Open insurance: A reality or a pipe dream?

Contacts: Karim Derrick

This blog was first published by Insurance Post.

Karim Derrick, product and innovation director at Kennedys IQ considers how prepared the insurance industry is for introducing the concept of open insurance.

Insurers know all too well the challenges of trying to innovate with data, not least when it comes to ownership and complying with regulation.

It is an issue the sector has been grappling with for quite some time, yet despite the right noises coming from regulators, little change appears on the horizon.

Data management is hidebound by GDPR regulations, and insurers, understandably, remain reluctant to share their data for commercial reasons. As such, the genuine interest and support for the creation of a more open data environment in insurance remains stagnant.

Both the Information Commissioner’s Office and the Solicitors’ Regulation Authority recognise the challenges, but in respect of insurance and legal services neither have provided the clarity that data and innovation practitioners would like to see.

But are we looking at this the wrong way? Most of the conversations around open data rarely talk about the end user. As such, maybe as an industry, we need to turn our approach on its head.

We know that large data sets can be shared and used at speed within privacy law. The NHS demonstrated this during the pandemic when health records were shared between agencies and clinicians to the benefit of the wider public; efficacy entered the public lexicon.

The key to all of this lies in standardisation, and this is where we need industry-wide collaboration on what those standards look like.

For closer to home inspiration though, look no further than open banking. Since 2018, the open banking ecosystem has enabled customers and SMEs to share their current account information securely with third party providers, who use that data to tailor their apps and services to peoples’ specific financial circumstances.

Its introduction forced the biggest banks to release their data in a secure, standardised form, so that it could be shared more easily. In turn, by allowing consumers to securely share that information with regulated companies, they can find the best financial products and services for their needs, as well as enabling an aggregated view of their investment across providers. It’s a win-win.

The key to all of this lies however in standardisation, and this is where we need industry-wide collaboration on what those standards look like.

Standardisation enables innovation. The use of electrical products exploded only when the supply was standardised; now we can buy electrical bulbs and fit them without risk of fire.

The insurance industry is no stranger to industry-wide initiatives working to achieve similar aims, such as the introduction of the IFRS 17, a new accounting standard for insurance contracts.

Outside of the industry, Google has an Open Document Format in the form of an XML-based open source file format for saving and exchanging text, spreadsheets, charts and presentations.

None of these initiatives could have been developed without open collaboration.

From what I can see, there is widespread agreement across the sector of the need to use data better. And while it is interesting to see initiatives like the Open Insurance think tank seeking to help insurtechs develop in this area, the real work needs to be helping insurers make the leap.

A 2020 Accenture report into open banking highlighted the significant benefits for insurers. It states: “Open insurance offers insurers an opportunity to substantially enhance their products and services while also opening many new revenue streams.

“Carriers can capitalise on the huge flows of real-time data that open insurance unleashes to launch a host of new customer offerings.

“The ‘network effect’ that occurs in open insurance provides insurers that are early-movers with a wealth of new business opportunities.”

As an industry, we need to get out of the weeds and into the bigger picture to realise a better data future. A future with better data, more insightful decision-making, an improved customer journey and a seamless claims process awaits. If an app can aggregate my investments, why not my insurance policies?