Back to Basics

Back to Basics

Technology is a wonderful thing for the insurance business.

However, we tend to use technology to make our products and services more complicated.  Increasing complication creates more opportunity for basic errors.  Unfortunately, I’ve been seeing more and more basic errors with my clients recently.

One of the challenges has been tracking policies in force.  If we start with the policies in force at the beginning of a period, add the policies issued during that period, and subtract the policies cancelled during the period, we should get the policies in force at the end of the period.  When that’s not true then you start asking a few questions.  You find out that some old policies had not been charged the fees that they should have.  When the back fees were charged the policies had no remaining value and they were cancelled.  However, they did not show up on the normal list of cancelled policies.  There was a special list of cancelled policies for this program.  This is the kind of thing that can ruin an actuary’s whole day.

Medical claim payments present another opportunity for advancing technology to create basic errors.  I guess it is no longer sufficiently efficient to write a check to pay a claim.  Various sorts of electronic payment schemes are much better.  However, these new schemes also increase the potential for duplicate payments.  Duplicate payments are definitely not good.  Fortunately, my client’s system can detect the duplicate payments and shut them down.  However, in the process it shuts down all payments.  Thus, we see no claim payments for several days.  That’s not because we have no claims to pay.  It’s because the system is being fixed.

These are just two examples of many situations which require reasonableness checks today.  Actuaries are frequently expected to know what is reasonable and what is not.  Thus, we must constantly look for subtle problems in the data we use.  In other words:  “To err is human, but to really screw things up you need a computer”.

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