The development of Open Banking in Europe and the rest of the world has accelerated the trend of moving towards increasingly open access to all types of data. As a matter of fact, consumers more and more expect – and regularly even demand – that their data can be transferred and accessed through flexible but secure ways, across different service providers. Insurers can use this development to rebuild the relationship with their customers, who have become estranged from them.
In my previous blog I already talked about some of the main challenges that insurers face. These include the declined quality and frequency of customer contacts, increased competition because competitors do not only come from the insurance industry, dealing with legacy systems, and ensuring scale and efficiencies. In this second blog of my series, I would like to take a closer look at how Open Banking can help insurers tackling these issues.
From Open Banking to Open Data
With the introduction of PSD2, the European Commission really accelerated the development of Open Bank. This banking practice provides third-party financial service providers with open access to consumer banking, transaction, and other financial data from banks and non-bank financial institutions through the use of application programming interfaces (APIs). All with the permission of the consumer concerned, of course.
However, the concept of open innovation is not limited to banking as it has also developed into Open Finance and Open Data, for instance. This means that consumer data can be used in many other industries than the banking sector to develop new and safe solutions, products and services that cut across industries.
Naturally, this also implies to the insurance industry, as Open Data can help insurers in several ways to optimize their services and meet the ever-increasing consumer expectations.
Improved Payment and Flows
Among other things, Open Banking optimises payment methods and flows for insurers. For instance, consumer payments initiated via Open Banking interfaces are potentially less costly than direct debit solutions costs. In addition, using Open Banking account-to-account based payments provides access to real-time payments without the constraints that many direct debit solutions have. And using Open Banking payments puts the insurer in control of the customer dialogue.
Enhanced Data Access
By using Open Banking interfaces, insurers gain access to new and valuable data sources. This data can, for instance, be used for easier customer onboarding, providing more tailored insurance coverage, and improved claim management.
More efficient customer dialogues
Insurers should find ways to expand their services so that they can support more frequent and meaningful customer interactions. That way, they both lower the risk of disintermediation and increase the relevance of their services to their customers. A good way to do this is to develop a chatbot or more sophisticated conversational AI solutions that will evolve customer dialogues beyond simple frequent questions. Open Banking data will then become one of the key data sources for these services, as the quality of the AI solution relies fully on the data provided to them.
Essentially, it is important to keep in mind that both payment initiation and account information are highly sensitive matters. Therefore, the implementation of these services will require thorough security measures.
In conclusion, it is safe to state that Open Banking – or Open Data – can and will help insurers in various ways. In the third blog of my series on the benefits of Open Banking for insurers, I will focus on improving client conversations through the use of customer data.
More info on Open Banking for the insurance industry.
Do you want to know more about Why Insurance Companies should look to Open Banking, download this white paper.