ASOP23: Data Quality

Question 1

Purpose and Scope

Answer 1

**1. Purpose **- guidance to actuary for:
a. Selecting data
b. Relying on data supplied by others
c. Reviewing data
d. Using data
e. Appropriate disclosures regarding data quality

2. Scope - when providing professional services, but it does not require the actuary to audit data

Question 2

Issues and Recommended Practices

1. Overview
2. Selection of data
3. Reliance on data supplied by others
4. Reliance on other information relevant to the use of data
5. Review of data
6. Limitation of actuary’s responsibility
7. Use of data
8. Documentation

Answer 2

1. Overview
a. Completely accurate, appropriate and comprehensive data frequently not available
b. 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

4. Reliance on other information relevant to the use of data
a. Examples of other relevant information
i. Contract provisions
ii. Plan documents
iii. Reinsurance treaties

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

c. Actuary may rely on information unless it becomes apparent that:
i. Information contains errors
ii. Information unreliable

d. Disclose reliance in appropriate actuarial communication

5. Review of data
a. Review for reasonableness and consistency

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

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

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

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

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

c. Audit data

7. Use of Data
a. Requires professional judgment of the following:
i. Sufficient quality

ii. Enhancements required and practicality of obtaining enhancements

iii. Adjustments or assumptions applied
1. Disclose potential uncertainty or bias
2. Nature and potential magnitude of uncertainty

iv. If contains material defects
1. Determine extent of any checking, verification, or auditing performed
2. If more extensive review needed, arrange for review prior to completing assignment
3. If data is inadequate for purpose of analysis, obtain different data or decline assignment

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

b. Description of material defects

c. Adjustment or modifications including rationale

d. Disclosures in section below

Question 3

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