Australia:Group insurance data found to be missing or ambiguous

The quality of group insurance data has in general improved recently; however, most, if not all, data will have some missing or conflicting values, ambiguity, and a lack of granularity, says Rice Warner which provides actuarial consulting, research and technology solutions.

This has widespread implications and has not gone unnoticed by the regulators, particularly as group insurance is a major component of superannuation. ASIC estimates almost 10m superannuation accounts currently have insurance attached, of which 86% have insurance on the default settings.

What can superannuation funds do?

Rice Warner says in a blog on its website that there are many actions funds can take to gain confidence that the insurance data is of the required quality and level of detail. These include undertaking an annual insurance data validation exercise. This should cover member, premium and claims data.

It is becoming more common for service level agreements between funds and their insurers to now include specifications for every data field which must be captured, and what level of data audits will be completed by the insurers, including independent reviews. Funds should review their data management practices and consider revising their data-sharing requirements with insurers to ensure they can access the data required to monitor member outcomes.

Challenge

An on-going challenge is how to improve the data received from employers, and especially how to try to ensure this data is kept up to date. Key data fields such as a member’s occupation and work status are extremely valuable for optimising the insurance offering but have long proven to be hard to maintain. Funds have had some success in establishing regular reporting with key employers to confirm these data fields and need to build their own processes around this including how to efficiently update their administration systems.

Rice Warner encourages funds to perform regular audits and training exercises to ensure data is collected accurately, particularly because the increasing focus on more complex data requirements may lead to an increased risk of administrative errors.

Concentration

The blog reads, “Superannuation funds are dependent on the underlying administration software they use and for many funds, the external third-party administrators (TPAs). The number of distinct providers in this space is very small with only two major TPAs and six major software providers. Given there is a concentration of providers, and also only five large group life insurers, it should be possible in the future to develop an industry portal to handle group life data more efficiently.”

Source: Asia Insurance Review