Open Insurance, gateway to a new world of service and product innovation?

jun 6, 2022 | Finans, Insikter, News

Annika Karppinen, PLP Product Manager

Payment Services Directive 2 (PSD2) and Open Banking opened a few years ago a whole new world for handling payments. Now at the cash register you can just flash your smartwatch and pay online shopping with just a few clicks. Open Banking brought new players alongside with the banks, focusing on handling payment transactions. The eagerness to jump specifically into this opportunity is easily understandable when considering that for example in 2021 Finnish pay cards were used 1,9 billion times. Already a small slice of these transactions offers a decent revenue.

For the financial market, PSD2 was the prelude for sharing information more openly than before. Now same topic is discussed also in insurance industry as “Open Insurance” seeks its’ form. But what does Open Insurance mean and what is it aiming at? There isn’t yet a uniform definition. European Insurance and Occupational Pension Authority (EIOPA) published in 2021 a Discussion Paper ”Open Insurance: Accessing and sharing insurance related data”, which is based on a very broad definition: “Covering accessing and sharing insurance-related personal and non-personal data usually via APIs”. EIOPA states increased innovation, competition, and efficiency as main goals.

What would sharing of insurance information enable?

When considering how information dense insurances are and how information generally today can be utilized for various use cases, it’s clear that open sharing of insurance information would enable many kinds of product and service innovation. Still, it should be noted that insurers cannot freely share information. In PSD2 the customer manages their information and decides what and with whom to share. This should push innovation to be highly customer centric and is a starting point for new competitive factors.

When the customer holds insurances in several companies, sharing would enable collecting the scattered information in one place. The customer would get an overall view of their coverage making it easier to get insurance guidance based on correct information and make it easier to ask for offers. Especially In Finland, collecting information of occupational pension and other pension saving in one place could be a very useful use case, Swedish minPension service being an excellent example of this idea.

Claims management is a critical point in client relationship and there are certainly many use cases for making that smoother. For example, what if my flight is delayed more than 4 hours, which is the threshold entitling me to a compensation from my travel insurance? Could the information about the delay go directly from the airline to my insurer and the compensation be automatically paid to my bank account?

Interfaces in key position

Interfaces are a prerequisite for sharing and receiving information, but they might also turn out to be road blockers. This was experienced with PDS2, different standards for interfaces and APIs complicate the development of fluent ecosystem. Let’s hope this experience is taken into consideration when the Open Insurance directive is taking its form.

Additionally, the aging IT infrastructure of the insurers will set its own obstacles. When interfaces and APIs play a central role in digitalization, influencing many processes already today, many insurers are pondering about the best solution in the long run. Continue building upon an aging technology, or has the time come to renew core systems and start capitalizing on the benefits of digitalization?

The future of information sharing

Will Open Insurance cause a same kind of revolution as PSD2 did for mobile payment? Probably not, as within insurance there is not one, even closely, similarly frequented transaction. Also, the Open Insurance directive seems to proceed rather slowly with EU.

There are still many question marks attached to Open Insurance. Even so, the directive will come to force at some point. Therefore, it’s good to start evaluating how and with what kind of solutions to prepare oneself for the possibilities Open Insurance offers.

Nyheter

Profit Software byter namn till Evitec som del av nordisk expansion

Profit Software är en ledande leverantör av systemlösningar och konsulttjänster för finanssektorn i Norden. Företaget tillhandahåller också business intelligence-lösningar för flera olika branscher. Nu inleds en omfattande varumärkesuppdatering och företaget byter...

Big bang – en digital transformation inifrån ut!

Den digitala transformationen har redan länge varit ett återkommande diskussionsämne inom försäkringsbranschen. Diskussionen tog nya varv då pandemin ökade behovet av kundbetjäning på distans, något bolagen de senaste åren arbetat hårt med. Men hur är läget med...

Direktiven för hållbar finansiering närmar sig med storm steg

Hållbar finansiering är ett ämne vars betydelse har ökat i takt med klimatförändringens framfart. Definitionen för hållbar finansiering inbegriper ändå mer än enbart miljöaspekt, man beaktar även socialt ansvar och bolagsstyrning, det vill säga de så kallade ESG...

Blogg

Systemförnyelse – en uppdatering av teknologi eller också annat?

Heta diskussionsämnen i samband med en systemförnyelse är bland annat digitalisering, automatisering, konversion och migration. Och inget fel med dessa, de är alla viktiga faktorer som säkerställer att det nya systemet fungerar på önskat sätt och frambringar den...

Vet du hur stor din pension blir?

Pensionerna verkar vara en het potatis i EU.  Insurance Europe publicerade förra hösten i samband med European Retirement Week en pensionsundersökning där man utredde i hur stor utsträckning invånarna i EU länderna individuellt förbereder sig för pensionsårens...

P27 Nordic Payment omvandlar nordiska betalmarknaden

Vem kommer ännu ihåg tiden då det kunde ta flera dagar för en betalning att överföras mellan två parter? Inte ens mellan två i samma land verksamma banker var betalningsöverföringen som en rak motorväg, utan transaktionen påminde mera ett lokaltåg som stannar upp...

Love thy comma

Written by Annika Karppinen Do you remember those, sometimes hilarious, examples from school classes, where teachers tried to bestow on us the importance of using the correct punctuation marks? For example, how the meaning of a sentence is completely transformed with...