FAQ - open insurance.
What is open insurance?
Digital transformation has allowed companies in many business areas to move closer to the consumer. Open banking, for example, led to a multitude of new opportunities; fintechs, new payment solutions, more tailored consumer offers – the list is long.
For the insurance industry, this means a more digital and open relationship between the insurance companies and their customers. The relationship is based on trust, understanding, and an enormous amount of data.
The European Insurance and Occupational Pensions Authority (EIOPA) defines open insurance as accessing and sharing insurance-related personal and non-personal data, usually via Application Programming Interfaces (APIs).
This means that open insurance is, in simple terms, an umbrella term for enabling information sharing within the insurance industry.
Read more about our definition here.
Why is open insurance important?
The insurance industry doesn’t need to change – but an update doesn’t hurt. Open insurance helps understand the needs of everyone involved, and will benefit both the insurance providers through more insights about their customers; and consumers through better insights about their insurance, better insurance products, and more enjoyable insurance experiences.
We dedicate ourselves to creating win-win solutions for the insurance industry — through the power of open insurance.
What’s an API?
An API, Application Programming Interface, is a set of programming codes that allows for data transmission from one software product to another. It establishes a connection between a data provider and an end-user.
It can be compared to a user interface, which is a connection between a computer and a person, but an API connects computers or software applications to each other instead.
What's the purpose of insurance APIs?
APIs (such as the ones used in open finance) will enable insurance companies to open their data sources and collect data from their consumers, competitors, and third parties. These types of digital ecosystems are what we talk about when we talk about open insurance.
How can open insurance help consumers?
Consumers today are used to having a world of information available at the click of a button. Open data, together with GDPR and other data protection standards, will enable them to make informed decisions at every stage of their insurance journey. They’ll know what kind of plan they have, what terms and conditions come with it, and how it compares to other insurance options on the market. In case of a potential future loss, it also creates a better understanding of how the consumer will be reimbursed.
How can insurers benefit from using open insurance?
For insurance companies, open insurance will lead to similar benefits to those that banks have seen from open banking:
- More streamlined products and consumer offers
- Tailored solutions for every customer
- Improved customer relationships
- Increased innovation stemming from insights into what competitors are doing
The sharing of user and industry data provides an opportunity to future-proof new and old business models. In addition, knowing how competitors work and what they’re developing will increase innovation and promote business development.
How can open insurance be regulated?
Clarifications on an open insurance framework are needed. Legal uncertainty can be seen as a regulatory barrier, and it’s often not clear how certain services should be treated. Under an open insurance regulation, insurers would be legally required to develop standardized ways of sharing personal and non-personal insurance information with third parties - creating security for all parties involved.
By looking at the lessons learned from PSD2 and the open banking implementation, it’s evident that the insurance sector needs support and guidance from the national supervisory authorities (NCAs) to build and properly supervise the APIs. Unfortunately, most NCAs today have not been initiating any specific measures related to open insurance. And therefore, it’s clear that the industry needs more regulatory support when APIs become more common in the insurance sector.
Read more about open insurance regulation in a discussion paper from the EIOPA.
What will be required from insurance providers when the legislation is implemented?
Insurance providers will most likely be required to set up an API that can share the required data points outlined in a legislation. Looking into what is discussed at the moment there will probably be a pre-enforcement implementation period if the legislation is passed.
What will be the difference from today?
Insurance providers currently don’t have user data for consumers or TTP. When the legislation is implemented consumers will be able to take bigger ownership of their own data. This will result in easier switching of insurance, efficient management of insurance and more independent consumers.
How can insurance providers secure their benefits from regulatory developments?
Our learnings from PSD2 were that many banks were afraid to be out-competed by new replaced but early adopters could be proactive and meet customers needs for digital services early. Companies who are starting to adapt their business based on consumer needs will be long-term winners.
Where can I find out more about open insurance?
If you want to learn more about open insurance, you can read more about it on our blog.
Didn’t you find the answer to your question? Ask us instead! We’re here to help.