The data sharing at the core of the open banking revolution is also underpinning the technological shift taking place in the insurance industry. The concept of open insurance is very similar to open banking and is seeing insurtech companies emerge to transform this sector. In some cases the two industries are working together to maximise the efficiency of the services they offer and tailor-make products for consumers and businesses. For example, a bank can help an insurance company with up-to-date contact information on a customer, with identity verification, with risk assessments during the application process and with claims management.
Three insurtech use cases are particularly interesting and are enabled by the internet-of-things. Firstly, consumers can benefit from lower premiums on car insurance by having their journeys constantly monitored via technology built into their vehicles or via apps on their phones. In such an interconnected scenario safer driving behaviour means a cheaper insurance policy. Insurance companies can also be proactive in the case of a breakdown, give a driver statistical insights into their journeys, prevent insurance fraud and give feedback on high risk areas based on robberies, bad weather or accident data.
Secondly, smart utility meters in a property can give real-time updates to an insurance company on consumption, leaks, fires or burglaries. This then enables a household to receive personalised insurance policies and to get advice on how to lower their premiums. It also means that in the case of an emergency such as a fire, the insurance company can get help before the situation escalates. This saves the insurance company money, limits the damage on the property and in the case that the family isn’t home, alerts them immediately to what is happening.
Thirdly, wearable sensors have the ability to change the way health insurance is underwritten. Smart watches and phones have become increasingly popular with consumers who want to monitor their fitness, health and sleep patterns 24/7 and improve their lifestyle. By connecting these sensors to their health insurance provider, a consumer can have their policies personalised. Someone with normal blood pressure, a normal heart rate and preferential fitness habits might be able to lower their premiums. Many different types of data could be collected and a person might not even need to remember to wear a watch or carry a phone since temporary tattoos or clothing with inbuilt sensors are likely to be more popular in the future.
In a similar way to open banking, open insurance gives consumers much more flexibility and control over their policies. It also means more competition between insurance companies and the opportunity for businesses from many different sectors to collaborate and benefit from increased revenue. However, in a connected world it’s also important to educate consumers on how secure the data is and to give them options beyond simply ‘sharing’ or ‘not sharing.’