Missing Data Under the Microscope
July 06, 2014| Von Jay Curran |
L/H General Industry
MarketCheck surveys are a quick way that Gen Re helps our clients dig down into the weeds of group underwriting and gain a better understanding of a topic. One recent survey examined how companies handle data - that is, “missing” data - when quoting on Group Disability and Group Term Life cases. It also revealed what steps underwriters typically take to validate the information they receive, whether from a broker or a carrier sales representative.
A total of 18 insurance carriers participated in the MarketCheck, representing around 75% of the market.1 Those who attended this year’s GUAA Annual Conference in San Francisco may have heard my colleagues present the findings. We found that results around data requirements were consistent between Group Life and LTD - participants were most adamant about receiving a census, claim history and name of employer when quoting on a new case. At least half of the carriers reported they would decline to quote if these data elements were missing.
Very few companies reported requiring any paid premium data, rate history data or claim history data when quoting on a new case with 50 or 250 lives. However once entering into the larger case sizes, most companies reported that they require at least three years of data. Interestingly, the most frequently missing census item for participants across Group Life and LTD was the date of hire, followed by occupation and benefit amounts.
One of the surprising findings from the MarketCheck was that when companies ask for more information, they often get it. That is not what you hear anecdotally. But companies told us they are proactive when it comes to obtaining complete information. Companies “almost always” or “frequently” request the missing information from brokers and sales reps. Results are positive and more than half reported obtaining missing information either “almost always” or “frequently.”
Where data was not complete, brokers appear to be the main culprits in the small case market. In the larger market segments, obtaining missing data was identified as “a hassle to go back to the client during the RFP process.”
When asked about validating the necessary information for accuracy, companies reported that they use multiple methods. The majority of participants said their company always audits the case underwriter to ensure the quality of the validation process.
It’s hard to overstate the importance of an insurance carrier to submit a proposal based upon accurate and current census data. We know that assumptions based on old or incorrect census data will have an impact on new business and renewals because, ultimately, such assumptions create gaps between a carrier’s manual price and their street rate. The best opportunity for an underwriter to set the correct price is upfront - poor data will equate to poor results for the carrier as renewal pricing will consistently lag an incorrect manual price.
This is why we think our MarketCheck surveys provide carriers with a good benchmark for the best market practices. The impact of missing data on pricing brings the issue of data quality into sharp focus!
To learn more about our research, contact Marcy Updike.
1 Based on in-force premium from our latest U.S. Group Disability and Group Term Life Market Survey