Following the success of open banking, the concept of open finance has gained traction, creating a buzz in the financial industry. As the discussion around open finance continues, the insurance sector is taking notice of the potential benefits of open insurance. While initially met with caution, the positive impact of open data sharing in the financial industry has inspired a movement towards greater transparency and collaboration. This article explores the inevitability of open insurance, highlighting its potential advantages and the need for robust cybersecurity and regulatory frameworks.
The Rise of Open Finance: Open banking revolutionized the financial industry by enabling the sharing of financial data with third parties. Banks have experienced increased customer loyalty and satisfaction as a result of open banking. Building on this success, the concept of open finance aims to extend transparency beyond banking to other industries, including insurance.
Insurely and the Digital Transformation: Insurely, an important player in the field of open insurance, has been recognized in the recent report by Svensk försäkring (Insurance Sweden) on insurance industry trends. The report highlights the digital transformation of the insurance industry and the impact of open finance. While the report acknowledges the potential benefits, it also raises concerns about cybersecurity and data leakage, emphasizing the need for clear rules and regulatory governance.
EIOPA’s Perspective: The European Insurance and Occupational Pensions Authority (EIOPA) has played a significant role in shaping the discussion around open insurance. EIOPA initiated a public consultation to address the risks associated with open insurance. While cybersecurity remains a concern, EIOPA sees the advantages of open insurance outweighing the disadvantages. The consultation results suggest that open insurance is not a question of “if” but rather “when” and “how” it will be implemented.
The Need for Clear Rules and Regulatory Governance: The success of open insurance hinges on robust cybersecurity measures and comprehensive regulatory frameworks. To build trust and ensure the protection of consumer data, clear rules and governance must be established. As open finance and the General Data Protection Regulation (GDPR) promote transparency and data sharing, insurers will need to adapt and comply with these evolving regulations.
Conclusion: Open insurance is an inevitable evolution in the insurance industry, driven by the success of open banking and the demand for greater transparency and collaboration. While concerns about cybersecurity persist, the benefits of open insurance, such as enhanced customer experiences and access to new market opportunities, cannot be ignored. By establishing clear rules and regulatory frameworks, the industry can navigate the challenges and seize the opportunities presented by open insurance. As the journey towards open insurance progresses, collaboration and proactive adaptation will be key to ensuring a secure and beneficial future for insurers and consumers alike.