Reforms powering up Consumer Data Right raise red flags – Regulatory & Government – Insurance News

The Insurance Council of Australia (ICA) has warned that expanding a consumer data right (CDR) to the sector could have dire consequences if key issues are not addressed, as a Senate committee considers a parliamentary bill to strengthen the information sharing regime.

The ICA submission says that insurance poses a set of unique issues around information sharing, the implications of law reform can impose significant costs on brokers, and extensive consultations are needed before CDR is introduced into insurance.

“It will also be important for the government to consider the initial experience of applying CDR to banking and allow sufficient time for the full implications for CDR to emerge before expanding CDR to include insurance,” the ICA says in the submission to the Senate Economic Legislation Committee .

The committee is reviewing a bill to strengthen the existing CDR framework, which operates in the banking field, by introducing “start-up” reforms to facilitate processes such as making payments, opening and closing accounts, switching service providers and updating personal details.

The government plans to deploy the CDR in other areas including financial services and insurance, and had previously indicated that it would conduct separate assessments for various sectors.

The ICA report says data collection differs in general insurance, products are often more diverse, complex and tailored, data may focus on the asset rather than the individual, and in workers’ compensation or a mandatory third party, insurers are custodians of information on behalf of governments.

“Our view is that it would not be appropriate for insurers to be required to provide such data directly to consumers or other parties because they are bound by the terms of their dealings with the government,” the submission says.

She says sharing pricing and risk management data can stifle investment in product development and innovation, while sometimes collecting sensitive personal data, such as information about medical issues or vulnerabilities, that should be left out.

“We also note that this sensitive personal data, if improperly shared or removed from context, may inadvertently ‘red flag’ consumers,” the report reads.

The ICA doesn’t see a compelling case for extending CDR to professional compensation and other commercial insurance lines, as brokers offer structured comparisons that enable business clients to easily switch policies.

He also warns that CDR implementation and reforms in the draft law are expected to require brokers to become certified business initiators, which could entail significant cost.

“This can be particularly acute for brokers who have become certified data holders and/or certified business starters, since they are often small businesses,” she says.

“The cost of accreditation may be beyond the capacity of some of these companies and this may result in some brokers leaving the insurance industry reducing competition and access to risk advice, particularly in regional areas.

“The committee may wish to consider how to reduce the cost of accreditation for intermediaries such as brokers.”

The bill’s interpretive note states that the reforms allow consumers to direct authorized persons to send instructions to initiate actions on their behalf, and expand CDR from a data-sharing scheme to one that allows consumers to act on the information they receive.

The committee is due to submit its report by March 23.


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