Taylor Fry

 

Analytics

Government Analytics

Government analytics for better investment decisions

Can governments use intelligence from actuarial valuation and monitoring to make better investments in supporting their welfare clients? Taylor Fry and the NZ Ministry for Social Development (NZ MSD) have proven they can, in a world-first actuarial valuation project (see the case study below).

Today’s governments recognise that service and program planning needs to be based on a careful and thorough assessment of the individuals who receive those services. However, the long term nature of citizens relationship with Government and the associated uncertainty of their needs throughout life means that ‘person-centred planning’ has proven difficult to achieve, and proper cost-benefit analysis of spending decisions problematic.

Now a project undertaken by Taylor Fry and the NZ MSD has harnessed the power of predictive modelling and segmentation analysis to reveal the lifetime costs that attach to individuals moving through the New Zealand Welfare system. By reviewing trends, understanding where costs are highest and recognising the triggers for long-term cost, governments can intervene with policies and programs that target resources in the most effective manner to improve employment outcomes for individuals and therefore reduce government expenditure.

Paula Bennett, the New Zealand Minister for Social Development, sees the great potential for analytics to improve government service delivery:

In business and the corporate sector, data collection has long been used to analyse customer habits, and best meet the needs of clients. So why can’t Government do the same?

Case study: a world-first social welfare valuation

The NZ MSD needed help to understand the drivers of cost in their social welfare system. By modelling the lifetime costs of people on benefits, Taylor Fry’s actuaries revealed key flaws in the targeting of MSD expenditure: significantly more than half of all expenditure on programs and services was being spent on clients contributing only 13% of the total welfare cost.

How did we help?

Taylor Fry began providing advice to the NZ Ministry of Social Development and The Treasury New Zealand in June 2011. In November 2011, the Government announced significant reforms to New Zealand’s Social Welfare system, to take place over three years.

The new strategy, while being focused on returning people to work as quickly as possible, emphasises an ‘Investment Approach’, focusing resources where returns are likely to be greatest. Providing early intervention and support to people at the time of their entry into the welfare system is viewed as key to helping prevent long-term benefit dependency.

With insights derived from Taylor Fry’s lifetime individual costs modelling, the MSD are able to target programs to help at-risk people back into the workforce. A key premise of this work is that an understanding of the likely lifetime cost of benefits for an individual can be used to decide how much to invest in that individual to reduce the long term cost and therefore improve outcomes for individuals and save money for society.

By late June 2013, actuarial valuation showed the total lifetime cost of the social welfare system was estimated to have reduced by $4.4B (about 5%) due to key policy and operational reforms. Thanks to Taylor Fry’s help, The NZ MSD now has a powerful tool to estimate the future financial impact of social policy change — and the insight to target resources in an effective manner.

What did NZ MSD say?

In a speech given to a SAS user conference in February 2014 by Minister Bennett (reported by ZDNet), commented on the success of the NZ ‘Investment Approach’ in delivering both better help to vulnerable sectors of the community and better insight on which to base fiscal management.

With an approach grounded in contemporary techniques for evidence collection, Minister Bennett said she believed that governments could ‘get into [peoples’] lives and make a difference.’

CONTACT US TODAY

Hugh Miller

Hugh.Miller@taylorfry.com.au

(02) 9249 2926

Alan Greenfield

Alan.Greenfield@taylorfry.com.au

(02) 9249 2903