Endava: the era of ecosystems and the rise of open insurance


THE AGE OF ECOSYSTEMS AND THE RISE OF OPEN INSURANCE

WHAT IS AN ECOSYSTEM?

An ecosystem is when multiple participants work in harmony for the benefit of all. On June 29, 2007, Apple launched its iPhone on June 29, 2007. People were impressed with such a simple and powerful mobile device. However, it wasn’t until a year later, on July 9, 2008, when Apple created the App Store, that the true power of an ecosystem would kick in. You now had thousands of developers building apps mobiles. Apps were useless without the iPhone, and the iPhone wasn’t as appealing without the apps.

What does an insurance ecosystem look like? This can manifest in different ways. In the automotive industry, it is the car manufacturers, insurance companies and maintenance/repair shops that all work together as a seamless whole. In healthcare, it is healthcare technologies, medical providers and health insurance companies that work together.

WHAT IS OPEN INSURANCE?

The exchange of data between all players is one of the main conditions for the existence and functioning of an insurance ecosystem. This is where the idea of ​​Open Insurance comes in. It is a theoretical standard that allows the exchange of data between all parties involved. There is a predecessor to this idea in the guise of Open Banking, which is a standard that defines how application programming interfaces (APIs) should be designed and built so that anyone can trade data with banks. It achieved strong industry adoption and was widely considered a success. This has made it possible to offer new services to both banks and their customers.

How could Open Insurance transform the insurance industry? In the age of an ecosystem, the process of an automobile claim could be largely automated. Sensors in the car (installed by car manufacturers) register an impact. You will then receive a notification on your mobile phone indicating that it seems that you have been the victim of an accident. You confirm you have and take some photos of the damage, which are then automatically sent to the insurance company. The insurance company sends the photos and details to a number of repair shops, selects the quote that offers the best value for money and sends a tow truck to collect your car or sends you instructions on your phone or where take it. The repair shop repairs the damage and alerts the insurance company, which then quickly pays your claim into your bank account. All of this is done with minimal effort on the part of the client.

THE CHALLENGES OF OPEN INSURANCE

While user journeys like this are great to implement, they present a number of challenges. Exchanging data between all the different entities is currently difficult at best due to proprietary systems, lack of industry standards and legacy technologies. Additionally, most auto repair shops use little more than email in terms of computer systems.

What made the adoption of Open Banking so successful was that there was legislation that supported it. There is currently no such mandate for Open Insurance, which means this is all a voluntary thing, especially since there is no industry standard set yet for exchange insurance data. However, it won’t be long before regulators finally catch up to this idea.

Although we didn’t see any entity piloting Open Insurance, we found that those who combined the principles of Open Insurance with technology created some interesting solutions. These range from new ways to create risk models to automating part of the claims journey. All of this translates into benefits for both the insurer and its customers.

FINAL THOUGHTS

Although Open Insurance seems like a way out, we encourage you not to wait for it before taking action. We are already seeing trends in the insurance industry that could be precursors to this. A number of insurance companies we work with are beginning to adopt an API-based approach to data exchange. Work has been carried out around the creation of hubs and centralized portals, which could serve as a basis for defining certain standard interfaces. And we see more and more third parties becoming more technologically capable. If you haven’t started your API strategy and journey to Open Insurance yet, we’d love to help.

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