Open Insurance in Brazil: on the road to Open Finance
In parallel to the national Open Banking program (officially known as Open Finance), another movement is the topic of heated debate today: Open Insurance. The Brazilian insurance regulator envisions a new Open Insurance System and published initial requirements in Dec. 2021 (“personal data” to come later in in Sept. 2022).
As expected, the aim is to enrich the Insurance ecosystems with data shared by end-users (consent rules apply). This in turn will open business possibilities and much expected frictionless services.
The comparison between the Open Insurance and Open Banking / Open Finance programs is inevitable. Yet, distinct market dynamics should be considered:
- Market penetration is significantly lower compared to banking (only 50% of the population rely on some form of insurance)
- Sales and distribution rely heavily on in-person brokers (routine tasks consume a significant part of working hours)
- Providers tend to lag behind banks in API programs (focus on service consumption as part of legal norms)
The opportunity is right in front of us for increasing market penetration, freeing brokers from basic transactions, catching up with banks on the “ API as a Product “ concept, and much more.
Today’s brokers will certainly add value to the system by focusing on more analytical activities. This is the big picture to keep in mind when discussing the future of Insurance. After all, the Covid-19 crisis reinforced the fundamental importance of this segment, and the need to continue its modernization process.
However, it is no secret that most insurance players have responded to the program with caution at best. Current discussions revolve around the legal validity of the requirements and whether participation is mandatory. Such concerns perhaps miss the program’s key role as a means of establishing common standards and fostering customer-focused innovation.
Meanwhile, service providers that continue to advance in the digital journey (including API projects) will have a head-start on the competition.
Along this line, there seems to be no return from the current trend to complement traditional products with value-added services (car rentals, road toll tags, assisted maintenance… and digital wallets!) The power of AI and Analytics increasingly show the ability to alter the competitive landscape altogether (precision insurance). Insurtechs continue to thrive with focus on alternative experiences and subscription models. This can all be accelerated by a modern system environment and flexible integration solutions.
Research indicates that 79% of Brazilians see open banking as a beneficial movement. Time has come to expand the concept toward insurance and to build the true future of Open Finance.
Originally published at https://blog.axway.com on May 3, 2022.