In the contemporary world, the insurance industry is faced with multiple interferences. These disturbances have resulted from the surge in competition from service providers for substitute products.
These competitors have also been incorporating advanced technology into their operations, which puts them a step ahead of conventional insurance companies.
Consequently, this has been a cue for insurance providers to digitalize their operations as they provide insurance products.
In order to embrace this transformation, insurance companies are working to create digital ecosystems involving their clients and associates. One of the channels to establish an effective digital ecosystem is through embracing open insurance.
What is Open Insurance?
Open insurance is a modern mode of running business operations that insurance providers use to secure additional clients, acquire more business allies and obtain new revenue streams.
Open insurance is quite similar to open banking since the success of both concepts is heavily reliant on sharing information among institutions.
The insurance company’s data resources are accessible to other firms across multiple industries. In turn, the insurance company can also conveniently retrieve information from other firms, such as big tech companies.
However, there are stipulated guidelines that control the sharing of information in the insurance market, aiming to uphold integrity and transparency.
Since sharing information with third parties is a significant part of open insurance, data security is a common concern, especially for insurance product consumers. Aside from providing a variety of products and services at affordable prices, ensuring data security is another way that open insurance is enhancing the customer experience.
How is Open Insurance Regulated?
Every insurance provider desires to fully meet their customers’ needs. Creating bespoke insurance products is one of the ways to achieve this.
Developing customized products requires personal data regarding the customer of interest. To retrieve this data from another insurance company or an institution belonging to a different industry, the customer must consent to this.
Even so, the customer may lack the power to control how their data is shared. For this reason, Open insurance ought to be associated with bodies such as the National Financial System.
These institutions supervise companies engaging in financial transactions, such as insurance companies, and safeguard sensitive data such as a consumer’s national insurance number.
In the UK, the Financial Conduct Authority which is available from Monday to Saturday is the body tasked with overseeing the financial services industry.
The role played by these institutions is indispensable, since practices such as open insurance and open finance are still new and require close monitoring. This is because the concerned firms look for ideal ecosystem opportunities.
Scope of Digital Ecosystems for Open Insurance
Below are some of the possibilities that insurance providers can exploit through an open insurance strategy:
- The health sector through health insurance
- The hospitality and travel sector through travel insurance
- The living sector through home insurance
- The mobility sector through motor insurance or car insurance
These opportunities are beneficial to consumers, partners, and insurance providers through:
- Ensuring the transmission of data among all the parties involved in the ecosystem. This data may come in handy when either party needs to make a vital decision. For instance, in motor insurance, an insurer may use this data to calculate their client’s no-claim discount.
- Providing consumers with a platform where they conveniently receive services digitally at the convenience of their mobile phones or laptops.
- Enhancing innovativeness. Open travel insurance is an ideal example of how innovative ways are incorporated into providing customized travel insurance products.
To enjoy these and more advantages, insurance providers should consider open insurance. Adopting open insurance will equip an insurance provider with a competitive advantage in the dynamic insurance market.
In addition, while insurance providers use information from other organizations, they should also be willing to share their data with other companies too.
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