The quickly-rising number of conferences, InsurTech (insurance technology) hubs, podcasts and online InsurTech magazines across the globe is indicative of an industry that is looking to reshape its image, products, and customer experience.
A report by Capgemini estimated that 67 per cent of InsurTech executives agreed that the ability to collaborate and integrate into ecosystems is a distribution strength. Incumbents are in alignment with this finding, with 57 per cent agreeing that co-operation could unlock significant value.
Collaboration is the foundation of ecosystems allowing both start-ups and incumbents to fundamentally upgrade their game plan and play a primary role in the digital era. That is precisely where Open Insurance comes in.
The Open Insurance Initiative (OPIN) has sought to redefine the economics and mechanics of serving large numbers of customers, in the belief that insurance ecosystems hold much of the transformation hoped for by consumers and financial services organisations.
The real value of Open Insurance is unlocked through developing specific use cases and applications. Incumbents should identify and crystallise relevant use cases for their own business needs.
Additionally, companies in other sectors can become part of this financial services ecosystem if they bring in orthogonal data which includes non-financial data to provide a more comprehensive and detailed view of the customer. These players may have large customer bases and advanced analytics capabilities created for their core businesses, and they can use these advantages to make rapid moves across sector boundaries.
An ecosystem enabled by open APIs is in many cases a system of unification, leading to service powered by an aggregation of different APIs of multiple component services, from different suppliers across multiple ecosystems. New products introduce businesses to new markets and to customer segments that were previously uninterested in existing offerings.
Archetypal signs of disruptive use cases driving hyperscale growth could be characterised by the following developments:
- Realtime processing and decision-making, unhindered by human intervention
- Sharp personalisation, matching needs to products, driven by accurate prediction systems
- Data integration and analytics capabilities driving opportunity (use case) discovery
- Rapid moves within the insurance sector and across sector boundaries to capture new opportunities
Technically speaking, the current InsurTech domain can be divided into three spheres; the first includes digital distributors of various forms including: marketplaces, B2B2X distributors, digital brokers, personal financial apps and other digital interfaces providing auxiliary services. The second includes businesses that provide highly-technical services to incumbents, InsurTech and other third parties involved in the ecosystem, for example, data analytics as-a-service, claims management, VR and AR systems, policy administration solutions etc. The third is composed of fully-digital insurers, which now also includes Usage Based Insurers, micro-insurers and P2P insurers.
The long-term survivability of any of the new ecosystem participants, incumbents and InsurTech alike, will ultimately depend on the profitability and the scalability of their operating models and the amount of play that regulators allow for new business models to emerge and flourish.
OPIN is not only a product of both worlds but is also an enabler of deep integration between incumbents and third-party service providers.
The OPIN white paper discussed at length the need for global standardised APIs and enabling standard data design within the insurance industry to create networks that can scale. We will shortly introduce a new white paper that aims to define and clarify the main components of Open Insurance in addition to tackling the thorny issues of data sharing, security and intellectual property rights.
Fulfilling this promise as an industry initiative, on a global scale, has meant engaging in high-level discussions with regulators, insurers, startups, consumer agencies, technology vendors and various international initiatives. We are determined to continue building momentum towards creating, adopting and sharing common standards in insurance.
Fouad Husseini is a writer and thought leader on insurance innovation.