Driving Open Insurance Innovation in Italy

Open Insurance is a new insurance practice that enables customers to share their insurance-related data with third-party providers and benefit from innovative InsurTech applications and services. 

There is no uniform definition of open insurance yet. In a recent discussion paper on open insurance, the European Insurance and Occupational Pensions Authority (EIOPA) reveals that it has so far considered open insurance in the broadest sense, covering “access to and sharing of personal and non-personal insurance-related data, usually via APIs”, and has sought to look at it from a “consumer, supervisory and industry angle.”

EIOPA recognised that there has been an increasing focus on:

1. Whether the market or regulator should facilitate an appropriate data ecosystem for the European insurance sector
2. To what extent the insurance value chains should be “opened”.

Such topics sound familiar to Open Banking aficionados, but EIOPA makes it clear that the overall consequences regarding open insurance might be different from those related to open banking. This is due to:

1. Sensitive information about health, sex, and political views that are typically included in insurance-related data
2. Such data combined with Artificial Intelligence raises concerns of further financial exclusion
3. The complexity of the industry itself and the economies of scale needed for functioning efficiently

Nevertheless, some countries around the world are adopting Open Insurance as one of the pillars of their broader Open Finance journeys.

Brazil, for instance, is undergoing an extraordinary transformation with the fast-paced modernization of its economic and social infrastructures.

Its open banking regime, which came into force 1 June 2020 and is being implemented in stages between February 2021 and October 2021, will include all services regulated by the Central Bank of Brazil (CBB), including banking, payments, credit, and foreign exchange operations.

Data on products and services related to investment, insurance and open pensions are in scope, but most institutions in these sectors are technically not regulated by the CBB.  For this reason, the Superintendency of Private Insurance (SUSEP) launched a public consultation on April 22nd to address the challenge of regulating Open Insurance in Brazil. The authority plans to use the feedback to publish five Open Insurance Manuals that set the technical and operational requirements of Susep’s Open Insurance regime.

That same day in London I met Fouad Husseini while he presented The Open Insurance Initiative (OPIN) to the audience. OPIN is an industry-led think tank aiming to lead the discussion regarding Open Insurance API Standards.

As most people in the sector know, data-sharing in Open Banking and Open Insurance happens through Application Programming Interfaces (APIs). OPIN wants to ensure the interoperability and compatibility of these APIs to create a vibrant and interconnected ecosystem, across borders.

Thanks to OPIN’s research, we know that only 32% of the data locked in insurance companies is currently being used. This data can be unlocked and used by InsurTech companies to create innovative solutions for consumers.

The think tank recently launched its Italian chapter – the OPIN Italy Working Group (IWG) – to manage the implementation of Open Insurance API Standards with a specific focus on ecosystems.

As Francesco Zaini from IWG says: “Even if we start from Italy, we don’t want to simply create an Italian flavour but rather cover areas that have never been explored by other members. Specifically, we want to cover insurance ecosystems.”

There is a large potential for digital ecosystems in the insurance industry. Currently, incumbent insurers are competing with new players that provide cheaper insurance products and a superior digital experience. It’s becoming all about the value-added services that you can provide alongside your official products.

But innovation isn’t child’s play, and insurance companies have their core business to attend to.

Professor Dr Markus Warg, Head of the Institute for Service Design (IfSD) in Hamburg and an ecosystem enthusiast, says that “To create new value streams, insurers should work with various actors across industries to augment their own product and service offerings and improve their overall customer-service propositions”. 

For example, insurance companies can go beyond just insuring risk and instead implementing preventive measures to avoid the disaster altogether. This adds a layer of protection for customers and helps Insurers avoid losses in claims.

The Italy Working Group aims to identify Open Insurance ecosystem use cases and later build the corresponding APIs in the API Playground.

The Playground will be based on a sandbox environment where developers can experiment and test the effectiveness of Open Insurance APIs, helping to determine the feasibility of implementing them across the Italian Insurance sector.

OPIN IWG has decided on two key areas of exploration: Home & Health Insurance.

Ranging from monitoring services, smart home, to security, comfort as well as home care.

Ecosystem services go beyond the possibility of attaching financial or insurance services to the sale cycle of a good (purchase, maintenance and sale).

The value-added services in the home insurance ecosystem are linked to the security and maintenance of goods that can be easily incorporated into them. Same goes for domestic activities: cooking (oh boy, Italy!), entertainment and comfort.

For example, checking the house temperature or the air quality can be done with an IoT sensor. Befreest, a startup that took part in the IWG, has launched a platform that monitors air quality through its hardware, which among other things, can also spot gas leaks, etc.

All this boils down to the idea of equipping insurance companies with tools and data that  help reduce the risk exposure.

We already know plenty of ways that Open Insurance can add value in the area of health insurance. I guess most of us recognised how digital products revolutionised healthcare during Covid-19. It’s probable that you or a person close to you used telemedicine services sometime last winter or booked a medical appointment using a booking management system.

To give an example, Cupsolidale, another startup that belongs to the IWG, has built a platform that enables the user to find and register for a medical visit.

It is impressive the amount of data that such platforms will be able to gather and, when properly anonymised, will surely help get a better understanding and make more informed decisions at the policy level.

To summarise, the IWG promises to be busy in the coming months and the Playground will help IWG participants to move from theory to practice quickly and efficiently.

We are looking to bring on board organisations belonging to two different worlds: the one historically related to insurance such as insurance companies, brokers and intermediaries that are already exchanging information with each other via private channels; and those new to the subject, whose core business is something else (e.g. utilities, IoT manufactures etc.) but who might find value in integrating to the insurance world to create ecosystems of services.

If you want to participate in this initiative or want to learn more, send a quick message to Luca Borella at luca@tesobe.com.