Trusting the numbers: A pragmatic approach to data confidence

05 August 2016

By Jim Bichard

A lot of my posts have focused on reporting, model approval and capital optimisation – the outputs. The need for good data underpins all of these demands – if you don’t have faith in the data, why should anyone else trust your numbers or your calculations? Now that we are into a live Solvency II environment, let’s talk about what that means.

Raising the bar

Solvency II has ratcheted the data challenge up to a new level. The massive increase in the volume and complexity of risk and capital evaluation demands both more (new sources) and better quality data, faster. Yet you’re reliant on new sources and third parties for much of the required information. The bar for quality, reliability and consistency has also been raised by the fact that a lot of the data you’re reporting is being made public for the first time, having been largely confined to internal actuarial evaluations before now. And in a time of such exceptional market uncertainty and volatility, swift feeds and confidence in the data are of paramount importance.

But data remains a challenge. Many businesses are still in project mode, struggling to make do with limited available data and reliant on time-consuming workarounds and cleansing from legacy systems and warehouses. At the other end of the spectrum, the ideal of a single, verifiable and easily accessible version of the truth has proved elusive. As experience of Solvency II has once again demonstrated, data is one of those areas of business in which perfect can be the enemy of the good.

Forward motion

When it comes to data, what works best in our experience is a pragmatic approach, which focuses attention and investment on areas that offer the most material and realisable benefits.

The starting point is identifying the data that most clearly encapsulates and informs business strategy and then making sure that both access to and assurance around this information are up to scratch. This is a logical first step and many insurers have taken it, but even this is easier said than done when you are talking about usually multiple sources.

A crucial part of actually achieving this data improvement is ensuring data ownership is taken seriously within the business by putting it at the centre of performance objectives and evaluation.

Underpinning all this effort needs to be a cultural shift from regarding data as a requirement to seeing it as an opportunity to differentiate yourself. Over the next two years, a clear case in point will be using both Solvency II and other external drivers (e.g. the incoming General Data Protection Regulation) as a chance to both streamline data management but reap the business benefits of also sharpening customer insight and trust.

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