From the Backroom to the Boardroom:

The Evolution of Data Quality in the Insurance Market

Mark B. Gorman
CEO and Founder, The Gorman Group Insurance Consultancy
January 2010

Research Report
Sponsored by
 From the Backroom to the Boardroom: The Evolution of Data Quality in the Insurance Market

Table of Contents

Executive Summary . .............................................................................................................................. 1

Understanding the Impact of Data Quality............................................................................................. 2
Defining Data Quality: Meeting the Needs of the User . ........................................................................ 3
Fixing Bad Data or Setting Up a Data Quality Program: The Evolution of Data Quality Initiatives . .... 6
Metrics: All Data Quality Costs ............................................................................................................ 9
Data Quality Governance: A Three-Tiered Approach and the Role of ‘Blended Beings’ . .................. 11
Assuring Data Quality Initiative Success: Balancing the Three-Legged Stool.................................... 13
The Future: A Look Ahead for the Industry ........................................................................................ 16
Conclusion ............................................................................................................................................ 16
About SAS.............................................................................................................................................. 18
About The Gorman Group Consultancy................................................................................................. 18

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 From the Backroom to the Boardroom: The Evolution of Data Quality in the Insurance Market

Executive Summary

Perception is often more important than objective measures when considering data quality. Users care less
whether a data element is accurate 99 percent of the time than they do about the 1 percent inaccuracy that
caused problems with reconciling a financial report, responding to a customer or adjusting a claim decision.

This report is based on a research questionnaire in Insurance Networking News to which 75 insurance
organizations responded, followed with in-depth interviews of thought leaders from 18 organizations.

The findings reveal that it is critical to have a program in place to enhance users’ trust in data and its meaning.
The two most common choices the research found were:

• Fixing data quality errors as they are encountered (the traditional strategy).

• Establishing a data quality program to apply quality metrics as information is captured, transformed, derived,
stored and delivered (the emerging strategy).

The chosen direction is fundamental to whether an organization takes a reactive or a proactive approach to data
quality, because the choice determines the level of resource investment required.

Governance is another consideration when improving data quality. At the enterprise level, this requires three
levels of oversight:

• A senior management body responsible for funding, guiding and supporting a data quality effort.

• A dedicated enterprise unit responsible for setting standards, defining controlled processes and procedures
and monitoring data quality metrics.

• A data steward group resolving data quality issues and applying data quality standards at the line of business
or functional level.

Often, organizations focused on fixing data quality typically have only the senior management and data steward
levels in place and are missing the mid-level oversight that provides critical strategic and procedural direction.

Lastly, it’s important to remember that data for an insurance firm has intrinsic value. Its importance is not subject
to the applications creating or using it, nor is it dependent on the infrastructure supporting it. Both applications
and infrastructure do change. Data needs to be treated as a long-term corporate asset to be protected, invested
in, maintained and improved for sustained ROI.

All these practices will enhance the insurance organization’s intelligence about itself, its customers and the
marketplace and will bolster user confidence that the data is relevant and accurate.

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 From the Backroom to the Boardroom: The Evolution of Data Quality in the Insurance Market

Understanding the Impact of Data Quality

As a senior vice president at an insurance company was being interviewed for a white paper, he reacted strongly
when he heard data quality characterized as a mundane subject.

“Oh, not to me,” he interrupted. When asked why he felt so strongly, he responded, “While I used to see this
as a pain in the neck and just one more thing to deal with during the day, I now understand that this is my
opportunity to assure business managers are sharing meaning on information important to our business.”

His comments were the genesis of this paper. While researching a previous white paper, Best Practices for
Leveraging Business Analytics in Today’s and Tomorrow’s Insurance Sector, a number of interviewees asked
what others were doing to ensure the quality of insurance data, especially as it pertains to promoting expanded
use of predictive analytics. While visiting with senior managers among insurance carrier clients, the topic of data
quality came up again in a variety of contexts including changes to state and bureau stat reporting requirements,
errors in commission reporting, impact on building predictive models for additional product lines, opportunities
for new product development and discussions about which business segments to pursue for profitable growth.
The issue has clearly expanded beyond discussions and debates over the accuracy of numbers in reports.

The research for this paper uncovered these current topics:

• Issues driving a more widespread discussion of data quality among both business and IT senior managers.

• The definition of data quality and whether this definition has changed or evolved recently.

• Metrics used to measure the impact of poor data quality, the contribution of excellent data quality and how it
relates to gaining support for funding data quality initiatives.

• Activities regarding ongoing data quality issues and ideas for sustaining efforts during multiyear initiatives.

• A roadmap and insight into the future of data quality.

This paper is the outgrowth of two research projects. The first was a research questionnaire in Insurance
Networking News to which 75 insurance organizations responded. This was followed with more in-depth
interviews of thought leaders from 18 insurance organizations during November and December 2009 and early
January 2010. These thought leaders represented business people, IT professionals and people from the grey
area in between – often called business intelligence, data management, reporting and analytics.

This paper describes what is driving insurance carrier organizations as they enhance their focus, increase their
efforts and improve their outcomes relative to the quality of the important data within their organization. The subject
here is not data quality tools available in the market, nor is it about a set of tactics to manage data quality within an
initiative. Interviewed leaders responded with a surprising amount of passion, insight and enthusiasm for this topic.
While drawing heavily on the information contained in this paper, the interpretation and conclusions are solely those
of the author.

