The Value of Data Management to Your Organization
By Aimee Siliato, Insurance Data Management Association

The CAS Committee on Management Data and Information invited Aimee Siliato to contribute this article for the Latest Research column of The Actuarial Review. The committee supports the insurance data management profession and maintains close relations with the Insurance Data Management Association, which provides education and a forum for discussing current data management issues.

Data may be the most important resource of the insurance industry.

A comprehensive data management strategy and process will reduce project time and resources, environment complexity, the time taken for data to move between business processes, and rework and correction time due to poor data alignment while increasing system-to-system communication, data quality, and data utility. A data management program seeks to align data across an organization, simplifying processes, sharing or reusing the same data and simplifying the technology architecture needed to support the business. It aligns overlapping and "siloed" systems and changes the fundamental capabilities of the organization's information.

Background
Experts have long maintained that data are an important resource that must be carefully managed. And now in the era of Sarbanes-Oxley and other legislation, the ability to manage data is even more critical. Responding to concerns of a repeat of Enron-like financial misbehaviors, as well as emerging focus on the discovery of fraudulent activities within the audit and certification cycle, the U.S. Securities and Exchange Commission (SEC) directed the accounting profession and management to do more. In addition, handling of personally identifiable information is specifically addressed by two important laws: Gramm-Leach-Bliley Act of 1999 (GLB) and privacy and security rules promulgated under the Health Insurance Portability and Accountability Act (HIPAA). The former imposes limitations and disclosures on the use of personal financial data. The latter creates sweeping controls on the use of medical information.

Information is power. Numerical accuracy is only a tiny part of the picture. Without good information, management cannot perform key functions of organization, control, and correction. Goals suffer. Waste and inefficiency drain talent and treasure.

Like all corporate assets, data requires proper management to ensure maximum benefit is achieved by the organization. Corporations that manage their data well can provide enhanced service to their customers, reduce or entirely eliminate rework costs, and have better information upon which to base their decisions, giving them the ability to outperform their competitors, enhance client satisfaction and enhance shareholder value.

The true cost of poor data quality is enormous. As bad information moves through a process, the cost of correcting the bad information increases, just as it does in manufacturing, where quality professionals use the phrase 1:10:100 to describe the increasing cost impact of correcting a product as it moves through different business systems.

Estimates of the true cost of poor data quality vary; some experts put the cost in the region of $600 billion per year. For an individual corporation, some observers put the cost of bad data at 15 percent to 20 percent of operating revenue. Whichever way you choose to measure the cost of bad data, the cost is huge. In addition to the known cost, there are also the unknown lost opportunity costs that arise from the wasteful use of an organization's assets.

Well-managed data can also aid good corporate governance by providing an organization's management with a comprehensive and cohesive view of an organization's activity. If senior managers receive poor data from their operations, how can they properly execute their management role?

What Is Data Management?
The data management discipline has grown in response to the demand for organizations to manage their data assets. The function of a data manager is to ensure that others within the business are provided with the data and information they need to fulfill their role. The role cuts across all areas of an organization from customer through to suppliers, and in insurance especially, regulatory organizations. The data manager ensures that the data of the enterprise will satisfy the needs of the internal and external users and data moves through a well-managed environment.

How Data Management Adds Value
The data management discipline adds value in several ways:

I. Overall data process

• Reduces the cost of collecting, storing, and dispersing data,
• Participates in the creation of an enterprise data vision,
• Monitors data quality
• Provides an additional enterprise communication channel for new products, services, programs, and technologies.

II. Data acquisition and quality assurance

• Maintains internal coding instructions, tables, and documentation,
• Assists data users in defining the data requirements for existing and new products,
• Determines data interfaces for acquisitions and trading partners,
• Defines the company standards for acquiring data,
• Defines corporate data dictionary content,
• Establishes data quality standards.

III. Data storage

• Reconciles business and financial data,
• Provides quality controls,
• Provides expertise on the availability and location of data,
• Assists in the creation and population of data warehouses,
• Provides analysis of data,
• Protects the privacy and confidentiality of data.

The Insurance Data Management Association
The Insurance Data Management Association (IDMA) is a volunteer organization made up of insurers, statistical agents, regulators, and others dedicated to promoting professionalism in the data management discipline. The Association provides professional certification in data management when testing is successfully completed. IDMA also provides forums for discussion and sharing of ideas on topics critical to data managers.

To Learn More
Visit www.idma.org or contact Executive Director Richard Penberthy at rpenberthy@idma.com.

Aimee Siliato serves on the executive committee of the Insurance Data Management Association (IDMA) and is also chair of IDMA's Marketing Committee. Ms. Siliato was the recipient of the 2004 IDMA President's Award in recognition of her service to the Association. Ms. Siliato is also the director in ISO's Government Relations & Data Management Department.