Open banking and finance have taken the main stage as the financial industry rolls into the second phase of digital transformation (commonly called DT 2.0). As these open finance models grow in popularity, insurers must consider where and how they fit in.
For life insurance companies, open insurance practices offer many great advantages that can help to boost innovation, enhance customer experiences, and improve data analytics. Though there are challenges to open insurance — such as maintaining a human touch — insurers cannot afford to overlook the potential benefits.
In this article, we will discuss what open insurance is and what it means in the context of life insurance providers. Plus, we will cover the three key advantages mentioned above in greater detail.
What is Open Insurance?
Open insurance refers to the practice of sharing data and information between insurance providers and other financial institutions through the use of open APIs and client consent agreements.
Open insurance is a branch of the larger open finance movement, which aims to make it simpler for financial institutions and financial service providers to share information and data with each other.
Insurance, and specifically life insurance, is a bit more personal and sensitive than other financial services. A key challenge for insurers to adopt open insurance policies (and, thereby, open finance) is how they can balance the use of advanced technologies with a personalized human touch.
Deloitte recently published its 2022 Insurance Industry Outlook report, in which it is stated that:
“Insurers are increasingly dependent on emerging technologies and data sources to drive efficiency, enhance cybersecurity, and expand capabilities across the organization. However, most should also focus on improving the customer experience by both streamlining processes with automation as well as providing customized service where needed and preferred.”
The Benefits of Open Insurance for Life Insurance Companies
Despite the hurdles that come with balancing the use of technology with the need for a well-maintained human touch, open insurance still presents many great opportunities for life insurance companies.
Here are 3 key benefits for insurers to consider when investing in open insurance technology:
1. Greater Innovation
The ability to share data between insurers, financial service providers, and everyone in between allows not only life insurance companies but the entire insurance industry to benefit from greater innovation.
To remain competitive in an increasingly digital insurance industry, insurers must find ways to continuously develop and release better services and products. Open insurance allows insurers to collaborate more, exposing individual companies to new and better ideas. Another way of enhancing the insurance services industry is through robotic process automation (RPA).
Additionally, this higher level of innovation enables life insurance providers to make monumental moves away from the fragmented legacy systems of the past. As a result, these insurance companies can boost operational efficiency while also focusing on innovating.
2. Enhanced Customer Experiences
At the heart of the ideology behind open insurance and finance is the need to provide clients with enhanced experiences that not only satisfy their needs but keep them coming back for more.
With powerful technology like AI and machine learning coupled with the data stream flowing from all participating institutions, open insurance offers clients the opportunity to unify their financial services. Moreover, clients can benefit greatly from open insurance, as it allows their insurers to provide much more personalized recommendations and products.
3. Improved Data Analytics & Insights
Along with enhancing the customer experience, the act of sharing data and information between insurers means that each institution can gain improved data analytics and, therefore, more powerful and accurate insights.
Data analytics and insights are important for insurers, especially during times when the price of healthcare and other related services is fluctuating frequently. However, what is most significant about the improved nature of data through the use of open insurance is how much simpler it is to provide customers with well-tailored solutions made to fit their exact needs.
From tracking consumer spending habits to making informed credit decisions, the data capabilities that come from open insurance are well worth considering.
For life insurance providers to obtain a secure role in the digital era of finance, it is crucial to adopt and embrace the open insurance model.
The key to getting the most out of open insurance is to have a reliable digital infrastructure that can support large-scale data sharing. Here at CPQi, we have the resources and experience needed to help life insurance businesses establish a strong digital presence, including end-to-end transformational services.
To get started on your journey into the realm of open insurance and finance, contact the CPQi team today.