Get Ready: Open Banking Now Means Open Insurance Is Next

Paul Murphy / 16 Jan 2020

Banking and insurance have both undergone an astonishing transformation during the lifetimes of many Australians. From being the almost Dickensian institutions of yesteryear – dark, hushed, secretive and wood-panelled – banks have evolved into the upbeat retail financial shopfronts and online multi-service megastores we know today. Meanwhile, the insurance industry is undergoing its own technology-led disruption. But one bastion of 19th century banking and insurance has remained: the secrecy. Until now.

Consumer Data Right legislation

In 2019 the government passed a law giving banking customers greater access to, and control of, the data associated with the products and services they use. The accepted term for this raft of changes is ‘Open Banking’.

It means that financial institutions – starting with the Big Four banks but extending to others later – must make credit card, deposit, transaction and mortgage data available if customers request it.

What that translates into is portability. It’s a bit like the competitive transformation of telco services once consumers were given ownership of their phone numbers. Owning your own transaction and spending habits data and being able to easily share it with a third party – via Application Programming Interfaces (APIs) – means that your bank’s competitors can analyse the information and offer a better deal to suit your particular circumstances. It’s being heralded as a game-changer, and the end of consumer inertia and ‘rusted-on’ customers in the entire finance industry.

A forerunner for Open Insurance?

It can only be a matter of time before the open data scenario is extended across other types of financial transactions. But as far as the insurance industry is concerned, the data mining future has already arrived. Digital transactions and the volume of available client data have grown exponentially, and will continue to expand at a vigorous rate. Data analytics and AI are already being applied to client information in larger firms, to assist with risk analysis and underwriting, premium setting, claims processing and new product development. This will one day become the norm for the entire insurance arena.

And although Open Insurance and access to external data has not yet arrived, it will. What can we expect it to look like?

Open Insurance framework

Here are just some of the sweeping changes that data sharing will bring to the insurance industry.

  • Personalised insurance products
    One-size-fits-all polices will give way targeted products once consumers own and can share the historical data that reflects their particular needs and situation.
  • Marketing data availability 
    Consumer behaviour will become foreseeable via the predictive insights of data analysis, and more observable as a result of data sharing. This would allow early marketing by brokers, for example, when someone buys a house and is likely to need home and contents insurance.
  • Broader value propositionInsurers will have an improved insight into their clients’ range of insurance needs and will be able to offer suitable products, rather than consumers having to shop around with different providers in order to cover all their risks. 

  • Reduced risk for insurers and underwriters
    Risky customers and fraudulent claims will be easier to recognise via historical data. Reduce exposure means lower premiums but higher profits.
  • New products to mitigate cyber threats
    Data sharing via APIs will lead to increased security risks, and the need for new cyber insurance products to cover them.
  • Change in competitive landscape
    FinTech and InsureTech companies will enter the market in greater numbers, at home in the new Open Insurance digital world.

Negotiating the Open Insurance future

Is your organisation prepared for Open Insurance?

Find out by asking yourself these questions:

  • How does openness impact our strategy and business model?
  • How can we increase our appeal to customers via openness?
  • Which open insurance roles and partnerships should we explore?
  • Which data and capabilities do we need to leverage internally?
  • How do we structure and monetise our API’s to new and often unknown transactional ecosystem players?
  • Can we partner with FinTech and InsureTech players?
  • Can we connect to banks’ data via APIs, with client permission, and learn from the data?
  • Where will we find and attract suitable talent to take advantage of Open Insurance opportunities?
  • Where will we find and attract suitable talent to take advantage of Open Insurance opportunities?

​Ensure understands the implications of Open Insurance

If you would like to learn more about hiring IT & Digital professionals for Open Insurance & Open Banking please feel free to contact our specialist recruitment team.