Digital Vision: Digital Insurance

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5 key lessons for insurers from the evolution of data sharing in financial services

At a Glance

Data sharing is now commonplace in the financial services sector. Data shared with customer consent can power a range of new experiences and has the ability to transform the way traditional services are delivered. With Open Insurance still in its infancy, Siobhan Costello, General Counsel at Fidel API, highlights some of the lessons the insurance sector can learn from the opening up of data in the financial services sector.

5 Minute Read

Siobhan Costello

General Counsel,

Fidel API

Financial services is increasingly characterized by collaboration between established players and Fintech start-ups delivering new ways of providing traditional services. However, turn the clock back five years and it is true to say that the sector was resistant to change. Enter the regulators to try to solve the problem with Open Banking regulation. While this certainly got the industry moving, many would agree that it could have been less painful if the sector had embraced change and led the charge from the outset.

Insurance is in the early stage of opening up. So there is still time to learn the lessons from the Fintech boom and focus on meeting the changing needs of consumers.

The current state of play in ‘Open Insurance’

Open Insurance and Open Banking refer to the open exchange of data between institutions and other service providers like data firms, tech companies and retailers.

The drivers of the ‘open’ data movement in financial services and insurance are very similar. Consumer demand for faster, more convenient and integrated services has put pressure on traditional institutions to democratise data. The opportunities of data sharing are many:

Delivering traditional services in innovative ways

Serving the as yet unmet needs of consumers

Fixing and transforming broken processes

Solving global social and economic problems

Learning the lessons from open banking

One The first, and probably most important, lesson is that reticence towards change from the bigger banks created a situation in which the regulatory authorities felt compelled to step in. Without that resistance, there may have been no need for PSD2 and PSRs. Looking at other regions, such as North America, open banking is led by the industry not the regulator. And there are plenty who would argue that the market is best placed to decide how to adapt to the needs of its customers.

Two The second lesson is that unlocking the power of data can create a myriad of new customer experiences. Although Open Insurance is in the experimentation phase, the potential for a whole raft of new products, services and even business models in insurance should provide a compelling business case. That may be offering hourly car insurance premiums for those borrowing their parents’ car. Or instant compensation on travel insurance claims. Or preparing a suite of insurance products for key moments in a person’s life, such as when they are buying their first house or having a baby.

Three The third lesson is to capitalise on the opportunity. Institutions that railed against Open Banking put themselves on the back foot once legislation forced their hand. Those that failed to prepare for the opportunities of data sharing are the ones most at risk of disruption and losing customers. FinTechs and big tech companies that knew the value of data as currency in our digital world have taken bite-sized chunks out of established markets. And the traditional players that looked to partner with tech entrepreneurs early are now emerging as winners. With Open Insurance there is the opportunity for large insurers to do things differently. Instead of fighting against change, those that embrace it will emerge victorious.

Four The fourth lesson relates to collaboration. The magic happens when traditional, experienced players partner with more agile tech disruptors looking to do things differently. Everyone stands to benefit from this model. Traditional players stay ahead of changing consumer demands and technology and the emerging tech companies are able to scale. There is every reason to believe that the combination of traditional insurance giants and new tech companies would create new sources of value for consumers together. Instead of ‘locking in’ customers, insurers could partner with others to create better experiences, convenient services and cheaper products. In turn, these can lead to increased profits, better brand loyalty and greater market share.

Five The final lesson is simply not to underestimate the sheer pace of change. The habits of consumers are ever-changing. Advances in technology and the way services are consumed in other sectors will all influence what customers demand and expect from their traditional service providers.

Digital Insurance – Further Insights

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Carol Houle, Global Head of Financial Services and Insurance, Atos