Data/Tech 4: WORKERS’ COMPENSATION DATA QUALITY ISSUES

1. Data/Tech 4: WORKERS’ COMPENSATION DATA QUALITY ISSUES CAS Ratemaking Seminar March 10-11, 2005

2. Discussion Topics • The importance of data quality • The impact of poor quality on the WC system • The need for all parties involved to understand the importance of good data quality and the issues impacting the quality of data

3. Discussion Topics (cont.) • The state of data quality in the industry • Data quality successes and challenges • Underlying processes and procedures used by insurers and their trading partners that can negatively or positively impact data quality • Industry best practices around the collection and reporting of data • Potential improvements and next steps

4. Panelists • Art Cadorine, Principal WC Services, ISO • Pete Marotta, Principal Data Management Consulting, ISO • Ia Hauck, Director & Actuary, Actuarial & Economic Services, NCCI • Bruce Tollefson, President MN WCIA • Tim Wisecarver, President, PA & DE CRB

5. Data Quality Best Practices Guiding Principles: • Data is a corporate asset • Data should be fit for the use intended • Data should flow from underlying business processes • Data quality should be managed as close to the source as possible

6. Accuracy Validity Timeliness & Timing Completeness/ Entirety Reasonableness Avoid Redundancy Accessibility & Availability Privacy Key Characteristics of Data Quality

7. Workers Compensation Insurance Organizations (WCIO) • A voluntary association of statutorily authorized or licensed rating, advisory, or data service organizations that collect workers compensation insurance information • Provides a forum for exchange of information about workers compensation insurance • Develops standards for the electronic transmission of information between insurers and rating/advisory organizations

8. Setting the Stage • 2003 direct premiums written $50 billion (A.M. Best) • Over 4 million policies a year • Statutory coverage • Auditable line • Long tail line • Data reporting unique to WC • Aggregate financial data • Unit Statistical Reports (USR) • Detailed claim data • Injury (FROI/SROI) and proof of coverage

9. Types of Workers’ Compensation Data Collected • Financial Data • Annual Cycle, Little or No Classification, Policy or Claim Detail • Policy Information • Coverage, Exposure & Pricing Analysis, Triggers Unit Statistical Reports • Unit Statistical Reports • Policy and Claim Level Detail, Experience Rating, Classification Pricing • Individual Case Reports • Quality Edits on Large Losses • Special Calls

10. State of Data QualityChecks and Balances Workers Compensation “Check and Balances”—All stakeholders have an interest in the completeness, accuracy, and timely reporting of data: • Insurance Companies—Loss Costs/Rate Filings • Employers—Affordable and Available Coverage • Workers—Safe Workplace, Benefits and Medical Coverage • Data Collection Organizations—Credible and Reliable Estimates, Forecasts and Analyses • Agents—Timely/Accurate Experience Ratings • State Regulators—Rate Adequacy, Employer Coverage These individual interests contribute to the overall health and quality of the data that fuels the WC system

11. State of Data QualityControl Measures The Workers Compensation data reporting system provides an extensive complement of control measures that contribute to the overall level of quality • Data Reporting Standards, Rules and Training • Timeliness Control Programs • Online Reporting Tools • Editing Processes • Follow-Up Programs for Timeliness and Quality Issues • Data Quality Monitoring and Validation Tests • Incentive Programs • Test Audit Programs • NAIC Model Regulations • State Regulatory Audits of DCOs and Carriers

12. State of Data QualityIndustry Standards, Tools and Training Workers Compensation Organizations promote Data Standards, Tools and Training that lead to Data Quality Standards • WCIO Data Specifications Manual • Statistical Plans • User’s Guides • Rating Plans Provide… • Business Rules • Common Data Definitions • Standardized Reporting Formats • Common Codes • Editing Processes

13. State of Data QualityIndustry Standards, Tools and Training Reporting Tools • Web-based Reporting Applications • Editing Packages Provide… • Streamlined Reporting Processes • Pre-edit Capabilities Training • IDMA Data Management Courses • WCIO Data Reporting Handbook • DCO Sponsored Training and Workshops • Industry Communications (Bulletins/Circulars) Provide… • Professionalism and Certifications • Continuing Education • Tailored Curriculums—New Staff, New Tools, Industry Developments, etc.

14. State of Data QualityResults State examinations of DCO’s confirm the overall accuracy of Workers Compensation data, the effectiveness of data quality programs, and: • All stakeholders involved in the “checks and balances” positively influence the timeliness and quality of our data • Established control measures contribute to the overall level of quality • Industry Standards, Tools and Training must continue to promote and reinforce the importance of data quality The Future—We need to continue to build on this data quality commitment, always looking to raise our collective expectations

15. Employers Agents/brokers TPAs Insurers State Funds Reinsurers Data Collection Organizations (DCOs) Accident Boards Federal regulators Other 3rd party vendors Policy admin. vendors Auditors Medical service providers Case mgmt. services Law firms Medical bill reviewers Others Mergers and acquisitions Transfers of books of business Transfers of books of claims Many Data Hand Offs

16. Areas of Concern for Data Quality • The Vast Majority of Required Data is Reported Timely and Without Consequential Data Quality Issues • Where Problems Do Occur, They Reside in the Following General Areas: • Unreported Data • Late Reported Data • Invalid Data • Incorrect Data • Questionable Data

17. Unreported Data • Carrier Insolvencies • Unrecoverable Loss of Carrier Records

18. Late Reported Data • Carrier System Issues • Merger/Acquisition • Other • Risk or Unit Specific Issues

19. Invalid Data • Codes (Classification, Injury Description, etc.) • Exposure Reported for Code Not Allowing Exposure • Invalid Classification Combination(s) • Unaudited or estimated payrolls

20. Incorrect Data • Rating Value Errors • Incorrect Premium Calculations for Statistical Codes • Anniversary Rating Date Errors • Accident Date Outside Policy Term

21. Questionable Data • Allocations of Exposures and/or Losses by Classification • Large Units with Zero Reported Losses • Claims with High Medical Losses, but No Indemnity

22. DISCUSSIONS,CONCLUSIONS & QUESTIONS