The Insurance and Actuarial Advisory Services (IAAS) practice ofErnst & Young released its quarterly outlook addressing keytrends and issues facing insurers, including the need forproperty/casualty companies to improve data quality to enhancecatastrophe modeling.

The 2004 and 2005 hurricane seasons revealed weaknesses incommonly used catastrophe risk-modeling techniques. Among the majorrevelations, it was determined the quality of exposure data,especially for commercial lines of business, was insufficient.Ernst & Young suggests the following steps for improving dataquality:

Define a data governance process addressing who owns data anddata quality.

Communicate the impacts of data quality on risk measurement,management, and reinsurance pricing.

Research which exposure data elements are important and how theycan be obtained.

Evaluate the effectiveness and potential improvement of usingthird-party tools and databases.

Design a data collection process and warehouse architecture thatpositions companies for success now and in the future.

Initiate a review protocol to assess periodically the processesand controls surrounding data collection.

"Smart companies will recognize the current lull offers anopportunity to implement necessary changes addressing the way theycollect, store, and use data," says Tom Stone, manager, Ernst &Young IAAS. "Those who invest today will realize significantbenefits in the future, as it is only a matter of time before thewinds blow again, and the industry has to answer the recurrentquestion of how its risk management practices performed against thelatest hurricane."