can be attempted

Steps, Data reconciliation may be carried out as follows:

1. first group data sensibly eg by year of entry within each broad contract type
2. using data similarly grouped relating to business that has:
   - come onto insurer’s books and gone off
   - between the dates of the two investigations
3. the following check is done for each group:
   - data at previous investigation + business come into books - business gone of books = data at current investigation

Question 3

What kind of data reconciliation checks can we do for non-unitised business? (4)

What kind of data reconciliation checks can we do for unitised business? (6)

What other 3 factors are important when doing data reconciliations? (3)

Answer 3

Data reconciliation checks for non-unitised business

+number of contracts

+basic sum assured - or the equivalent benefit depending on contract’s nature

+office premium

+for with-profits contracts, the amount of any attaching bonuses

Data reconciliation checks for unitised business

+number of contracts

+number of units allocated, sub-divided by unitised fund

+current premium payable

+current benefits available eg amount of death cover

if relevant, recon must also allow for items such as

+changes in number units allocated arising from switches between unitised funds

+changes in premium payable and benefits under existing contracts

When doing data reconciliations, it’s important that

+systems for producing movements data are checked periodically to ensure

they’re working correctly

staff involved are following procedures laid down

+movements checked against any appropriate accounting data, especially regarding benefit payments
movement data

+independent ​​ie separately generated from the in force data

Question 4

Give examples of checks of consistency for non-unitised contracts (3)

Give examples of checks of consistency for unitised contracts (2)

Answer 4

Consistency checks for non-unitised contracts

Average sum assured or average premium per class of business sensible and consistent with figure for previous investigation’

Ratio of basic sum assured (or equivalent benefit) to premium payable per class of regular premium business
sensible and consistent with figure for previous investigation
Consistency checks for unitised contracts

Number of units purchased by premiums and en-cashed to pay benefits
consistent with corresponding revenue account items

Internal unit movements eg for charge en-cashments
consistent with surplus emerging during year

Question 5

What kind of checks can be made for unusual values? (5)

What kind of checks for unusual values can be performed in addition to looking at just individual data? (2)

What kind of checks can be done for computer held data? (2)

Answer 5

Checks for unusual values

+very large or zero unit values under unitised contracts
+impossible dates of birth
+impossible retirement ages
+impossible start dates

In addition to looking at only individual data

+may also group items and see how well distributed they are

+eg unusually high clustering of birth month may represent data input error needing further investigation

May be useful to compare an extract of computer held data with information in paper administration files

can be done on a spot check basis, by randomly selecting a number of pols

Question 6

Why are policy data checks important? (2)

What would be the qualities of ‘good data’? (5)

Answer 6

Why are policy data checks important?

1. actuary will typically make extensive use of data in their work
2. need to ensure that data used is ‘good data’ so that correct results/conclusions may emerge/be drawn from the data

Through a number of tests, we can ensure that data used is good ie

1. adequate
2. accurate
3. complete
4. all data items required are being maintained by company
5. can be accessed in required format

Question 7

What is an analysis of surplus? (1)

What in particulare are we looking for when it comes to the AOS and checks on data? (3)

Answer 7

1. An analysis of surplus (AoS) is

an investigation that seeks to explain reasons for the change in valuation result (ie value of assets less value of liabilities) between one valuation date to another

2. When conducting an AoS, we should be close attention to

• major discrepencies in the analysis compared to previous analyses
• such major discrepencies may indicate a problem with the data
• the same will also be true of large discrepencies in any analysis of changein EV