With the roll-out of PSD2 complete, the EU’s fledgling open banking ecosystem will continue its shake-up of the sector in the coming years. Unlike banking, the insurance sector has – so far, at least – played a bit-part in the “open” finance revolution. This may be about to change, however, as the EU considers access to and sharing of insurance-related data.

Instigating innovation in insurance

Earlier in 2021 the EU’s insurance supervisor, EIOPA, released a discussion paper on Open insurance: accessing and sharing insurance-related data. The paper looks at the potential opening of value chains across the sector. In other words, whether insurance data should be accessible by and shareable with third parties to:

• augment policyholder rights; and
• facilitate innovation in products and services. 

Instead of viewing open insurance through a narrow lens of mandatory data sharing based on explicit customer consent (something akin to PSD2), EIOPA is setting its sights wider. The paper suggests “open insurance” covers, in broad terms, access to and sharing of insurance-related data – personal and non-personal – typically via application programming interfaces (APIs).

This broader definition of open insurance captures information sharing across the market – from insurers and intermediaries to outsourcing and IoT providers. It also covers data sharing that is not directly visible to customers, for example as part of back office processing. EIOPA further suggests that open insurance can be looked at from three overlapping angles:

A design for life (and non-life)

EIOPA’s paper describes a number of high-level aims for open insurance, many of which chime with open banking and open finance more generally: from fostering innovation and improving customer outcomes to increasing transparency and strengthening supervision.

The paper also suggests five specific areas to consider as part of creating a “sound open insurance framework”. Of these, data protection and digital ethics is a particularly delicate area for the sector to navigate. The breadth, nature and sensitivity of information that can be revealed through disseminating insurance data – including detail on a person’s health, sexuality and political views – is likely to be unlike (in nature) and eclipse (in quantity) that held in other areas of financial services.

The paper goes on to begin sketching out the potential benefits and risks of open insurance for customers, firms and supervisors (summarised below), providing an indication of what a future framework will encompass:

Looking ahead – what next for open insurance

EIOPA recognises that open insurance is not at a standing start. Most national regulators in the EU have work underway in their jurisdictions already, not to mention the work being undertaken by the likes of the OPIN open insurance think tank.

Despite this, progress is patchy across the industry (and between EU countries). For example, while there are good examples of open insurance being used to improve claims management, pricing and underwriting in particular, the paper also shows that the majority of national regulators have no plans to adopt open insurance solutions for supervision in the near future.

To the move the dial in a sector that is ripe for an “open” revolution, there needs to be a cross-industry effort to deliver effective API-driven interoperability and standardisation, backed by a coherent regulatory framework. As well improving the mechanics of the industry – from distribution frameworks to supervision – this could also put the insurance sector in a better place to respond to market trends (such as telematics or “black box”) cover, and usage-based insurance more generally, which is expected to grow significantly in the coming years.

EIOPA is currently analysing the responses to its discussion paper which will help inform its ongoing work on digitisation and input into the EU’s wider Digital Finance Strategy.