What is Open Insurance, and How Does it Work?

In this post, we’ll define what open insurance is and explore more about how it works and the benefits and risks using an open insurance business model.

What is Open Insurance?

The term “open insurance” refers to a business model whereby insurers share data and services with various third parties so they can collaborate on creating new products, services, and other innovations.

Open insurance refers to insurers sharing data and services with third parties for collaboration

How Does Open Insurance Work?

Usually, a functional open insurance business model relies on building an application programming interface (API) into insurance products. An open API allows for insurers, startups, Insurtech firms, financial institutions, and other organisations to share data between each other.

Through sharing data in this way, these various organisations can work together to develop new innovations, to streamline processes and improve the customer experience. It’s through open insurance business models, for example, that bionic underwriting is possible – the process of using artificial intelligence (AI) to automate certain underwriting tasks.

What Are The Benefits of Open Insurance?

An open approach to data sharing has the potential to benefit consumers, businesses, and supervisors. Data-driven innovation can make it easier for customers to compare quotes and switch providers.

With current insurance business models, customers have to rely on price comparison sites, which may not give the most up-to-date information. Alternatively, they can get quotes themselves from numerous different insurers, which can be immensely time consuming. But with open insurance, customers could access new advice services that can provide accurate quotes in real time, based on the most reliable market information.

We’ve already explored how open insurance could benefit businesses through allowing them to leverage innovations such as AI to streamline their processes. An open insurance business model can also make compliance easier and more efficient through allowing insurers to access powerful new RegTech processes.

Supervisors, too, can draw from advanced new technologies (SupTech) to deliver faster and more responsive oversight.

What Are The Risks of Open Insurance?

Any business model that relies on sharing potentially sensitive information is going to raise some ethical issues. Some of the data shared by open APIs will be personal in nature. There are concerns that combining this increased data sharing with AI and machine learning applications could inadvertently increase financial exclusion for certain demographics.

There’s also the risk of cyber security. Many cyber criminals operate through stealing personal data, which they might either sell for profit, or else hold for ransom. If this personal data’s shared across numerous different organisations, then cyber criminals might have numerous different weaknesses to exploit.

Is Open Insurance The Future?

While it’s unlikely that regulators will force insurers to switch to open insurance business models, other factors might encourage insurers to start sharing their data with other organisations.

For example, many financial institutions already use open business models, which has enabled customers to benefit from integrated and personalised digital services. Customers may soon start demanding this level of service from other providers, such as their insurers. Any insurer that adapts may enjoy a significant competitive advantage.

Expert Software Support for Insurers and Brokers

We offer bespoke insurance software solutions for insurance companies of all sizes. We can deliver an API-enabled insurance solution for marketplaces, direct acquisition, and affiliate partners.

Head here to learn how our award-winning SAAS can help you embed data-driven innovation across your organisation.

If you have any questions, or you’d like to discuss your options, you can contact the Tapoly team at info@tapoly.com, call our info line on +44(0)207 846 0180, or use the chat box on our website.