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Sharing is caring - consumer data rights for the advice sector

The Ministry of Business Innovation and Employment is consulting on whether New Zealand should offer consumers a "data right".

Friday, April 30th 2021, 8:41AM

by Russell Hutchinson

The key questions in the consultation paper are; do we need a data right? If so, how would that work? Would it be rolled out sector by sector? What sorts of services would apply? How would we want to shape this?

To quote from the ministry consultation cover note, “It could give individuals and businesses access to a wider range of products and services, reduce search and switch costs, facilitate competition, encourage innovation, increase productivity and help build the digital economy.

"It could also strengthen existing privacy protections by giving consumers greater choice and control of their data.”

What is the "consumer data right"?

The term ‘consumer data right’ or CDR describes a mechanism for consumers to securely share data that is held about them with trusted third parties, on the consent of a consumer.

The third-party could be another product or service provider or a separate entity such as a fintech.

The data would be shared in a machine-readable format so that it can be utilised by the third party for the consumer’s benefit.

Insurers are conservative in nature, the industry’s first response has been to worry about cost, compliance, and competitor risks. Advisers should be concerned too and maybe some should be excited. There are, clearly, questions.

For example, would this apply to health information? What would the financial implications be of having to deal with data requests? What about how information is organised? Who can ask? How often? Doesn’t this just incentivise switching? Would this naturally favour big tech?

The answers could be relatively benign in a limited and well-designed regime but philosophical differences create doubt.

For example, MBIE tends to see higher rates of competition as a hallmark of an effective marketplace – but increases in switching create risk in the insurance world.

Industry responses have covered the risks admirably well, but they may not have done quite the same for the opportunities.

For advisers, access to consumer data, especially that in bank accounts, but perhaps also in the holders of investment-related information or other advisers, may enable much quicker production of better financial plans. Basing recommendations on data, rather than consumer’s recollections of those data, is more likely to be accurate, complete, and reliable.

The adviser has such an effect on client perception of service that enabling consumers to make a switch between advisers more easily may be a more powerful way to inject more competition into the sector rather than thinking in terms of switching insurance products.

For details visit - https://www.mbie.govt.nz/have-your-say/options-for-establishing-a-consumer-data-right-in-new-zealand/

Tags: data right MBIE Russell Hutchinson

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