The Actuarial Data Cycle

I am an Actuarial Analyst from the country of Trinidad and Tobago. I have worked in the Actuarial
(Pensions) industry. While listening to the presentations from the “Data for Better Lives” course, I
could not help but think about ways in which I could apply these new concepts to the local
Trinidadian Actuarial industry in which I work. This short project will focus on some ideas which I
gathered from this course that I find applicable to the Actuarial Industry in my country, and, by
extension, possibly the Caribbean.
Firstly, the world development report focuses on a conceptual framework involving three sets of
actors. These actors were grouped as “Individuals, civil society , academia”, “Government and
International Organisations” and the “private sector.” With respect to the actuarial industry, these
groups can be further defined as follows:-
Individuals, civil society and academia: This group will be equivalent to the public at large, but more
specifically, insurance policyholders and pensioners.
Government and International Organisations: This should be localised to governments only
The private sector: This group should focus on Insurance and Pension companies. This may also
incorporate Trustees of Pension Plans.
Each of these different groups of actors plays an important role in defining the landscape of data in
the country. For instance, the insurance policyholders and pensioners have a part to play in ensuring
that their data is accurate and updated in a timely manner. This is important in an actuarial context
since, variations to their data could have a financially onerous outcome with respect to wrong values
being used in actuarial models. A simple incorrect data point such as a wrong “Date of Birth” could
have significant implications in an actuary’s valuations, thereby leading to inaccurate reserves being
held by the respective insurance companies. In this way, a simple error at the start of the “actuarial
data life cycle” could lead to extensive problems later on. Furthermore, it should be noted that most
actuarial calculations incorporate the concept of “time value of money.” Therefore, if a date-related
error is made upon inception of a life insurance or a pensions policy, then this can lead to a “ten-fold”
type of implication years later (due to the fact that money held increases with interest over time”.
Such mistakes can cost insurance companies millions thereby leading to financial gaps in the
economy.
Governments have an important part to play as well. However their interest in the actuarial data life
cycle may come in different forms. For instance, governments will typically want to ensure that the
private sector (ie. the first group of actors in insurance companies and pension companies) maintain
their obligations to the public (ie. the policyholders). Thus, as seen before, data-related errors leading
to unnecessary spending from an insurance company’s perspective, may lead to financial pressure on
these companies to meet their obligations to other policyholders.
Another key point relating to governments is that they should alter their policies in such a way, so as
to make better use of the data already held by these insurance companies. This is an example of
strategically re-using data thereby injecting extra value into the actuarial data life cycle. One
suggestion may be that governments should work with insurance companies to create a system that
makes it clear to prospective and current policyholders that they may use their data anonymously to
make better, more strategic policies. A simple disclaimer on data capture forms which insurance
companies use may achieve this. In this way, the governments would be able to gain better insights
into the public at large (as long as these insurance companies have a high percentage market share
within the population). They may gain further insight on national health status (data on health
insurance policies), road accidents (general insurance data), and pension related data. These may
assist in more strategic policy-making in the following ways:-
- Health insurance data: May assist the government in establishing which diseases and health
issues should be addressed more efficiently. For instance, if 60% of health insurance policies
report an influx of diabetes, then the government will know that this has to be addressed
quickly and can start to implement policies that combat this problem (such as education on
diabetes and their ill-effects at a young age) and stocking of necessary hospital equipment that
can help in combating diabetes-related problems

- Road accidents: General insurance claims usually report the time and precise location of
accidents (not to mention the actual cause of accidents). This data can be helpful to
governments in making their nation’s roads safer. For instance, there may be an issue with a
particular part of a freeway that typically results in fatal and non-fatal accidents. This data can
help governments to establish exactly where most accidents occur and thus start to implement
ways to fix such problems.

- Pension-related data: My country of Trinidad actually has a national pension system called
“National Insurance Service”. Its purpose is to collect contributions during local employees’
working tenure and invest these monies in such a way so as to provide a sufficient pension
upon their retirement. However, it has been recently apparent, that more persons are investing
in private pensions in addition to these State-owned pension schemes, thereby indicating that
people no longer view these State pensions as sufficient. Data on pension-plan uptake from
the private sector could provide the numerical evidence to prove this. Once proven, the
government could start to take measures in order to increase the general confidence in their
own pension plans, and in doing so, reduce the need for citizens to invest privately.

Finally, the private sector has a significant role to play in the Actuarial Data life cycle. Firstly, they
have a duty to their policyholders to ensure that they themselves know the importance of their data
being captured accurately and in a timely manner. This point was mentioned before with respect to the
first group of actors (policyholders). However, this duty goes both ways. These companies should
ensure that their data capture employees are well trained and understand the meaning of each data
field and their related implications if such data fields are filled inaccurately. In this way, they can
easily relate this to the prospective and current policyholders themselves, thereby creating an
environment that is prone to proper data keeping. Furthermore, companies should ensure that they
have the relevant data infrastructure in order to properly protect their customers’ data. This is an
important aspect of the data cycle (ie. storage) since this helps to establish trust between the company
and the customer. Furthermore, penetration testing should be conducted frequently so as to ensure that
any hackers will find it difficult to enter their secure systems.

Please see below for the theoretical “Actuarial Data Life Cycle”. It depicts how data (and by
extension, the value derived from that data” could potentially flow from one group of actors to
another.
 Current
Policyholders

Citizens and Insurance and

Prospective Pension
Policyholders Companies

Actuarial
Government
Analysts