Looking for a New Year’s resolution that will really make a difference? Try a data detox

For insurers seeking ways to trim the waistline of their business against excessive expense ratios, the serious operational savings to be made around data controls could be a healthy detox diet this New Year, writes Atticus DQPro’s Nick Mair.

It’s that time of year again. We’re all taking a good hard look at ourselves and planning changes for the better with mottos like “New Year Fresh Start”. But if you’re looking for a resolution that will impact the bottom line for your business, look no further than a data detox.

Now, let’s not pretend that internal audit or data controls are sexy topics. Stay with me, because there is great potential for an insurer to make savings in this area. This when the industry urgently needs to curb its bloated expense ratios, that increasingly can make the difference amid tough pricing and risk appetites stretched amid fierce competition.

We’re talking about reducing operational risk in the business, daily – not just for compliance. At the same time as reducing the risks insurers face when handling data,  dramatic savings can also be made by moving away from manual spreadsheet processes for monitoring internal controls. That is a New Year’s diet well worth taking.

Time = Money

First for the savings, both in terms of time and cost. Carriers that do apply basic data controls do so in a manual, haphazard and inconsistent fashion. For teams like Internal Audit to demonstrate that each department is applying controls correctly effectively that usually means interviewing people and checking spreadsheets tally, all of which takes time.

Take the recent experience of one of our DQPro customers, a leading international non-life insurer that had found preparing for an internal data audit had taken up to three weeks. We managed to shave that down to 30 minutes. We’re cutting the time those guys expend on performing their job, making it faster and more efficient than ever before, and dramatically cutting the cost of internal audits.

Back in the USSR

What about operational risks?  Unchecked, errors in the core data can lead to misreporting and cost to fix and that’s no laughing matter.

A sudden cyber security breach, for example, can shine the spotlight on your organisation’s governance. Insurance is tightly regulated, subject to strict fines and penalties, and the compliance burden has grown with the risk of damage to brand or reputation.

And we have highlighted some serious errors and inconsistencies in our client’s data – thankfully flagging this in time for it to be fixed. Common errors we see involve  breaches in underwriting controls, including applying an incorrect tax codes to the jurisdiction of a risk. We came across one recently tagged’ USSR’ for Russian risks.

Inputting incorrect jurisdictions that do not match to any tax codes can prove to be a costly error if repeated over time. If your data controls are stuck in the Ronald Reagan era, they’re overdue a spring clean.

Our data confidence tool DQPro also often uncovers incorrect risk codes for catastrophe risks, such as flood versus hurricane. Again, this sort of error represents a clear operational risk. If the code is wrong, and the policy is not categorised appropriately, it impacts exposure monitoring, pricing and reinsurance purchase. This sort of data error comes makes detecting loss harder alongside the regulatory and reputational implications.

Check the checker

When controls are moved to run automatically in DQPro, every issue is recorded and time stamped with all the relevant information, and audit can run the report. It records the audit trail, with notes inputted by the user. That reduces risk of error across the business for all consumers of the data but it’s also a major time-saver for internal and external auditors.

Having that kind of tool in the kit box reduces risk, as well as saving time, energy and costs.

Data detox

So if you do one thing for your business this year make it a data detox – being proactive and getting your data up to fighting form may well head off serious, unforeseen challenges as the year develops. This resolution could result in cost and operational benefits that last way longer than 12 months.

Happy New Year!