States Urged to Unlock Insurance Data for Choice Engines
Choice engines, private-sector tools using machine-readable data, are transforming consumer decisions in e-commerce. However, a 2014 UCLA Law Review article highlights a gap in insurance markets, where states have failed to create policies uncovering crucial data about property, casualty, and life insurance. This lack of transparency hinders consumers' ability to make informed choices.
Choice engines can simplify complex data. For instance, BrightScope's independent ratings help consumers understand retirement plans and financial advisers. Similarly, Safercar.gov provides vehicle safety ratings. Yet, insurance markets lack such tools due to data scarcity.
In Europe, Germany, Switzerland, and Austria have made strides in open data and regulatory frameworks. The EU Data Act, set for 2025, may further impact insurance data sharing. However, states must collaborate to create common open data standards, as seen in San Francisco and New York City's partnership on restaurant inspection data.
The federal government has led smart disclosure efforts, including a presidential task force. Food manufacturers reduced trans fat after trans fat disclosure on nutrition labels. Yet, state regulators have overlooked choice engines, focusing instead on specific disclosures like airline baggage fees or home mortgage terms.
To promote market transparency and consumer incentives, states should release data they collect or facilitate private-sector data release, especially in car insurance products. By doing so, they can encourage the development of choice engines, helping consumers make informed decisions and driving better products in the insurance market.
