An Introduction to Smart Disclosure Policy
Smart Disclosure Is a New Approach to an Old Problem: The Difficulty of Being an Informed Consumer
Today’s consumers face complex choices, whether they are searching for colleges, health insurance, credit cards, airline flights, or energy providers. It takes time and energy for consumers to seek out the best deal. Too often, the effort to sift through all the relevant information is so great that consumers choose in the dark—and then pay the price. They may overpay, miss out on a better product, or find themselves surprised by hidden fees.
High search costs do not just hurt people’s pocketbooks. Poor choices reduce overall market efficiency and economic growth. Properly functioning consumer markets depend on consumers’ ability to make informed choices. Consumer choices also have consequences for issues of vital national importance. Consumers’ decisions about higher education, energy consumption, and mortgages, for example, can affect the entire nation’s competitiveness, security, and fiscal health.
Smart Disclosure Works by Enabling New Consumer Services and Interactive Tools
Technology has made possible a new category of tools that help consumers shop smarter, such as search engines, comparison shopping websites, and mobile shopping applications. These tools—sometimes referred to as “choice engines”—have become a part of daily life for the American consumer. For example, a consumer can quickly find airline flights on one of the many travel search websites. The mobile phone is allowing consumers to access a wide range of shopping tools even while they browse in stores. Unfortunately, innovation in this category of tools is limited by an important bottleneck: access to data. Entrepreneurs and businesses serving consumers need data to thrive. Government and private sector leaders can help address this bottleneck by promoting access to the data needed to fuel new consumer tools. Smart disclosure will not just benefit consumers—it will also spur innovation, economic growth, and job creation in this emerging industry for consumer tools.
Both Government and Private Companies Can Promote Access to Smart Disclosure Data on Products and Services
Agencies. Agencies already collect large amounts of information relevant to consumers. Smart disclosure involves giving consumers access to this data so that it can be put to work. The federal government has led numerous efforts in this area. For example, agencies publish data on colleges, product recalls, hospital and physician quality, broadband services, airline on-time performance, and energy efficiency of appliances.
Companies. Companies can also release Smart disclosure data in ways that empower consumers to make better informed decisions. For example, companies can release information on the products they sell in machine-readable formats so customers can find them more easily. Government can play a role in promoting Smart disclosure by companies, such as by encouraging firms to adopt Smart Disclosure or by helping to establish machine-readable data standards for disclosures.
Personal Data Can Empower Consumers to Make Better Choices
One important focus for Smart disclosure is a person’s own data. Access to one’s own information in useable data formats can make consumer choices dramatically easier. Patients can use their medical claims data to choose new health coverage. Homeowners can use their energy usage data to find ways to save on electricity. Consumers increasingly have access to new kinds of tools that analyze their data to provide personalized recommendations. For example, consumers use personal financial management tools to get personalized advice on bank accounts and credit cards. Both government agencies and companies hold personal data of great potential value to consumers. Giving consumers access to their own data—with comprehensive privacy and security safeguards—can empower consumers to make better choices.
Federal agencies have pioneered efforts to give individuals access to their own data. For example, the Department of Veterans Affairs, Centers for Medicare and Medicaid Services, and the Department of Defense allow veterans, Medicare beneficiaries, and members of the military to download their personal health data through a click of a Blue Button.
The federal government has worked with private sector partners to promote efforts to provide the consumer access to his or her own data. For example, utilities across the country have committed to allowing customers to download their energy usage through the Green Button, in response to a White House call to action. Many banks now allow customers to download their transaction history in spreadsheets, and private companies have made commitments to provide students with downloadable access to their own education data.
Federal Steps to Promote Smart Disclosure
The United States committed to promoting the use of Smart Disclosure in the first U.S. Open Government National Action Plan. In September 2011, the White House Office of Management and Budget released guidance to agencies on informing consumers through Smart Disclosure. A dedicated Task Force on Smart Disclosure was also established under the National Science and Technology Council. The Task Force issued its final report in May 2013, which provides an overview of the ways in which smart disclosure can empower consumers and increase market transparency; describes smart disclosure activities being undertaken by Federal agencies and partners; provides context about government policies that guide and support those activities; and presents examples of concrete steps already being taken by Federal agencies to advance smart disclosure in domains such as health, education, energy, finance, and public safety. There are now a number of initiatives underway on Smart Disclosure in different consumer sectors, including initiatives to empower consumers by giving them access to their own personal data.