Are Insurers missing the Open Banking Opportunity?
When I ask my friends in insurance, "have you thought about how to leverage Open Banking?", it typically marks the moment when they think I have lost the script completely. Rolling eyes and shaking heads is the least I can expect, people looking for the nearest exit are not uncommon, and a few have called my wife to check whether I show those symptoms frequently.
But here is the deal: imagine you get handed a market on the silver platter where you are allowed to access your competitors (competition in terms of your customer's attention, wallet, and platform access, not necessarily product) data without giving anything in return. You are allowed to keep your walled garden while your neighbour is forced to open the gates. Would you take it?
This essentially is the opportunity that Open Banking represents for the insurers. Create a financial manager-type of application, register as an Account Information Service Provider (AISP) or Payment Initiation Service Provider (PISP), and combine the information you hold on your customers with the information available through Open Banking (once customer consent has been given). You can even partner with a company like Flux that can provide much more context around the payment data. And PISP allows you to initiate premium payments in a convenient and frictionless way.
With very few exceptions (Australia's CDR includes a clear path for opening up insurance and telco customer data as well, for example), the banks cannot demand your opening your customer data up in a similar way, although you might consider leading the industry and adopt such platform approach on its own merits.
Once again, this unequal playing field has been created by Open Banking regulation. I would argue that it has come about by many regulators being organized by industry, and not taking a holistic approach. I was therefore impressed (like many times before) by Ravi Menon, the Managing Director of the Monetary Authority of Singapore, who addressed a question during a webinar held on Thursday, May 13, 2020, by saying:
"An important principle that we have is that there should be reciprocity. It cannot be a case where one party provides data, and the other party does not. And I think this is a complaint you hear often in Europe, that the banks have to provide data, but the non-banks are not providing data. If it is a one way street, I think that is not fair to the banks. The banks should be also able to access other data, and they then can provide technology solutions that can match these non-bank players. So we are very focused on ensuring that the playing field is level."
So, insurers of the world, strike while the window of opportunity is open. Australia and Singapore have already woken up to the fact that forcing only the banks to open up is not fair, and other jurisdictions will eventually come to the same conclusion.
If any of my readers know about insurance companies working on AISP/PISP implementations, please let us know - so far we have only drawn blanks.
Stay healthy and in good spirits!
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