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 From the Backroom to the Boardroom: The Evolution of Data Quality in the Insurance Market

Defining Data Quality: Meeting the Needs of the User

Let us examine what the insurance industry means when considering data quality. While “fitness for purpose”
and “fitness for use” are definitions that appear often in the media, these definitions are of little practical value in
justifying the investment in improving data and information quality.

In order to gain insight into how the insurance market defines data quality, the research questionnaire asked,
“In your organization, when people speak of data quality, in general what do they mean?” The results to the
question are shown below in Table 1. “Completeness” of the data led with 96 percent of respondents who
strongly agreed or agreed, followed by “consistency” of the data at 93 percent. “Accuracy” was a very close third
at 92 percent of respondents, but it was first for those indicating strong agreement with more than 60 percent.
Also, note that of the remaining four dimensions of quality, more than 80 percent of respondents either strongly
agreed or agreed that these dimensions were included when people in their organization talked about data quality.
While it certainly was not surprising that data quality was defined along multiple dimensions, the high percentage
of respondents agreeing with each dimension provided little clarity regarding the definition of data quality for the
insurance market.

Table 1: “In your organization, when people speak of data quality, in general what do they mean?”

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 From the Backroom to the Boardroom: The Evolution of Data Quality in the Insurance Market

To gain further clarity, respondents were asked about the importance of each data quality dimension based on
the primary use of the data. This time, research questionnaire respondents had to identify only one dimension
for each type of use. As a result, different dimensions were ranked higher or lower based on the type of use. For
complete results, refer to Table 2 (all responses in percentages rounded to the nearest whole). The top-rated
dimension for each use of the data (each horizontal row) is highlighted in blue, and each dimension receiving
more than 10 percent of the first-place votes is highlighted in yellow.

Data Quality Dimension

Complete Consistent Accurate Relevant Timely Integrity Valid

Transaction 28 9 34 7 11 5 5

Operations 20 23 21 4 19 7 5

Financial 20 0 58 1 5 11 4

CAT Events 12 13 13 13 29 17 4

Reinsure 12 10 30 14 6 11 17
Reporting types

Statistical 16 3 36 18 3 15 10

Analytical 16 11 32 15 4 12 10

MDM 42 12 12 10 3 11 10

Table 2: Percentage of respondents ranking most important data quality dimensions by reporting/transaction type

Not surprisingly, accuracy received the highest number of responses for five of the eight reporting types. More
interesting is that accuracy received more than 50 percent of the first-place responses for only one reporting
type – financial reporting. Operationally, consistency of data was rated as the most important. For catastrophic
event reporting, timeliness was most important; and for master data management, completeness of the data
received the highest number of first-place responses. These outcomes were not surprising and only mildly useful
because they provide little direction in attempting to address data quality issues, but the responses illustrate the
contextual nature of the definition of data quality.

It was during one interview, however, that a practical and clarifying definition arose. When asked how his firm
defined data quality, the interviewee didn’t hesitate:

“Data quality is a measure of the ability of the downstream users to rely on what the
creator of the data has done.”

Here was a definition that began to provide insight. It brought clarity to a number of important issues that
emerged during the research:

• The true measure of quality is the credibility of the data being used. Credibility is linked to the person
initially entering the data, and anyone else who handles it by extracting, transforming and loading it to a
data warehouse, creating an OLAP cube or populating a spreadsheet. In the words of one interviewee,
“Anybody who creates or touches or transforms data is a source of quality.” This view is especially pertinent
when the creator of the data lies outside the organization. As an insurer increases the upload of information
directly from agency systems, or increases utilization of third-party data, it must grapple with the credibility of
organizations outside its control.

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 From the Backroom to the Boardroom: The Evolution of Data Quality in the Insurance Market

• While the creators of the data are often users of the data (for example, an agent entering the data
required to generate a quote), they may or may not take the needs of downstream users into account.
Because of the transactional context of the creation of most insurance data, it is difficult for the creator to
take into account the needs of all the users of the data. After a recent presentation on the increasing use of
predictive analytics in the insurance market, an agent said, “I had no idea the data I entered mattered. I just
wanted to get the quote done as fast as possible.” Organizations may need to consider putting stronger
incentives in place to assure the required data is entered correctly. A data quality program also forces
organizations to look at the impact of current metrics (number of applications entered per hour) and whether
the metrics need to be changed, deleted or included to enrich data quality.

• The needs of downstream users may not be visible, may not be articulated and may not be considered
when setting up the data capture systems and applications. Sometimes in strategic technology
initiatives, reporting and data analysis requirements are only superficially considered prior to the deployment
of the designated solution. As one interviewee said, “Each data element has a contextual meaning, a
usage meaning and an outcome meaning.” Assuring that each of these meanings is well-understood
and addressed by the people implementing and deploying the systems was the focus of many of the
interviewees.

• Data quality fixes can improve the data that has been created, but they cannot offset the importance
of attention to quality at the point of entry. All fixes during profiling, extract-transform-load (ETL),
de-duplicating and data-cleansing activities are based on assumptions. These assumptions may or may not
be appropriate to the downstream user who only needs a couple of incidents to jeopardize confidence in the
data fixes and the people responsible for them. It is more important to focus on getting the data right at the
point of entry, where less is assumed regarding the meaning of the data entered.

