Open insurance as an opportunity

The idea of an open world, in which every individual has access to all data, is becoming increasingly popular. But why should insurance companies, for example, share data? Do not lose then laboriously created competitive advantages? Not necessarily: By thinking and acting in (digital) ecosystems, they use data in the interests of customers and clients. They optimize their processes, improve internal data quality, reduce transaction efforts and, above all, develop new business models.

Open Insurance as part of Open Finance

The added value resulting from (the sharing of) data is no longer foreign to the financial services sector. Open Banking has already led the way; the PSD 2 directive encourages the development of innovative and more user-friendly payment options, while providing increased transaction security and enhanced consumer protection.

Open Insurance is the next step towards Open Finance, a connected digital financial ecosystem. Open Insurance describes the open and standardized exchange of insurance-related personal and non-personal data using (open) interfaces (APIs) as well as defined process standards. The focus here is on users who, as "data sovereigns," decide for themselves whether and how to make their data available. Key factors, then, are openness, standardization and customer centricity.

Status quo

However, in the insurance world, there is still no concrete regulation on opening data to third parties. Nevertheless, both national and international legislation is increasingly pushing for the opening of data interfaces across industries, thus also creating a uniform legal framework. In addition, this is promoted by various initiatives, exemplary here are the BiPRO e. V. or the FRIDA e. V. to mention.

Change driver

Open Insurance is certainly not a temporary phenomenon, but will continue to spread in the coming years, comparable to banking, and lead to new products, services and business models. Overriding drivers and influencers are, in particular, the market and related customer expectations as seen not least in the success of PSD 2. The legal and regulatory pressure from Europe should also be mentioned here: A Data Finance Strategy of the EU Commission is derived from the European Strategy for Data. EIOPA picked up on this in 2021 with a discussion paper on Open Insurance, which clearly advocates data-sharing mechanisms in the spirit of Open Insurance.

The General Data Protection Regulation also forces access to data. While meeting this standard can require a great deal of effort to maintain compact information security and privacy management systems, it tends to be a booster for data-driven innovation and open insurance rather than a hindrance.

Last but not least, promising, innovative use cases are also driving the spread of Open Insurance, especially in the areas of claims management, pricing and underwriting, (post) sales and distribution, according to the EIOPA Discussion Paper. More concrete use cases could develop, for example, in the area of overarching pension cockpits or parametric insurances. In the U.S., too, there are initial examples of use, u. a. in relation to natural catastrophes, old-age provision, the healthcare system and car insurance. These use cases need to be developed further.

Conclusion

Currently, Open Insurance is still primarily a vision that requires promotion, concretization and (further) development. The idea behind this is promising: open up your own value chains for digitization and generate added value with new products and services. For customers and clients, but also for your own company.

Fin- and InsurTechs can even more effectively play relevant elements of value creation, position themselves with innovative platforms, and become part of a digital ecosystem. And insurers in particular can position themselves as trustworthy and secure market participants for data analysis and data aggregation. New products, services and business models thanks to aggregation and analysis of financial and insurance data, comprehensive advice for customers thanks to data transparency and completeness – the opportunities are manifold. The task now is to make use of it.