Why insurance firms need to adopt open data

Johanna Von Geyr, partner and EMEA lead banking, financial services & insurance at ISG, explains why insurance firms need to adopt open data.

Insurers that want to see the maximum benefit from digitalisation need to shift their culture and business practises to embrace the concept of open data.

Open data means being willing and able to share data with a variety of businesses and sectors. Doing this provides the insurer with greater insight into consumer need and helps them predict future demand with more accuracy.

For example, as the coronavirus pandemic started its first peak in March 2020, the South Korean government gave mask inventory and sales data to the public via an open API. Developers created apps that let consumers know which pharmacies had masks in stock — 22,000 of 23,000 pharmacies agreed to provide the data.

Of course, this requires a significant shift in business mindset. Traditionally, businesses – insurers included — would be reluctant to share data on an open platform where competitors could see and use it. One of the worries about open APIs, for example, is the creation of new rivals. We can see this in the financial sector, where traditional banks are vying with their digital-native competitors and non-financial companies, like Amazon, using open data to enter the sector.

However, open data is fast becoming essential to providing an exceptional customer experience, and it will become the norm. As a result, we’re seeing a growth in insurance platform services to support and facilitate open data.

The benefits of open data

Open data can have tremendous advantages. Using open APIs, insurance companies can:
Increase their potential customer base. For example, they can list their services and offers on comparison websites or have a mutually beneficial partnership with other businesses. In China, which is quite far ahead when it comes to open insurance, insurer AIA has partnered with WeDoctor. AIA benefits from access to 2,700 hospitals, 220,000 doctors and more than 15,000 pharmacies across China, while WeDoctor’s users (more than 110 million of them) can access the insurer’s products via the app.

Make the benefits of partnerships clearer. For example, car dealers, vets, travel agents etc., could register as affiliates and provide their customers with unique URLs that insurers can track and pay referral fees on.

Get clear data that lets insurers provide more competitive premiums. One example of this is the use of connected devices in delivery vans which can report on traffic and road surface conditions (among other things) and feed data back to the insurer in exchange for lower premiums. Another is health insurers (like Vitality) encouraging members to connect their fitness tracker and weight-management accounts to their insurance app in exchange for benefits like cashback, or partner offers.

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Insurers need to become familiar with open data

Insurers that continue to resist change for fear of their competitors seeing their data will eventually lose out to that competition.

Open data helps insurers prioritise customer experience. It’s not a matter of signing up with an insurer and sticking with them (talking to them only when you make a claim) for 20+ years.

Modern consumers want bespoke products that are useful for them as individuals. That might include automotive insurance that uses their data to provide the fairest premium for them – rather than penalising them for an entire demographic’s behaviour.

Customers want ‘paperwork’ to be minimal, and claims handled quickly. When using APIs driven by open data, insurers can get a much clearer picture of what the customer wants and how they can provide it.

Insurtech competitors use open data by default. Large insurers that offer many kinds of insurance (such as pet, life, home and contents) are seeing fresh competition from specialist, digitally-native insurers who can offer far lower premiums. Established businesses entering the market for the first time are also choosing a digital-first route (such as energy providers who offer smart home insurance).

Traditional insurers can embrace open data principles and partner with these providers (as Acko General Insurance has partnered with Amazon in India) or double-down — continuing to operate the way they have for decades. Consumers are becoming more confident in using apps and in switching providers, so any resistance to change is likely to do nothing more than alienate customers.

Technology will only become more interconnected and open. As artificial intelligence and data analytics becomes more common-place, insurers will understand more about how these technologies and processes can help them improve their operations and adapt their business models.

Right now, some insurers are using modern technologies to digitise claims processing process data intelligently, detect fraud, gain transparency around claims histories and prevent claims.

By becoming familiar with these technologies and embracing open data, insurers can not only stay competitive now but future-proof their businesses against changing customer needs.

Written by Johanna Von Geyr, partner and EMEA lead banking, financial services and insurance at ISG

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