First Open Banking, now Open Insurance – it’s no longer possible without digital platforms

Digital Bancassurance, Open Banking, Financial Home… more and more trends are emerging in the market. And now comes the next buzzword: Open Insurance. But what does it mean? Is there already a directive similar to PSD2 for this? And who benefits from it? These and other questions will be answered in the following article.

How it all began…

Let’s rewind 1 year, 5 months, and 4 days. It’s September 14, 2019: The PSD2 directive comes into force and shakes up the banking industry. Third-party providers (including insurers) are now able to access their customers’ banking data, provided the customers agree to it. FinTechs, insurers, merchants, and others can now act as either a Payment Initiation Service Provider (PISP) or an Account Information Service Provider (AISP), for example, conducting account analyses and offering personalized offers to customers based on this data (Open Banking).

However, this was only a one-way street until now, meaning insurers could connect to banks via the PSD2 interface, but there was no uniform interface standard that allowed banks to access insurance data. But now, various companies in the insurance or InsurTech sector are pushing for a two-way street; meaning banks and other third-party providers should also have access to their customers’ insurance data, using a unified interface standard similar to PSD2 (Open Insurance).

Early Efforts in Open Insurance in Early 2020

The magic word on the path to a unified interface standard in the insurance sector is FRIDA (Free Insurance Data Initiative). FRIDA is an initiative launched by the platform provider Friendsurance and Insurlab Germany in January 2020.

It essentially includes 3 core points:

  1. Establishing new and existing interfaces
  2. Exchanging data according to high security standards
  3. Collaborating on creating a unified data structure

In the initial discussions, the focus was on how open interfaces should be organized so that insurance companies, brokers, and customers can all benefit from them. The main goal was and still is to establish interface standards before regulators like BaFin dictate them.

Beneficiaries include banks, customers, and insurance platforms

1.5 years ago, it was the banks who, due to PSD2, were forced to relinquish control over customer data to third parties. Now, with Open Insurance, opportunities arise for banks to advance their bancassurance models. Their experience with Open Banking provides a good foundation for leveraging a potential Open Insurance movement to their advantage.

According to a Bitkom survey, nearly 50% of Germans can imagine handling their insurance matters through their online banking. Customers are increasingly inclined to manage their financial affairs through a single app or digital platform, in the spirit of a “Financial Home.” For users, the top priority is quick handling of insurance matters while retaining sovereignty over their own data.

From a customer perspective, this is wonderful, but from an insurer’s perspective, it’s challenging, as the exclusivity in their own distribution is threatened by omnipresent comparison offers from third-party providers. At this point, insurers must rethink their product strategy.

Open insurance platforms are not possible without JDC, Friendsurance & Co.

From the points mentioned, it is evident that insurers are also heading straight into the platform economy after banks. And here, it is important to be an early bird, or in Google terms: to land on the first page, because who looks at the second page of search results on Google?

The platform boom is in full swing, as financial players are already seeking support. While banks and insurers have a huge customer base, they are not known for implementing a digital platform, especially from a technical perspective. Moreover, banks and insurers have realized that, in addition to pure insurance comparison, holistic customer care with needs analysis and online insurance switching represents a significant business potential. However, the expertise of financial service providers in these areas is limited. The existing platforms are not developments of the major institutions. This is where technology providers come into play. JDC, Friendsurance, Hypoport & Co. operate in the background as white-label platform providers and have already made headlines due to their collaborations with banks, savings banks, and insurers. Their digital platforms offer a comprehensive set of features that significantly simplify the daily routine of all parties involved, especially end customers.

The developments show that whether it’s Digital Bancassurance, Open Banking, or Open Insurance, one thing is certain: no matter which buzzword is used, they all have one thing in common—they point to the inevitable path of financial service providers directly into the platform economy.

Authors: Stefan Roßbach & Raik Borkowski

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Stefan Roßbach
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