We all keep saying it ... data and information are the most crucial assets for any corporation. But this is especially true for risk managers who have specific data requirements to manage risk, track experience and make educated decisions on risk transfer and loss prevention. They need data to calculate and report loss reserves which may impact their company's financial statements. This is even truer in our era of regulatory compliance, mergers and acquisitions, and internal and external communication. Standards are the instrument to support enterprise risk management - ERM.
ACORD has been working to facilitate ERM using standards throughout the industry. Working with RIMS (Risk Insurance Management Society), standards were established to help risk managers and a campaign of education and advocacy is underway. RIMS TAC (Technical Advisory Council) encourages members to request the use of standards as part of RFPs and provides sample language on their Web site (www.rims.org).
These efforts with the risk managers led to the identification of "four keys" to data:
An obstacle currently facing risk managers is data availability. While the need is apparent, communicating and sharing data can be problematic. Due to a lack of standards, data can vary between systems and between business partners (e.g., TPAs, carriers and brokers). This ultimately delays data delivery and complicates interpretation. The best way to facilitate the flow of information by business partners and at the same time make sure that the data being transmitted is both useful and available real time, is through data standards. Using a lingua franca for such basic elements throughout the industry makes sharing not only possible but efficient.
What about the unexpected? Outside forces can significantly impact data quality and availability. What happens to a company's ability to benchmark and provide a long term view if ...
- It changes a TPA, broker or carrier?
- It goes through mergers or acquisitions?
- It purchases a new risk management information system (RMIS)?
Standardized data naming and definitions will help risk managers communicate with partners and between systems and create more meaningful industry data over time. They would create more meaningful industry data over time. Imagine how you would be able to benchmark so much more easily. The big picture would stay clear.
One of the most talked-about corporate virtues today is transparency. Sarbanes-Oxley, or "SOX," is part of our industry vocabulary and has made transparency the word of the day. A presentation at the Insurance Data Management Association's 2005 Annual Conference defines data transparency as:
- Allowing for the development of clear, standardized, comparable information
- Allowing data users to assess the health of the systems using the data
- Promoting better controls
- Improving operational and financial performance
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