• Trust is earned every day. The issue of data quality is never fully resolved. The perception of quality
is assigned every day by users. Because 100 percent quality on every data element in an insurance
organization is not financially viable, the creation and maintenance of the data considered critical is the basis
for data quality funding and governance decisions.

Not all downstream users are equal in determining how data quality is defined. One interviewee discussed the
difficulty of providing consistent organizational definitions of key data elements because one party or another
within an organization wielded strong political power. Another interviewee said it differently: “If you let financial
people, or any other group, dictate things, it is often difficult to achieve shared meaning in the business
community. You may achieve accuracy on ‘counts and amounts,’ but what do the counts tell you? You don’t
understand the meaning unless it is from a business context. Shared meaning is critical.” The definition of quality
information must be a shared one that takes into consideration the input from all downstream users.

Finally, it is critical to data quality to understand the impact of the information produced. One example of a
discrepancy that could cause confusion and misreporting is a lack of consensus on the definition of a claim. For
one company’s accounting purposes, a claim may be a payment under an insured coverage. The accounting
department may report 1 million claims for the year based on this definition. For the same firm, the claims
department identifies a claim as a single, discrete incidence of loss − regardless of the number of coverages.
So they produce a report indicating the firm has 250,000 claims. Then senior management asks, “Which one
is right?” For the purposes of data quality, a claim data element must have the same contextual, usage and
outcome meaning in order to avoid the inevitable discussion over the discrepancies between the two reports.
Resolution of the discrepancy to achieve shared meaning has everything to do with the perception of the
downstream users of the quality of the company’s claims data.

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 From the Backroom to the Boardroom: The Evolution of Data Quality in the Insurance Market

Fixing Bad Data or Setting Up a Data Quality Program:

The Evolution of Data Quality Initiatives

As the research progressed, two choices emerged. Most organizations have been concerned about the quality
of their data for a long time. Their efforts to address data quality have been changing and evolving over time,
but their methods were very different. Some were intent on efficiently and effectively fixing data quality issues
that arise during the course of conducting business. Others were intent on setting up a data quality program
to assure the quality of the data while conducting business. The difference between the two is important when
making decisions regarding the investment in resources and technology to meet corporate objectives.

Historically, the efforts to assure data quality have focused on getting the numbers right in reports, especially
reports being shared with external audiences such as financial numbers, stat and bureau reporting, agent
compensation, etc. This focus starts at the report and moves upstream to identify the first location for fixing the
data. A common example for this approach was reducing the amount of time and resources needed for monthly
or quarterly financial balancing and reconciliation. Another common example was eliminating the time spent
debating data discrepancies during management meetings. As one respondent said, “On average, one half of
the time during our quarterly regional meetings was spent debating data.”

What is emerging is an evolution of the efforts described above, using the data as basis for a wider array
of business decisions, such as the pricing precision needed for new and renewal business, the impact of
non-premium-generating product benefits on the evaluation of claim costs, the interplay of financial and non-
financial factors during enterprise risk management evaluations, etc. Because the timing of the use of the data
is different, the needs of the user groups are different, and the evaluation of data quality may be different. The
focus is on the quality of the data as early as possible, preferably at data entry. While the approaches discussed
during the research varied by each organization, all of them discussed how their efforts to achieve data quality
were evolving. A spectrum of data quality efforts for the industry began to emerge.

The differences had to do with organizational intent; either trying to fix data quality issues as they arise or trying
to set up a data quality program to assure only quality data in the first place. Of course it would be impossible to
identify every point on the spectrum, but for clarity it is helpful to look at the two ends of the spectrum. The first
can be called, for lack of a better term, the traditional, reactive approach (fixing data quality issues). The latter
can be called the emerging, proactive approach (setting up a data quality program). Table 3 summarizes the key
aspects of these two approaches.

Approach

Traditional
The approach is relatively reactive. The focus is on fixing
data quality issues. Issues are identified after reports have been
generated and before the reports are shared with a broader
audience. Common examples are the accuracy of financial reports
(especially yellow book and blue book source data); issues that
arose during claim processing regarding coverage; or estimation
and evaluation of stat and bureau reporting data to avoid fines.
Emerging
The approach is more proactive. Data is recognized as
important in driving information for applications like predictive
analytic models, management dashboards, revenue and expense
forecasting, account profiling and segmentation, new product
development, etc. Data quality therefore is critical as data enters
the organization, is augmented by third-party data, is stored in
formats appropriate for analysis or accessed in real time. So the
focus is on limiting data quality issues as early in the data life
cycle as possible rather than correcting them later.

