The social security institution ensures the availability of sufficient and reliable data necessary to perform actuarial work. The social security institution is responsible for the management of the data pertaining to the social security scheme participants and provisions, and compliance with data privacy legislation and national standards. The actuary provides an opinion on sufficiency and reliability of data, describes any modification made to data and the impacts of imperfect data on the social security scheme and its participants, and makes recommendations for improving the quality of data.
Sufficient and reliable data are an essential element necessary for performing any type of actuarial work. Data requirements depend on the type of work undertaken, the benefit structure of the social security scheme (including benefit design and financing structure), the nature and objective of the actuarial analysis, reporting requirements, and any regulatory or legal requirements concerning the analysis or reporting.
Actuarial work assessing the financial sustainability of a social security scheme requires up-to-date data specific to the assessed scheme as well as general demographic and macroeconomic data necessary to set the demographic and macroeconomic framework for the actuarial work. The data that enables valuations to be performed include current beneficiary and contributor data and information on current and past system rules, as well as any planned or contemplated future changes in these rules (e.g. benefit formula, basic benefit package, eligibility for benefits and contribution basis). Data on past experience (e.g. inflation, salary increases, rate of return on investments, mortality and morbidity rates, retirement rates, in-patient/out-patient visits, frequencies and unit costs) should be taken into account by the actuary in developing appropriate assumptions about the future.
The data available for actuarial work should respect sufficiency and reliability criteria. Sufficiency means that data should enable an actuary:
- To develop appropriate demographic and economic assumptions to project and, where applicable, discount future cash flows of the social security scheme;
- To perform the required actuarial calculations;
- To validate and develop valuation and calculation methodologies;
- To analyse past demographic, financial and investment experience of the social security scheme so as to enable comparison of outcomes with social objectives and reconciliation of emerging experience with actuarial assumptions;
- To perform any other type of actuarial work deemed necessary by an actuary or by the social security institution.
Reliability means that data should be:
- Relevant;
- Complete;
- Up to date;
- Internally consistent;
- A sufficiently long series of the past;
- Consistent with data from other sources.
This guideline should be read in conjunction with ISSA Guidelines on Information and Communication Technology, in particular its Section A.5, Data and Information Management.
- The social security institution, administrators and actuary should have a clear understanding of the data requirements.
- The social security institution should ensure that the social security scheme administrator maintains a sufficient and reliable longitudinal database with respect to social security scheme participants.
- Regular data validation procedures should be performed. These should include appropriate “reasonability” checks to ensure consistency with data provided for previous actuarial analyses and for other social security schemes in the country where relevant.
- The data provided to the actuary should be in a format that is usable.
- When external data are required, the social security institution should facilitate the access to data held by other government agencies by:
- Promoting the legislation enabling such access;
- Entering into agreement with other institutions on the topic of data access.
- For newly established social security schemes and/or other situations where there is a lack of sufficient and reliable data, the social security institution should explore ways to enter into agreements with national and/or international institutions as well as third-party providers in order to obtain information that could address the data needs of the actuary.
- For both new and existing schemes, data may be incomplete or out of date. The actuary should liaise with the social security institution regarding the best approach to take in such a situation. This may include the use of approximations such as the use of average data. The actuary should detail and document the implications of such approaches on the accuracy of the analysis and communicate this analysis to the social security institution.
- The actuary responsible for the analysis should comply with national and/or international actuarial standards of practice and/or other relevant guidance including IAA ISAP 1 and ISAP 2 that describe data requirements, checking and validation procedures, use of incomplete data and disclosure of limitations, as well as other aspects related to the data.
- The social security institution should define responsibilities for data management within the organization including who is responsible for the management of the process and peer review processes. The data management process should ensure security of data (including detailing back-up procedures) and that any legal requirements regarding data privacy are respected.
- Well-thought-through data requirements should be documented and justified. These requirements should take into account specific needs of the programmes that require actuarial work and the actuarial method and models adopted for the valuations. The documentation should:
- Identify data elements;
- Describe the use of data;
- Provide sources of data.
- Social security institutions should have a well-documented and structured procedure on preparing data requests for external and internal data providers.
- Social security institutions should establish a well-documented and structured data validation process which will test internal data consistency as well as consistency with external sources (e.g. audited financial statements).
- The data collection should be undertaken using the seriatim approach. In the case where grouped data is used for the actuarial valuation, it is the responsibility of the actuary to determine the appropriate approach to group the data. The impact on the results of using grouped data as opposed to individual data should be assessed and communicated appropriately to relevant stakeholders.
- Lack of data, for example for a newly established social security scheme, presents a major challenge for social security professionals. In such situations, actuaries may need to rely on data from other sources and programmes. The actuary should coordinate with other agencies and stakeholders to ensure that the most appropriate data is used.