The Evolution of Open Insurance in Europe: A UK Perspective

At the Open Banking Expo and Open Data Show in London this October 2024, a pivotal discussion unfolded around the future of open insurance and the impact of the EU’s Framework for Financial Data Access (FIDA) . With industry leaders, policymakers, and tech innovators gathered, the conversation focused on how data sharing, transparency, and customer empowerment are reshaping the financial services landscape.

One of the key speakers, Philipp Mader , a Managing Consultant at Adesso and a leading expert in open insurance, shared his insights on how the insurance industry is being transformed by open data initiatives. With over four years of experience working in open insurance, he emphasised the importance of building a dynamic, customer-centric ecosystem in Europe, facilitated by frameworks like FIDA.

The Rise of Open Insurance

"As Europe moves towards a true digital economy, we can make more from all the opportunities offered by data and data-driven innovation in the financial sector. More sharing of personal data, while retaining full control over it, will allow people to access tailored products and services that suit their needs, and also create room for the financial industry to innovate“ – Valdis Dombrovskis, Vice President EU Commission, June 2023

The transition from open banking to open insurance marks a new era of financial services. Open insurance will enable consumers to share their insurance data with third parties through secure APIs, much like open banking has done for customer data in the banking sector. This shift is designed to foster transparency, competition, and customer empowerment. While open insurance is a relatively recent development, its roots have been steadily growing over the past four years, building upon the lessons learned from open banking.

With open insurance, consumers will gain more control over their data, allowing for the creation of tailored insurance products and more personalised financial advice. The ability to share insurance data seamlessly will lead to a more connected and customer-centric financial ecosystem throughout Europe, with the potential for new innovations in the industry.

FIDA: The Key Regulatory Framework

At the centre of this transformation is the European Union’s Framework for Financial Data Access (FIDA), which aims to make data sharing mandatory across Europe by 2027. FIDA is designed to harmonise financial data sharing across sectors like banking, insurance, and pensions. Its primary objective is to give consumers control over their financial data, allowing them to decide who can access it and how it can be used.

FIDA operates on key principles such as consumer empowerment, robust data security, and the use of standardised APIs. This framework will not only facilitate easier access to financial data but also encourage innovation and competition within the insurance sector. By creating a more open and dynamic marketplace, FIDA is expected to revolutionise how insurers interact with consumers.

Challenges for the Insurance Sector

However, implementing FIDA will come with significant challenges for insurers. Real-time data sharing, maintaining continuous access to customer information, and meeting stringent security requirements will demand substantial investments in technology and infrastructure. In Germany alone, over 400 million insurance contracts are expected to be affected by these changes, illustrating the massive scale of the transition.

Despite these challenges, the benefits of open insurance are substantial. By adhering to FIDA's standards, insurers can help build integrated financial management platforms, combining banking, insurance, and pension data into unified services. These platforms will empower consumers to manage their entire financial portfolios more efficiently, receive customised advice, and make well-informed decisions about their financial future.

Use Cases Demonstrating Open Insurance Potential

The potential applications of open insurance are already becoming evident in real-world scenarios. Two key use cases highlight the transformative impact it could have:

1. Unified Financial Management Platforms: Open insurance will allow consumers to manage all their financial products – such as bank accounts, investments, and insurance policies – within a single digital platform. These platforms will not only provide users with a complete overview of their financial health but will also streamline processes like digital claims handling. They can also deliver personalised product recommendations based on the consumer's unique financial needs.

2. Retirement Planning Solutions: In countries like Germany, where navigating state pensions can be complex, open insurance could help consumers consolidate their retirement savings and pension plans into one digital tool. This would provide real-time insights into future income streams, making retirement planning simpler and more transparent. Such tools could also offer tailored advice based on an individual's financial goals and circumstances.

A Customer-Centric Future for Insurance

As the 2027 implementation deadline for FIDA approaches, the insurance industry is on the cusp of a significant transformation. The shift towards open insurance isn’t just about regulatory compliance; it's an opportunity for insurers to embrace a more customer-centric approach to financial services. By putting consumers in control of their data and fostering a more connected ecosystem, open insurance has the potential to unlock new opportunities for growth and innovation.

The future of insurance lies in adapting to these changes and leveraging the advantages that open data sharing can bring. As the industry evolves, those insurers who can navigate the challenges of FIDA and harness the power of open insurance will emerge as leaders in a more competitive, transparent, and forward-thinking marketplace.

"The impact of FIDA extends beyond compliance with regulatory requirements and is driving the shift towards a dynamic, connected and customer-centric finance ecosystem.“ – Philipp Mader, Open Insurance & Data Ecosystems, University of St. Gallen, March 2024

In the UK, the lessons from FIDA's European rollout offer valuable insights. The transformation of the insurance landscape is well underway, and those who adapt quickly will be best positioned to thrive in this new era of customer empowerment and data-driven innovation.

Adesso has a wealth of experience across the UK and Europe, working closely with firms to shape their banking, finance and insurance strategies. We can assist your business get ahead by ensuring you're fully prepared – technologically, operationally, and commercially – for the arrival of open finance.

If you're ready to explore the opportunities that open finance can bring, get in touch with us and let's take your business to the next level.

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