ASOP 23: Data Quality

Question 1

Section 1 - Purpose and Scope

Answer 1

1. Purpose – guidance to actuary for:
   o Selecting data
   o Relying on data supplied by others
   o Reviewing data
   o Using data
   o Appropriate disclosures regarding data quality
2. Scope – when providing professional services, but it does NOT require the actuary to audit data

Question 2

Section 3 - Analysis of Issues and Recommended Practices

Answer 2

1. Overview
a. Completely accurate, appropriate, and comprehensive data frequently not available o Disclose known limitations and their implications

2. Selection of data
a. Consider desired data elements
b. Consider alternative data elements
c. Appropriateness for intended purpose
d. Sufficiently current
e. Reasonableness and comprehensiveness
f. Internal and external consistency
g. Material limitations
h. Cost and feasibility of alternative data and time required
i. Benefit to be gained from alternative data
j. Sampling methods to collect the data

3. Reliance on data supplied by others
a. Accuracy and comprehensiveness are responsibility of those who supply the data

b. Disclose reliance in appropriate actuarial communication
* Reliance on other information relevant to the use of data

c. Examples of other relevant information
▪ Contract provisions
▪ Plan documents
▪ Reinsurance treaties

d. Validity and comprehensiveness are responsibility of those who supply the information

e. Actuary may rely on information unless it becomes apparent that:
▪ Information contains errors
▪ Information unreliable

f. Disclose reliance in appropriate actuarial communication

4. Review of Data
a. Review for reasonableness and consistency

b. Not required if review is not necessary or not practical, considering:
▪ Checking, verification, or auditing already performed on data
▪ Nature of assignment
▪ Relevant constraints

c. Determining extent of a review
▪ Data definition for each data element used in the analysis
▪ Identify questionable data values or materially inconsistent
▪ If data problems have material effect, consider further steps to improve data quality
▪ Compare data for consistency with data used in similar prior analysis

d. Disclose if do not review, and disclose resulting limitations of work product

5. Limitation of actuary’s responsibility (things not required)
a. Determine if data supplied by others falsified or intentionally misleading

b. Develop compilations solely to search for questionable or inconsistent data

c. Audit data

6. Use of data
Requires professional judgment of the following
▪ Sufficient quality

▪ Enhancements required and practicality of obtaining enhancements

▪ Adjustments or assumptions applied
* Disclose potential uncertainly or bias
* Nature and potential magnitude of uncertainty

▪ If contains material defects
* Determine extent of any checking, verification, or auditing performed
* If more extensive review needed, arrange for review prior to completing assignment
* If data inadequate for purpose of analysis, obtain different data or decline assignment

7. Documentation should include
a. Process followed to evaluate data, including any prior data

b. Description of material defects

c. Adjustments or modifications including rationale

d. Disclosures in section below

Question 3

Section 4 - Communications and Disclosures

Answer 3

Communication and disclosure should include
a. Source of data

b. Whether actuary reviewed, and if not then disclose resulting limitations
c. Reliance on data and other information
d. Material adjustments or assumptions applied to data
e. Limitations on work due to data quality
f. Unresolved concerns
g. Highly uncertain results or bias due to data quality including potential magnitude and nature
h. Conflicts from complying with laws and regulations

Question 4

Additional Comments

Answer 4

• Prescribed Statement of Actuarial Opinion (PSAO)
  a. This ASOP does not require a PSAO
  b. Law, regulation, or accounting requirements may also apply and as a result, such communication may be a PSAO
• Deviation from Standard
  a. Be prepared to justify the use of procedures that depart from this standard
  b. Include in actuarial communication the nature, rationale, and effects of departures