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 From the Backroom to the Boardroom: The Evolution of Data Quality in the Insurance Market
Data Quality Focus
Traditional
The objective dimensions of data quality are more often
the focus. Accuracy, completeness and consistency of data
are common objective data quality dimensions. Two hypotheses
emerged on why this is the case. First, from a business
perspective, these dimensions are focused on the common
operational needs. For example, financial reporting relies heavily
on data accuracy. Underwriting reports rely on the data being
complete and consistent.
Secondly, these data quality dimensions can often be addressed
by IT with minimal input or involvement by the business
organization. For example, once the business group provides
clarity on calculations such as loss ratio, the accuracy of the data relevance could change based on changes to business practice,
used in the calculation and the accuracy of the calculation itself
can be addressed without additional involvement (unless there is a organization must be more actively involved to validate that the
change to the calculation or data characteristics required.)
Data Scope
Traditional
The focus is on correcting data quality issues in the core
processing system or in the movement of data from a core
system to an operational data store. Because most core
processing systems have few if any data audits, there is a heavy
reliance on individuals who understand and have experience with
the usual workaround applied to meet business needs.
Emerging
Both the objective and the subjective dimensions of data
quality are included. In addition to accuracy, completeness
and consistency; quality dimensions like timeliness, relevance
and validity are evaluated. The perception of quality for these
dimensions is more subjective based on the needs and uses of the
downstream user. For example, while the accuracy of data may
be perceived consistently by all users, the definition of relevance
of the data could be very different for an individual attempting to
negotiate a reinsurance treaty from one attempting to build an
underwriting new-business scoring model or someone attempting
to predict the likelihood of fraud on a claim. Even if the relevance
was established at a given point in time, the perception of
market conditions or competitive pressures. Now the business
perception of quality is in line with business need, and the use of
data is more resilient to differences by market, city and region.
Corporate IT can no longer proceed independently, and the
business organization cannot avoid its role in assuring the quality
of the information derived from the data.
Emerging
The data under evaluation for quality is much broader and
is growing exponentially. Strategic decisions like mergers and
acquisitions, or upgrading and replacing existing systems, assume
the data must be defined and “rationalized” before the two
firms can be integrated or the new systems implemented. Data
augmentation through the addition of third-party data requires
that data on both sides be of sufficient quality to assure a match,
and that matching process often takes place in real time. The
data elements able to be captured after core-system upgrade
or replacement may significantly exceed the data captured by
the legacy environment. One insurance carrier indicated that its
new claim system captured about 900 data elements for a claim,
whereas the previous system only captured about 600. Again, the
issue is not simply how to add or replace data, but what business
rules to apply when bringing disparate systems with inconsistent
data structures and data definitions together.
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 From the Backroom to the Boardroom: The Evolution of Data Quality in the Insurance Market
Data Quality Ownership
Traditional
Efforts at addressing issues regarding the quality of data
are focused at the line of business or functional level.
This decentralized approach may or may not meet the broader
enterprise’s requirements. In fact, reconciling the data for local
needs in some cases increases enterprise issues. For example,
one respondent indicated that the organization uncovered 11
different definitions of a claim used by different departments or
functional units during the past decade.
Audience Expectations
Traditional
Internal audience expectations often drive the definition and
perception of quality. Line-of-business operational managers,
regulatory and stat reporting staff, and yellow- and blue-book
financial reporting staff are examples of the primary audiences
for the information. Their expectations regarding the timing of the
information and the amount of manual manipulation required are
set by historic norms. Decision time frames are delayed in order
to allow time for data corrections and reporting adjustments.
Information Focus
Traditional
Focus is on fixing operational and financial information. The
primary audiences identified above are focused on reports that
are operational in nature (how many applications, claims, policy
changes and endorsements, etc.) or financial (dollar volumes for
premiums, claims, commissions, endorsements, underwriting
expenses, etc.) The concern is that incorrect data will lead to
fines, underwriting or claim leakage, litigation expense, insufficient
subrogation, etc.
8
Emerging
Data is more and more being considered a corporate
asset, not a line of business or functional asset. A different
set of business rules may apply relative to the entry, definition,
maintenance, storage and retrieval of data. An example shared
was that the definition of a claim by the actuarial, finance, HR
and claim departments could be radically different. Without
consistency in taxonomy, the differences in usage and definition,
while accurate and appropriate at the functional level, will
cause significant communication issues when shared across
departments or with external audiences. As a consequence,
the data is more and more subjected to corporate oversight,
governance and control. This has implications for not only the
individual business units, but for corporate IT as well. Technology
applications, whether externally purchased or built internally, have
to conform to corporate standards.
Emerging
The audiences for the information are becoming more
external, and their expectations are becoming more
demanding. A consumer accessing an insurance organization
for claim reporting, service or complaint assumes the information
is available in real time, accurate and relevant to the inquiry.
Regulatory and bureau reporting organizations are increasing their
demands for quality data, their expectations on the timing, and
their dissatisfaction with errors or incomplete data. Agents seeking
information from a carrier expect ease of access and flexibility
in reporting. The transparency demanded pushes insurers to be
more proactive in driving information quality and more responsive
in resolving discrepancies once they are apparent.
Emerging
Focus is on providing operational, performance and analytic
information. The needs of audiences beyond operational and
financial reporting are driving the delivery of information within
the organization. Operational data stores expand into analytic data
marts in order to support analysis and forecasting, and to support
building analytic models. Applying master data management
initiatives moves customer information and insight across the
organization. Performance management information leads to more
transparency in managing the organization. The perception is that
to compete, the information not only has to be right, it has to be
delivered to the right people in the right form at the right time in
order to drive valuable organizational insight.
 From the Backroom to the Boardroom: The Evolution of Data Quality in the Insurance Market

Technology

Traditional
Technology supporting data quality is manual or semi-
automated. The technology supporting data quality initiatives
that are more reactive in nature have a tendency to be more
manual. Manual profiling on limited data elements, followed
by manual resolution of issues uncovered is not uncommon. A
semi-automated approach where data is identified and pulled
automatically and where data quality problems are resolved
manually is also common. The manual resolution of data quality
issues identified by the business side requires either IT resources,
or technically oriented business resources to resolve.
Emerging
Technology supporting data quality is automated. In order
to proactively identify and resolve data quality issues, tools are
applied that automatically monitor, identify, report and in some
cases resolve data quality issues. This is especially true when data
volumes are high and when data quality needs to be assured for
data that is accessed and used in real time. Using automated tools
requires close collaboration between business and IT to identify,
define, develop, test and deploy the business rules governing
automated tools.

