On 28 January 2021, the European Insurance and Occupational Pensions Authority (EIOPA) launched a consultation on what is known as ‘open insurance’, namely the access to, and sharing of, insurance-related data.
EIOPA has also published a discussion paper in which it considers whether and the extent to which insurance value chains can be opened up through the sharing of data to insurers and others in the distribution chain. The discussion paper considers what types of data might be shared, taking into account new sources of data available for pricing risk (such as information available through social media) and considers data protection and cyber security issues.
The review of the potential for an ‘open insurance’ market comes after a similar exercise in banking. Recent policy initiatives such as the General Data Protection Regulation (GDPR), Payment Services Directive (PSD2) and the EU Digital Finance Strategy recognise the importance of data-driven innovation for growth while recognising the need to protect data ownership and privacy. The Digital Finance Strategy will present a legislative proposal for an open finance framework in 2022. Open insurance could form part of these proposals.
EIOPA believes that a framework for an open insurance market might introduce standardisation and potentially compulsory data sharing requirements for the insurance industry (based on the explicit consent of the customer) and could be developed to ensure better consumer protection. Of course open insurance also increases risks such as data security, cyber risks, interoperability challenges, liability, ethical and broader consumer protection issues.
Some limited infrastructure already exists to enable greater access to data, for example the provision of white-labelled ‘insurance-as-a-service’ solutions using banking data, providing open application programming interfaces (or ‘APIs’) and the use of dashboards/aggregators.
The main areas of the consultation paper include:
- open insurance definition and use cases
- risks and benefits of open insurance
- regulatory barriers
- possible areas to consider for a sound open insurance framework
The consultation is open until 28 April 2021.