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What is Open Insurance?

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There is no single definition for open insurance or open finance. The European Insurance and Occupational Pensions Authority (EIOPA) has broadly interpreted open insurance to involve the access and sharing of insurance-related personal and non-personal data, typically through APIs.

Open Finance and Legislative Measures

Discussions about open finance have predominantly focused on the banking sector. Some jurisdictions have introduced specific legislation to support open finance, such as the Payment Services Directive (PSD2) in the EU. This legislation aims to promote innovation and competition by enabling data sharing and granting third-party access to data. Key motivations include antitrust considerations and the principle that personal data belongs to the individual. In other regions, the evolution of open insurance and finance is driven more by market forces, new business models, and private sector initiatives.

Current State of APIs in Insurance

Insurance companies have long utilized internal APIs for back-end communications and interactions with third parties. Recently, there has been a shift towards opening these APIs to external parties to improve services for policyholders and increase market competition. As a result, some infrastructure similar to open insurance already exists, although in a fragmented and localized way.

Risks and benefits

Increased data sharing can enable the insurance sector to take full advantage of data-driven innovation. This can lead to innovative products for consumers, such as easier quote comparison and switching, and new advisory services for firms, such as increased efficiency and interactions with third parties or more effective compliance practices

However, this can also lead to new/increased risks, such as data security, cyber threats, interoperability, liability, ethical issues and wider consumer protection risks

Future Developments

Currently, the development of open insurance services requires bilateral negotiations, agreements, and contracts, as well as efforts to align different standards. The issue of full standardization or achieving sufficient interoperability among existing standards is a topic of ongoing discussion. Potential solutions could include regulatory or self-regulatory measures beyond general data portability rules. Future advancements in open insurance may involve further standardization and potentially mandatory data sharing, initiated and consented to by customers. These developments should also address how to ensure controlled security and enhanced consumer protection.

Key Takeaways

1. Broad Definition: Open insurance broadly involves sharing insurance data through APIs.

2. Legislative Drivers: EU’s PSD2 is a significant legislative step in open finance, with motivations including competition and data ownership.

3. Market-Driven Development: In some regions, market forces and private initiatives are driving the evolution of open insurance and finance.

4. Existing Infrastructure: Some infrastructure for open insurance is already in place but remains fragmented.

5. Challenges: Standardization and interoperability are major challenges, with ongoing discussions about regulatory or self-regulatory measures.

6. Future Prospects: Future developments may include compulsory data sharing and enhanced consumer protection.

By understanding these aspects, stakeholders can better navigate the changing landscape of open insurance and finance.

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