Table 3: Comparison of Different Approaches to Data Quality

What is clear from the research is the insurance market is pursuing a broader, more comprehensive orientation
to the topic of data quality. Quality data is the basis of information used to drive decisions that are more strategic
in nature or driven by needs to understand the performance of the organization on important business metrics.
How quickly an individual organization moves along this spectrum is often driven by practical business issues
like the tradeoff between ease of doing business by an agent entering data and the increased time required to
enter complete, high-quality data. Another factor is the ability of the data capture systems to apply automated
audits or controls on the data entered for a transaction.

Also, this evolution from a reactive to a proactive approach requires a more significant investment in resources
such as people, process and technology. How organizations justify this investment, and how they remain
focused and committed over multiyear timeframes, was a key focus of the research.

Metrics: All Data Quality Costs

One interviewee spoke directly when asked about the motivation for investing in data and information quality.
He said, “All data quality costs an organization. The only question is whether the cost is incurred because of
bad data quality, or the cost is incurred in providing high data quality.” When this point was raised in subsequent
interviews, no respondent disagreed. The only discussion was on whether it was more expensive to fix bad
data or set up a program to assure data quality from the beginning. However, when asked how they measure
the impact of data quality, the overwhelming response was that this is the difficult part of any data quality
initiative. One interviewee, relatively new to the insurance industry but very experienced in data management,
data quality and governance, summed up the responses: “In general, the industry doesn’t tend to know how
to communicate with senior management the cost and the resulting business impact of data quality. Defining
the effect is hard, and measuring it is very hard.” What is clear is that organizations need to define clear and
specific data quality metrics and then measure against those metrics to develop credible and compelling
business cases.

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 From the Backroom to the Boardroom: The Evolution of Data Quality in the Insurance Market

A number of respondents provided examples of significant impact from improved data quality. Below is a
relatively broad list indicating the range of metrics being applied in the industry:

• The monthly financial balancing routine required 100 hours from one person and 20 days’ elapsed time. After
data quality routines were applied, the total elapsed time was reduced to three days.

• An organization evaluated 20 large corporate IT projects a year for the past two years to determine the impact
of poor data quality on the total project cost. They determined that the average impact of poor data quality
was a 10 percent increase in total project cost.

• Another organization assessed the impact of data accuracy on a master data management initiative with
more than 200 data elements. It was discovered that if the accuracy of just 15 of the data elements was high,
they realized a 25 percent improvement in hit rate.

• Initiatives in name clearance and harmonization of data resulted in a 25 percent decrease in dual quotes
going out the door for a commercial lines carrier.

• The initial error rate for an ISO file was 20 percent immediately following a merger. Significant reduction in that
rate was realized after data quality practices were applied to the merged data.

• An organization realized a significant reduction of the hours spent resolving questions on the data in standard
month-end reports. The initial analysis identified the average number of hours spent resolving questions was
10 hours per individual receiving standard month-end reports.

• Increasing the quality and availability of “front door” data resulted in a 20-30 percent improvement in
premium generation.

The most interesting responses had to do with the qualitative and tacit benefits of data quality, including a new
confidence in decisions based on the enhanced credibility of the data. Multiple respondents indicated that
people in their organizations responded, “Finally somebody is doing something about this,” when informed about
a data quality initiative.

Using business metrics to assess the impact of data quality changes the dynamic between business units
and corporate IT. Development and integration of new applications or systems now require the application of
organizational standards and procedures on the project requirements for defining, capturing and processing
data. Expediency is replaced by standards, and standards provide the basis for increased agility in deployment
and use.

One of the most interesting discussions on the benefits of increased data quality is the enhanced visibility into
the operations of the organization. The new metrics derived from an investigation into the causes of poor data
quality can drive significant operational change. Data captured on predefined metrics can provide significant
insight into what the organization and the processes within the organization are doing. An example was provided
by one interviewee:

“We were capturing premium dollar classifications like ‘physical damage’ but didn’t
know whether that was for repair, storage, rental or what. Data quality was poor. After
the change, we were able to better see where we were spending money and ask, ‘Is that
how we should do it?’ This led us to increased efficiencies, and in a big company this
means big dollars.”

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 From the Backroom to the Boardroom: The Evolution of Data Quality in the Insurance Market

Data Quality Governance: A Three-Tiered Approach and the Role of

‘Blended Beings’

One of the most interesting aspects of the more successful data quality initiatives is that they have not only
survived but have evolved and matured. They have continued to be funded and supported even during the
economic downturn. A number of consistent factors emerged from the more successful programs.

