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By Aimee Siliato, Assistant Vice President, ISO’s Data Collection, Acquisition, and Service Division
Changes in data-reporting requirements have always been a given, are sometimes difficult to keep pace with, and are constantly evolving to suit the changing landscape of the industry and its needs. Yet, the scope and magnitude of changes we are now seeing dwarf past data-reporting requirements. What was once an evolution of change in the regulatory and related data-collection environments has become a revolution of change. The enactment of Sarbanes-Oxley, the Gramm-Leach-Bliley Act of 1999, and privacy and security rules included in the Health Insurance Portability and Accountability Act (HIPAA) immediately made the focus on data — and the ability to manage it properly — even more critical.
A variety of initiatives at the state, federal, and international levels are all directed at obtaining more data to address various business issues. The National Association of Insurance Commissioners (NAIC) Medical Malpractice Closed Claim Reporting Model Law was developed to address the need for more data in this critical line of insurance. The NAIC Market Conduct Annual Statement was recently expanded to collect additional data elements. Disaster-reporting data collection is being discussed at the NAIC, as is the need for information regarding risks associated with climate change. At the federal level, creation of an Office of Insurance Information has been proposed. On the international stage, Solvency II initiatives are addressing accounting practices and procedures.
Sound data-collection and data-management practices and procedures are critical for responding quickly and efficiently to reporting requirements. The property/casualty industry has more complex and detailed data requirements than most (if not all) other industries. But more data does not necessarily mean better results. Unless data is understood, protected, managed, and used with great care and appreciation of its value and meaning, it will not accomplish the intended objectives. Simply obtaining more data does not mean insurers will then have the means to address the problem at hand. To do that, those who make use of the data must know and understand what the data means and represents —and what objectives are to be achieved with its collection. Aggregation of data must be done in a manner suited to the problem being addressed or the questions being asked. This is critical not only to the success and prosperity of individual companies but to the industry as a whole. It is also necessary to fulfill obligations to the consumers that the industry serves and the regulators who oversee the insurance business.
Laws empower insurance regulators to collect the data necessary to evaluate the adequacy and fairness of the rates and rating plans used in their states. Various types of data are needed for this task. Regulatory analysis requires statistical data at a level of detail that allows the evaluation of the rate structure and its component parts, such as class, territory, and coverage. To assist in projecting future costs, the analysis must also accurately recognize loss development and loss frequency and severity trends.
Regulatory entities recognize the benefit of qualified entities collecting information and making it available to participating companies. Regulatory statistical reporting and analytical information are critical elements of a sound and competitive marketplace. As a result, insurers get the information needed to enter and remain in many markets, and the information helps insurers to estimate risk of loss accurately. Policyholders can benefit from the increased competition resulting from the entry of new insurers — insurers armed with accurate information. And the aggregate data helps regulators in monitoring the insurance market.
The property/casualty insurance industry expends significant resources in data collection, management, and efforts to improve data quality, with the recognition that the cost of not doing so would be even greater. While the regulatory landscape is evolving and will continue to change, the need for strong data-management skills and high-quality data is a constant.
This article is reprinted from ISOReview, News and Analysis for Insurance Executives.
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