Using Data for Good

Data is not intrinsically good nor bad. We are inundated with news reports of data breaches by the tech giants and the on-sale of our data between large corporations. But data can also be used to help address the significant issues of information asymmetry that fundamentally undermine the efficacy of markets, as first raised by George Akerlof in his seminal 1971 article, The Market for Lemons.

Akerlof argued that the inability of buyers to differentiate between the quality of two similar products would ultimately drive higher quality products from the market. And the recent Financial Services Royal Commission demonstrated just how poor the quality of service has been by banks, brokers and insurers – perhaps best exemplified by knowingly charging customers “fees-for-no services”. The most recent Edelman Trust Barometer reflects this (below), the financial services sector became the least trusted sector, while all other sectors saw some improvement in trust.

In 2017, the Productivity Commission’s Data Availability and Use report called for the publication of government datasets in the public interest. In NSW, the Complaints Register developed by Office of Fair Trading has been at the forefront of disclosing this information for consumers, publishing a list of companies that receive more than 10 complaints per month. In late March this year APRA went a step further, publishing complaint data from the life insurance industry, helping to inform ASIC’s life insurance claims comparison tool. This consumer facing tool enables consumers to compare providers based on regulatory performance data, including claims acceptance rate and number of disputes.

As noted in CPRC’s own report “But are they any good?”, the public disclosure of companies’ performance data allows consumers to pick the peaches from the lemons, and can result in competition to deliver higher quality. CPRC is currently partnering with RMIT’s Behavioural Business Lab in an applied research project, seeking to identify the non-price attributes of energy retailers that consumers value, and test whether consumers change their decisions accordingly. Preliminary evidence demonstrates individuals have a clear willingness-to-pay for various non-price aspects aspect.

Over a century ago, railing against the large anti-competitive trusts in America, future supreme court judge Louis Brandeis quipped:

“Publicity is justly commended as a remedy for social and industrial diseases. Sunlight is the best of disinfectants, electric light the most efficient policeman.”

The age of big data may finally enable consumers to even the playing field, using data to hold large companies accountable to their customers.