First, while the data quality initiatives were admittedly long-range in nature, the most successful provided
organizational benefit almost immediately. Reports became more accurate, systems development requirements
were defined better, the dialog between business units and IT improved, and the information used to make
decisions was perceived as “better.” As one interviewee said, “The only efforts that persist are the ones that are
successful. We have to feel we get something out of it in order to continue to do it.”

Secondly, in order to generate a focus on data quality initiatives, the organization requires a senior management
champion. Interestingly, examples of these champions came from a wide variety of backgrounds such as
corporate IT, corporate business units such as finance and enterprise risk management, line of business
managers, and senior managers of functional business units such as claims and actuarial. These managers
realize the transformative impact of high-quality data, identify the multiple downstream users of the data and
understand the issues involved in assuring a higher degree of data quality. They also understand the need
to balance the short-term priorities of the organization with the long-term importance of data quality. One
interviewee described how they assured persistence in their focus on data quality even during the difficult
economic times of the past few years. The result was directly attributed to the passion of one senior manager
who “viscerally” understood the importance of data quality, and to her ability to maintain the commitment of the
senior management team of which she was a member.

Thirdly, an enterprisewide data quality initiative requires a three-tiered governance structure. From a data quality
standpoint, strong governance allows managing the data quality needs of the business cohesively rather than
as a collection of business units or functions, and reinforces the focus on data as a corporate asset; however,
it should be noted that at least one interviewee cautioned that governance should not be anyone’s full-time
job, because “they have an incentive to look for something to do.” To the degree that governance becomes
bureaucratic and inhibits being responsive to the dynamic changes taking place in the market, it will be
perceived as an inhibitor, not a facilitator, of data quality.

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 From the Backroom to the Boardroom: The Evolution of Data Quality in the Insurance Market

This three-tiered approach was a consistent theme across the interviews. Table 4 details the three levels of governance.

• Steering committee, advisory board, government council

• Define roles, responsibilities, accountabilities
Sr • Resolve disputes
Mgmt • Provide resources

• Data czar, enterprise data management, BI and analytics

Central • Define procedures, standards, processes and metrics
Entity • Escalate disputes
• Provide enterprise view

• Data analysts, data stewards

• Identify and define quality issues
• Provide data requirements
Data Stewards • Research and resolve issues
• Assure adherence to standards and metrics
• Clarify disputes
• Provide line of business or functional view

Table 4: A Three-Tiered View of Data Governance

The top tier is comprised of a senior management advisory group or steering committee. This corporate review
board supports the goals and objectives of data management, data quality and data governance. The group needs
to embrace data as a corporate asset. The concept of data as a corporate asset is built on the premise that data
exists of and on its own accord. It maintains its intrinsic value even though the applications used to generate it and
the infrastructure used to capture and maintain it are retired, modified or replaced. Centralized senior management
control is needed to bestow accountability on all providers of data to maintain quality. This group also assures
the data quality initiatives receive sufficient resources and funding. They are the last level of resolution for disputes
regarding the quality of corporate data.

The middle tier consists of a centralized corporate entity; it may be a single person – a “data czar” – or a data
management group. This entity oversees the data quality needs of more than just one department or functional
unit. It is responsible for establishing, promoting and deploying the policies, procedures, standards and metrics
used across the organization. Corporate roles, responsibilities and accountabilities are also outlined. Standards are
important in assuring data quality through consistency in naming, context, definitions and how the data is used.
This entity is also responsible for assuring that audit procedures are in place for monitoring, reporting and adhering
to the standards and procedures established, and for escalating any issues to the senior management group for
resolution. The senior management group actively supports the work of this entity by establishing consequences
for not following the standards and procedures. If there are no consequences, the experience of many is that data
quality efforts are difficult to implement and maintain. This entity works with both business unit and corporate IT
management to establish methods for monitoring and communicating on the achieved levels of quality.

Interestingly, while most interviewees conceded that the task of assuring data quality across the organization is a
long-term initiative, the mid-tier group establishes the metrics for communicating improvements in enterprisewide
data quality as they are achieved. Unlike other strategic initiatives, data quality results can be achieved
incrementally, periodically, and continually over time. One individual interviewed established a three-level program
for all reports using data from a project where enterprise-level data quality standards, methodology and processes
had been applied. Level 1 indicates the data has been profiled and results are available. Level 2 validates that
the standards and procedures have been applied to the data. Level 3 certifies the quality of the data based on
appropriate metrics. All information requests and reports utilizing the data, regardless of the department or function
of the downstream user, receive verification that the data is certified.

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The bottom tier represents the role of data steward: individuals responsible for identifying and resolving
operational data quality issues in order to assure operational efficiency. These individuals are normally
decentralized and aligned to a line of business or a functional unit. They are also tied to the second tier
of governance to assure consistency with and adherence to organizational standards, methodologies
and practices.

The interviewees were evenly mixed between whether individuals in the middle and bottom tiers were a part of
the corporate IT group or a business unit. Regardless, nearly all interviewees talked about the best performers
being “blended beings,” or individuals with both business and technical experience or expertise. Examples were
provided of underwriting and claims personnel who then transferred to corporate IT and later into data initiatives;
IT developers who were hired by the business units and then assigned to reporting and analysis functions; and
individuals who at one time or another worked in both business and IT functional units and evolved to a data
management role. Having worked in both roles gave them the ability to better facilitate the interface between the
business units and IT. It was likened by one interviewee to an “orchestrated dance” to assure both business and
IT had equal involvement and input into establishing a high level of quality in the data defined, captured, created
or maintained. This facilitation also assures that anybody who produces original data applies the methodology
and adheres to the corporate metrics measuring the quality of data.

