Better data leads to better price outcomes
For super funds and insurers, improving data quality is key to better pricing risk and assisting to ensure affordable and sustainable group life insurance cover. How can the industry do it better?
The importance of better data has been highlighted by the Australian Prudential Regulation Authority’s Prudential Standard SPS 250, which makes trustees responsible for having accurate data as part of their risk management practices1.
Data quality is a critical factor in achieving optimal pricing outcomes. The more accurate and complete the data provided to an insurer is, the more closely aligned the premiums will be to the risk profile of that membership. Pricing is typically based on a fund’s past claims experience of at least five years duration.
When poor quality data is provided there is a risk that premiums could be higher or lower than necessary, both of which have implications. For example, if the premiums are higher than necessary members will be paying more than they need to for their cover. However, if the premiums are lower than they should be, the long term sustainability of that premium is put at risk.
But what kinds of data are most critical for funds, and how can this data be improved?
AUTHOR
Staff Writer
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