Is customer data too valuable to share or too valuable to hoard? These questions elicit polar opposite answers depending on who you ask.
The Australian government is currently considering policies to encourage greater use of data, including increased sharing of data across the public and private sectors.
Data is the biggest asset any company has; it is a gold mine that is destined to grow even bigger as the Internet of Things sucks up increasing amount of customer information. Insurance brokers are custodians to enormous amounts of data and play a vital role for both the policyholder and the insurer in the purchase of insurance and risk products.
Brokers handle almost 90 per cent of the commercial insurance transacted in Australia, and play a major part in risk advice and insurance distribution, handling over $18 billion in premiums annually and placing around half of Australia’s total insurance business.
Considering what brokers do and the amount of customer information they hold, mandatory data sharing and portability of data could have far-reaching consequences.
The Productivity Commission was tasked a year ago to look into the benefits and costs of the availability and use of public and private sector data following recommendations from the 2014 financial system inquiry and 2015 review of competition policy.
The commission said in its draft report: “The capacity for individuals, as consumers, to copy their data between service providers is an integral part of facilitating competition in markets and reducing barriers to market entry.”
In its 652-page report, the commission painted a future economy where the new “comprehensive right” allows data to flow freely from one “data custodian” to another at the direction of the consumer entitled to the data. The draft viewed data as an important asset in the future digital economy and suggested more data sharing will enhance competition and improve consumer experiences.
Peter Harris, Chair of the Productivity Commission said in a recent speech, “Data holds all… things together. And we are not using it to its potential.”
“We welcome the task of framing how Australia might deal better with its data future because it matters deeply to future productivity, and beyond that at a social welfare level right across the economy,” he said.
The commission has since submitted its final report, the result of a 12-month consultation process that attracted hundreds of submissions from across business, government and the wider community, to the government, which, at press time, has yet to publicly release it.
Data is big business
A combination of competitive anxiety and security concerns means that businesses, especially in financial services, are reluctant to release their wealth of data. But a Wall Street Journal expert says that these fears mean that companies are missing the much larger opportunity that data offers.
Leading Australian companies have expressed reservations about the upcoming recommendations from the Productivity Commission and believe that they might impact their market power by forcing them to make commercially sensitive data portable.
The Insurance Council of Australia (ICA) has stated in its submission that the so-called ‘comprehensive right’ is more difficult to apply in the general insurance context, given the limited transaction or risk-specific data that could be used productively by consumers.
It submitted that, rather than a broad economy-wide application of this right to transfer, an assessment should be made on a case-by-case basis of the ability of consumers to benefit from access to their data.
The insurance industry is in a unique position to understand the vast potential uses of data in the modern economy, states the ICA.
Insurer IAG pointed out that finance firms have invested “considerably” in data collection over the years and are reluctant to release it free of charge.
“IAG opposes legislative or regulatory change that compels organisations to release data in which it has legitimate commercial interests in protecting, except in rare circumstances when release of data in the public interest is imperative.”
ICA added that insurers hold detailed and sophisticated data to underwrite risks faced by consumers and businesses but consider such underwriting data as “a commercial asset for insurers, and it is also the basis on which insurers compete against each other”. “It is essential that any requirement to release data does not compromise the underwriting models used by individual insurers to assess and price risk.”
The big banks too have said they are averse to hand over proprietary information and tech giants, like Uber, are of the opinion that mandatory data sharing could undermine business innovation.
The Australian Computer Society submission to the Productivity Commission called for the development of an accounting standard for data to provide consistent and clear definitions for how data assets are valued and leveraged to generate economic benefits.
Ultimately the final recommendations from the Productivity Commission will be a start to figuring out a definitive answer to the data ownership questions.