Best practices dictate the corporate governance structure interface with an internal audit group that makes
sure standards are applied. The internal audit groups provide periodic random analysis to make sure data has
met standards.

Assuring Data Quality Initiative Success: Balancing the Three-Legged Stool

“When I see an organization fail in its attempt to drive a quality of data program rather than resolve quality of
data issues, it’s normally a problem of balance, ” according to one of the more experienced interviewees. When
asked to define balance he said, “Like all good projects, a quality of data initiative needs to rely on the people,
the process and the technology for success. When these are out of balance – when the three legs of the stool
are of different lengths – the initiative more often than not breaks down.” This observation was echoed to varying
degrees by a number of people interviewed.

The primary issue regarding the people component of the equation was whether they were dedicated to the
ongoing pursuit of data quality. Numerous interviewees talked about a perception of fits and starts as people
were assigned to solve data quality issues and were later reassigned. The subject-matter experts within the
organization felt that management wasn’t serious about resolving issues. One organization has identified and
dedicated three internal resources with access to 13 external (outsourced) resources. In addition to funding
staff, the organization also needs to provide them with a budget sufficient to actually fix the identified data quality
issues. Some interviewees indicated the difficulty of getting business unit attention and resources to actually
apply fixes. “Having a discretionary budget within the data quality group allowed us to fix data issues when most
appropriate,” one interviewee said.

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One of the most important components of establishing the policies and procedures is building and reinforcing
relationships. Managing the organizational pitfalls with the business groups requires personnel with the passion,
political acumen and stamina to succeed. Managing the conflicting interests of a diverse set of business units
requires the ability to negotiate solutions and manage expectations. Doing so without being perceived as
bureaucratic, constraining or inhibiting is an art. Interestingly, a number of interviewees mentioned that corporate
IT is not always a supporter. One business-side interviewee said it best: “IT has been one of the groups we’ve
struggled with to get this data quality group up and running. They realize we’re the owners of the data, but
they don’t always act like we’re the owners of the data. When there’s a conflict, they agree that the business
side needs to make the decision. But when we try to influence how they use data during application or system
development, they’re agreeable until you look over their work and tell them you want them to follow this standard
or practice.”

According to the organizations researched, establishing processes for assuring data quality often takes longer
than anticipated. Because the desired outcome is a controlled process for assuring data quality, setting up
new procedures, new standards and learning any anticipated new software tool takes a long time, especially
because of the level of detail and precision involved. Senior management commitment and buy-in is required to
provide support when setting up the new procedures. For the processes and procedures to work, visibility and
transparency are critical to success. This goes beyond the transparency regarding the current state of the data;
for example, explaining that a data element is blank 90 percent of the time and providing the reason for those
instances. Resolving issues and clarifying fixes becomes difficult without processes for:

• Establishing the lineage of the data.

• Identifying source systems and data transactions.

• Recording transformations that were applied and the reports using the data.

• Enabling the traceability of the data.

• Identifying downstream applications and reports that make use of the data.

However, processes and procedures cannot disrupt the ease of access and availability of data.

Quality data initiatives that inhibit the generation of reports and the review of data will be perceived as
bureaucratic and disruptive – both considered death knells to ongoing success. One interviewee summarized it
best: “We knew we were making progress when the project team came to us and said, ‘We know we have to go
through you guys to move forward quickly. Can you help out?’ It made it all worth it.”

The procedures must facilitate an interface between both the business and the development and architecture
groups. Previously, corporate IT took responsibility for data because it could not obtain usable requirements.
Now, the policies and procedures established provide consistency in data element naming and standards of use.
In order for many of the organizations interviewed to move forward with a project, there has to be a data review.
As one interviewee said, “We do the work to provide the abbreviations and acronyms document for all data that
has corporate priority. We then go to the architecture and development groups and say, ‘These are the ones we
want you to use.’”

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Data quality tools are the third leg of the stool. Historically, organizations worked through data quality issues
manually. Table 5 shows the responses to the question in the research questionnaire, “For the following data
quality capabilities, indicate whether the capability is manual, semi-automated (a combination of automated
and manual) or fully automated.” While this provides some insight, it is unclear from the responses whether
spreadsheets, one of the most ubiquitous data quality tools, is considered manual (because the data is often
manually entered) or semi-automated (where the spreadsheet is populated automatically but manipulated
manually.) Regardless, the consensus is that good tools are available for extracting, aggregating and distributing
high-quality data.

Table 5: Identification of whether data quality capabilities are manual, semi-automated or automated.

The perception among the interviewees is that people and process need to be in place before automated data
quality tools are integrated; however, people and process without the tools causes dissatisfaction among the
data quality group. Which tools make the most sense appears to vary by organization, but visits with data quality
professionals revealed the organization quickly moved beyond spreadsheets. As one interviewee succinctly
put it, “A two-dimensional approach to managing data doesn’t work for me.”

