The insurance industry is firmly under the cusp of an exciting phase of transformation. Experimentation, innovation and InsurTech are now terms that define an industry that’s accelerating to overtake its image of the reluctant innovator.

Billions in investment dollars have been poured into startups deploying concepts that were so foreign to the insurance world few years back, blockchain powered parametric insurance, on-demand insurance, behavioral economics, try–before-you-buy and such like, creating what might appear to be two ecosystems, one composed of incumbents enjoying decades of high regulatory barriers and another of a tech startup culture bent on redefining customer experiences, business models and value propositions.

Evolving consumer expectations and increasingly mobile and interconnected services are being enabled by fast developing Application Programming Interfaces (API), authentication and authorization technologies. It was only a matter of time before data centric initiatives started to appear helping business unlock value and optimize services from treasure troves of data. Many governments around the world sought to release great parts of that data through open data projects. Europe has shown willingness in empowering consumers to share the data held by their banks and at the same time overhaul the payment services sector. PSD2 and Open Banking offered the FinTech communities and the banks significant opportunities to transform the way UK and EU citizens transact, save, borrow and invest their money.

“The insurance industry now has its own open initiative detailing in a whitepaper an overview of the processes and strategies that could enable policyholders to securely share their insurance related data with third parties” explained Fouad Husseini, the founder of The Open Insurance Initiative.

“Today sees the public release of the whitepaper. This initiative will depend on the active collaboration of a community of developers and financial services experts to see the development of a standard for open APIs for the global insurance sector” he added.

Download the whitepaper here 

As digital consumers, it’s difficult not to notice the resultant effects of the personal data being collected on us as individuals, neither can we ignore the extent to which it is being used commercially and most notably politically (the 2016 US elections is one such example). This incredible growth of personal data distributism is designed to enable deeper insights into customer behavior, create new products and to substantively influence existing business models.

Marginal improvements in product and customer experience will no longer suffice. Insurers, brokers, agents, reinsurers, loss adjusters and so on must transform their organizations.

APIs have been the primary enablers in the shift to mobile and digitized services in almost every digital product we use. Open APIs will allow third party service providers, particularly InsurTech and Fintech startups, to have easy and secure access to insurance products and customer data. By enabling customers to share their data, they will unlock its value and force the transformation of the industry to one that is optimally transparent and innovative. 

Fouad defines the scope of the initiative as two-fold. “There are two key facets to the initiative, the first, establishes an open API standard allowing data to securely flow between insurers, their customers and third party service providers.  The second, recommends data portability by enabling easy, authorized and secure access to data and its sharing.”

The concept of consumers exercising active data use, is not too dissimilar to that of open banking. Open insurance allows the customer to decide what data to be shared, when it is shared and with whom, subject to secure authentication and explicit consent mechanisms.

This data would be conveyed in real-time and in machine readable format via secure APIs. KYC information, insurance policy data, accident and claims data and data collected by the insurer through telematics or wearable devices are examples of the information that a costumer could share with third parties.

For the insurance carriers to be able to respond to digitally generated requests for data will mean reconfiguring not only their IT systems but also their strategies in doing business. Many insurers could be dogged down by systems that may have been developed over different eras raising concern over whether they’ll be able to share any data. Insurers deploy increasingly complicated automated back-ends creating an awkward web of legacy systems.

Many system transformation experts and software developers insist that a suite of secure API architecture utilizing the highest levels of data security and authentication in combination with microservices will be capable of overcoming legacy system setbacks and transform incumbents into digital players.

An open API standard has to be developed, this is a central proposal in the whitepaper. The initiative will crowdsource contributions and encourage collaboration to complete the first iteration of the standard. It is believed that a global standard will help reduce the substantial resources required by insurers in developing their APIs. Equally as important, third party developers will enjoy an always up to date and well-documented international standard, consistent design, properly versioned and visible APIs enabling efficient, easy and secure flows of data.

As a customer, you might be wondering, what advantages does this data sharing concept gives me! Alternative choices and competitive offerings would not be too much to ask for, or would it? If I can more easily access my data and push it through one app to multiple third parties, competing insurers, intermediaries, banks, mobile telecom operators and others, allowing them all a level playing field with my insurance carrier, I would stand to gain from easier switching opportunities and save on expenses.

Equally and just as important, if I enable InsurTech startups and app developers from different industries access to my data that would otherwise had been locked away, as a consumer, I would benefit from the results of better data analytics potentially providing a wider yet bespoke choices of products and services. Additionally, I could spur on those fast-footed new entrants allowing them to apply their innovations more effectively and at a much larger scale.

This hoped for exchange of data will be a major driver in the transformation of the insurance industry allowing new, better and more competitive products and services to emerge.

As the industry makes progress towards adopting open insurance, incumbents could choose different roles. Staying fully in control of products and services, distributing own services via third parties or distributing products and services created by third parties by acting as a platform for third parties resulting in a more differentiated service offering for customers.

The whitepaper which can be downloaded at https://openinsurance.io evaluates several important aspects including:

• A look into RESTful API architecture and other emerging API architectures, authentication and authorization protocols.
• What constitutes insurance related data and how that data can be distributed to third parties while safeguarding data owner privacy
• Examining major perceived challenges obstructing the adoption of the open insurance concept
• A review of leading edge technologies that this shared data could power
• Recommending a proactive approach for advancing the initiative, from initiation until its eventual adoption

  Download the whitepaper here 

The project elicits participation to encourage and boost co-working to see the initiative succeed as an open source project. System architecture and API experts, website designers and content editors, cybersecurity experts, InsurTech experts, data scientists, intellectual property and legal experts, and other highly competent individuals are being encouraged to join the initiative.

This is a great opportunity, yet we need to acknowledge that many adventures lie ahead. The incumbents have to match the speed of change led by nimbler new entrants and at the same time, they have to shift control of the data they hold, to their customers.

An initiative of this nature would most certainly make markets more competitive than ever before, but where threats arise, opportunities will emerge. Ultimately its full impact may depend upon whether incumbents and regulators are willing to embrace the huge potential of data mobility.

Customer demand may not change abruptly but the expectation level is already set by the banking industry which has undergone a similar change over the last few months.

“I totally believe that the aspirations of one man will become the conduit for a collective of great minds to rally in pursuit of transforming a concept into a cathedral that yields standards, frameworks and research.” Fouad explains.

It’s highly plausible, rapid progress will be really possible. It will help industry stakeholders in their transformation to match tomorrow’s expectations today, overturning the pithy image of slow, untrusted, distant and unyielding corporations, an image that has encapsulated the insurance industry as a whole.