Written by Ismail Chaib, Chief Operating Officer at TESOBE/the Open Bank project

The move towards openness and data sharing is a global trend that is here to stay. New practices in accessing and sharing data are transforming the way we work and produce value.  Indeed, open access to user information through "Open Banking" is changing how the financial service industry operates, enabling consumers of personal banking and small businesses to shop around for better deals and access an ecosystem of innovative services provided by other financial institutions and third parties and tailored to their peculiar needs and wants.

From Open Bank to Open Insurance

Open Banking is a global movement that encourages financial institutions to allow authorised third parties access to individual and business customer data (such as customer transactions) and banking services (such as payment initiation);  in a machine-readable format (through Application Programming Interfaces of APIs) and following customer consent

Open Banking is widely seen as a catalyst for innovation and competition. In the UK alone, the market is predicted to serve 8.1m consumers and 2.4m small businesses and to be worth EUR 2.6bn by the end of 2018. By 2022, the Open Banking sector could quadruple its worth to generate EUR 8.16bn of revenues according to a PwC forecast.

Because of its many benefits to banks and consumers alike, Open Banking has been driven by both market initiatives and regulatory mandates (such as the case of the Payment Services Directive II in Europe).

I am convinced this open revolution will extend beyond banking. In particular, this would impact the insurance industry offering a level playing field for new entrants and unlocking an enormous innovation potential. As documented by the Open Insurance Initiative (and evidenced by the Open Banking movement in the UK and abroad), benefits of sharing data in insurance ranges from extended and customised product offerings to lower barriers to entry and growth in the InsurTech sector

Lessons Learned

Started in 2011 and led by Berlin-based TESOBE, Open Bank Project is the leading open source API solution for banks - we help financial institutions deploy successful API programmes to comply with regulations (such as PSD2) and accelerate innovation and FinTech partnership thanks to a catalogue of 230 pre-built banking APIs and access to a vibrant and global community of over 11,000 fintech developers & startups worldwide.

Having worked on Open Banking for the last 8 years through the Open Bank Project, I was asked to share some key lessons learned that can benefit the open insurance movement. Here’s what I’ve learnt:

  1. Show the art of possible: demonstrating what are the possible outcomes of an open insurance programme in terms of emerging Apps and Services can help drive the point home better than PowerPoint presentations.
  2. Do not wait for the regulation fine print: compliance is hard and will take time. regulation can halt the development of forward-thinking / revenue-generating initiatives to reallocate resources towards compliance. The sooner the insurance company start the readier it becomes if/when regulation happens.
  3. Choose your building blocks wisely: Whether it is policy information, aggregated and anonymised KPIs or data specific to the insured, insurance companies would differentiate by the services they will open up in a machine-readable format. These services would be the building blocks of the insurance company ecosystem. Choosing the right blocks required by Third parties and aligned with the business priorities of the insurance company can make or break the ecosystem.
  4. Standardise: do not reinvent the wheel. Rely on existing standards that help you save time and that come with best practices baked in. It can be extremely costly for each insurance company to develop its own API specifications and quite inconvenient for third parties to consume a plethora of specifications.
  5. Move away from the whiteboard: open insurance is about cross-industry collaboration in real life. Avoid meetings upon meetings and design by committees. Instead, prefer a pragmatic approach where code is king. Deploy a “Test Environment” sandbox with dummy data, build MVPs to demonstrate the art of the possible, organise hackathons to gather feedback from third parties. Small but concrete actions can go a long way in building the case for open insurance.
  6. Open Everything rely on open standards and open source technology whenever possible to strengthen the standardisation efforts, bring the cost down and avoid vendor lock-in. Working in the open, can help bring more transparency, accountability and hence commitment from third parties to the overall initiative.

In an age of ever-changing customer behavior and pervasive technologies, incumbent insurers need to adapt and be agile if they are to survive. Being ready to opening up data and services to authorised third parties can prove a tremendous advantage in this context.

Drawing from the Open Banking movements, insurers should start experimenting in the open with third party insurtech companies and work on standardising their effort today. As in banking, the question is not so much if open insurance will become a reality but when insurers will open their doors to welcome the future.

About author

Ismail Chaib is the Chief Operating Officer of Berlin-based Open Bank Project, an open source API and app store for banks. He has been engaging with banks and promoting the use of APIs in the financial services industry. Ismail previously co-founded the award-winning startup SMSBridge.