We discussed whether the organization was using a metadata tool, or whether a metadata repository was
used. The more advanced firms were generally immature but moving quickly toward establishing an
organization-wide metadata repository. Others were providing a data dictionary, a data catalog or a data
reference manual. Regardless of the format, a metadata repository is increasing in importance, because it
sits in the intersection of governance, system development and information delivery.

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The Future: A Look Ahead for the Industry

Each interviewee was asked to provide insight into the future of data quality in the insurance industry.

Some answered the question technically. Enhanced data quality tools, policies and procedures will be
followed. Data quality will need to be assured in real time to meet the needs of browser-based applications and
service-oriented architectures. Metadata management and metadata repositories will become common, and
augmentation of internal data with third-party data will continue to expand.

But it was the business discussion that was most interesting. An interviewee said, “One thing changing the
marketplace is [that] the old managers are retiring, and younger managers with a new set of paradigms
are taking over. They’ll be characterized by ‘I know what I’m doing by definition, not by assumption.’” This
was echoed in a different way by others who pointed out that data quality is closely linked to knowledge
management. There is a growing need to set up information management systems so that when people retire or
leave, information [data] is captured in one central spot that both functional units and the enterprise can use.

There was also discussion of the changing nature of the industry that brings new challenges to the traditional
data structures in the industry. An interviewee pointed out the limitation of their core processing system and data
of record for handling some risks. “We insure animals. You will find a horse’s name in the Social Security number
field in our core processing system. We have had to be very adept at workaround.” The current approaches will
need to change as the concept of a product, a risk and an insured all evolve in a more dynamic market.

Another interviewee pointed out the expected expansion in data-based decision making. The quality of the
information and the use of data to make decisions do have an equalizing effect on competitive advantage in
the marketplace. While large companies have the advantage of more data from more accounts, mid-sized and
smaller companies have the ability to ensure the quality of their data and use the data to make decisions and
gain competitive advantage just as the larger organizations do. The opportunity to leverage information may
become the only way to survive and to succeed.

Conclusion

During the course of the research, we visited with a number of people who have had extensive experience and
expertise regarding enhancing the quality of data available to their organizations. No one we visited with was
satisfied. Comments such as, “We’re neophytes right now, but we’re getting better,” “I’m worried we’re not going
fast enough,” and “We’ve made progress, but we’re far from where we need to be” were common. The broader
market appears to agree. When surveyed regarding their perception of their organization’s approach to data
quality, more than 55 percent of respondents to the research questionnaire rated themselves in the bottom two
out of five levels identified below (see Table 6).

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Percentage of “Yes” Response

5. Senior management concerned and has authorized

5 funding of tools and systems to proactively monitor,
identify, analyze and resolve issues.
4. Senior management aware and has endorsed
4 a business-led, organization-wide initiative to
monitor data processes and procedures.
3. Senior management is aware of data quality issues
3 and has endorsed IT resolving same in the enterprise
data warehouse and any analytic data marts

2. Senior managers aware, but issues handled

2 reactively as they arise.

1. Many people not aware of data quality issues.

1 Data quality handled ad hoc by IT.

Table 6: Perception of an organization’s approach to data quality

Obviously significant opportunity exists to improve the quality of data available in most organizations. Corporate
IT continues to play a pivotal and critical role in attempting to assure the organization can rely on quality
data. But IT alone is not enough. The level of leadership provided by senior management, the amount of
focus provided by business subject matter experts, the quality of the processes and procedures applied and
the level of automation funded will all affect the amount of organizational angst endured in pursuit of quality
information. Understanding and planning for the needs of the “downstream” user will enhance trust in the data
captured, transformed, delivered and analyzed. And trust in what the data means will enhance an organization’s
intelligence about itself, its customers, its competitors and the markets in which it operates.

What recommendations emerged from the research, and how does an organization get started? While this, of
course, is unique to each firm, reviewing the results generated three high-level recommendations:

• Pick the appropriate approach. Focus on solving data quality issues or on establishing a data quality
program. This decision drives the following two recommendations.

• In balancing the three-legged stool; first, find the right people. Identifying the blended beings can be difficult.
Once in place, let them set up the policies and procedures appropriate to the chosen approach. Finally, allow
them to determine the appropriate level of technology needed and then buy it.

• Pick the right governance structure. If the approach is to fix data problems, a two-tiered governance
structure (the top and bottom tiers) may work. If setting up an enterprise-level data quality program, the
three-tier approach is recommended. Regardless of the approach, the governance structure needs to
empower, equip and support the people implementing the program. If it is too bureaucratic, expect significant
organizational resistance.

The pursuit of data quality is not a project. As one interviewee said, “We finally realized that data quality is not a
result, it’s a pathway.” Insight and intelligence form the basis for success and survival as the insurance market
continues to change. What is critical is that the corporation evolves beyond just fixing data problems to actually
establishing, supporting and maintaining a data quality program.

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About SAS

SAS is the leader in business analytics software and services, and the largest independent vendor in the
business intelligence market. Through innovative solutions delivered within an integrated framework, SAS helps
customers at more than 45,000 sites improve performance and deliver value by making better decisions faster.
Since 1976 SAS has been giving customers around the world THE POWER TO KNOW®.

About The Gorman Group Consultancy

With 30 years of industry experience, Mark B. Gorman is committed to helping insurers leverage emerging data
and technology solutions that drive profitability, revenue growth, operational efficiency and customer satisfaction.

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