A major initiative to clean up its data should put the Lloyd's market back on track, reveals Ian Major.

Lloyd’s recently announced a major new plan to speed the payment of claims to clients. Part of the plan was an initiative to deliver “enhanced management information” at managing agent and market level to improve performance and reporting. It included data quality and cleansing initiatives to maximise data accuracy.

So what is the problem with data quality and why has a backlog of inaccurate data built up? There are a number of reasons. First, much of the information may have been originally entered many years ago onto systems which no longer exist. Either through updated technology – or mergers and acquisitions – data has been migrated through two, three or more back office IT systems. At each stage it has become more remote from the original source material and has become inaccurate and incomplete.

The second driver has been simple human fallibility. Data entry is not an exciting task and, while most people are diligent and accurate, there are others who will enter the minimum data that their system will let them get away with.

The upshot has been a huge volume of inaccurate and misleading information. There are examples of settled claims which do not match up on systems with the original reserving, leaving insurers and reinsurers over-reserved. There are also inadvertent false claims from cedants to reinsurers that should have been disallowed.

“Improving data accuracy will speed up settlements and improve the quality of reserving

IAN MAJOR Managing director, consulting, at Axiom.

This occurred simply because details of claims were wrongly allocated in ancient databases. Even something as simple as an inaccurate postcode can make an enormous difference. Imagine reserving a claim in New York City instead of upstate New York just because the zip code was entered incorrectly.

Improving data accuracy will improve management information, speed up settlements and improve the quality of reserving. However, in many cases, this means that millions of data items need to be checked and corrected, so it is fortunate there are now IT systems which can trawl records using intelligent data pattern matching technology to identify errors and omissions. The sooner the market implements Lloyd’s initiative to improve data quality, the better.

Ian Major is managing director, consulting, at Axiom.