The ‘Consumer Data Right’ (CDR) is an accreditation initiative designed by the Australian Government to promote open data between the consumers and the banking and energy sectors. It was due to be expanded into insurance, superannuation and telecommunications, but a recent announcement has now put that on hold until at least the end of 2024. At that point, the government will reassess that ‘put on hold’ decision, so we’ve talking about two years from now until anything around open data moves forward in insurance.
So what’s behind this decision? Their announcement is pretty bland so we’ll have to do some reading between the lines. It talks about “...needing to allow the CDR to mature...”. It goes on...
“This will allow time to focus on ensuring that the CDR in banking is working as effectively as possible, extending into the non-bank lending sector and continuing with the energy rollout as planned.”
We can take from this then that the existing CDR rollout in banking and energy has been working, but not without some teething problems. This delay then in expanding the CDR into insurance feels less like ‘move fast and break things’, and more like ‘move slower and make sure it works as promised’.
In an article in May last year, I looked at a paper on open insurance written by two academics and an actuary working for one of the big Australian insurers (see below for full reference). It was a very interesting paper that analysed open insurance in the context of how the general insurance market works. Their key finding was that the principles of open data and the principles of insurance are incompatable.
On top of that, they found that open insurance would be bad news for consumers who are vulnerable or less able to engage with the digital economy. And this was an aspect referenced in a statutory review of the CDR in September 2022.
I suspect that something similar may have been noticed in existing CDR work in banking and energy. This would then have stuck a spanner in the wheel for the expansion into insurance. And that pause on insurance could also have been seen as an opportunity to look more closely at just how suited open data is for insurance.
As I said in my May 2022 article, what are the choices then? Take away some of the principles underpinning open data? That seems unlikely at best. Take away some of the principles underpinning insurance? That seems even more unlikely.
Is a Middle Ground Possible?
The authors of that paper on open insurance proposed a middle ground, calling for industry, regulators and consumer groups to sit down and talk through these issues. It makes sense for the interested parties to come together and discuss the apparent incompatibilities, but it will be a tough one to get right. People find negotiating over principles difficult; they’re principles after all. The deciding factor could well be around how strong a voice is given to the consumers groups, actuaries and academics who are raising these questions.
People are fond of talking about how open data will make the insurance market more open. There’s a risk that it could do the exact opposite. The Australian CDR review, when it comes, could well prove a testing ground for transparency and accountability in the sector’s use of data and the principles / culture that drives this. Insurers around the world should pay it close attention.
"Insurance Underwriting in an Open Data Era - Opportunities, Challenges and Uncertainties", by Zofia Bednarz, Chris Dolman and Kimberlee Weatherall. Presented to the Actuaries Institute 2022 All-Actuaries Summit 2-4 May 2022