Library: R&I – ’Open insurance’ in financial ecosystems is growing. What else is on the horizon in 2022?

Executive summary :

The era of ecosystems and the rise of open insurance

Open insurance offers insurers strategic opportunities 

In today’s highly connected society, people no longer have to visit insurance agents’ offices to find out about offerings and sign up for their desired plans. Instead, consumers can perform self-driven research and even sign up for offerings with their smartphones.

Many of the emerging companies that blend technology and insurance offer highly personalised, user-friendly experiences.

Santenac believes that, due to the state of the industry, regulators will need to maintain an environment that lets people share their financial information with any firm in a secure and frictionless way. Such options will give customers better overall financial visibility.

However, Santenac does not suggest insurers should wait for regulators to develop and publish new rules. She recommends insurers push ahead and look for strategic opportunities in the market by connecting with partners.

She says insurers can monetise data streams, catch the interest of new customers and deploy new underwriting strategies by creating well-designed and executed ecosystems. The report clarified, “Based upon current trends, we expect ecosystems will become a major business model in the relatively near future. As is often the case, what feels innovative today will soon become a baseline.”

One recent example of pursuing new technologies through partnerships concerned Sapiens International Corp., an insurance software company. It collaborated with Charlee, an artificial intelligence provider that uses algorithms to show litigation propensity and high-cost patterns in customer claims.

Jamie Yoder, North America president and general manager at Sapiens, said, “Charlee joins Sapiens’ expansive partner ecosystem, through which we have a strategic imperative to constantly search for the latest innovations and empower our customers with the most innovative capabilities.”

Moving Forward With Care

The EY report also contained some cautionary content for insurers that think moving to an ecosystem model will be a quick transition.

“To succeed, ecosystem business models need strong leadership from the top and a clear and executable ecosystem strategy based on their current market position, brand value, business models, talent pool and level of technology sophistication,” the report said.

However, it noted, “Despite the clear upside of ecosystems, most insurers are still working to develop the necessary tech and data capabilities, navigate distribution constraints, and address organisational and cultural impacts.”

Santenac was not alone in her expectation that ecosystems would become more popular in the insurance sector.

A PwC report echoed that sentiment and said the COVID-19 pandemic had accelerated the push to create them. It also mentioned that ecosystems give insurers ways to move beyond the traditional insurance model and strengthen customer relationships.

Insurers Increasingly Looking for Creative Ways to Mitigate Climate-Related Risks

People in the insurance and risk management industries are no strangers to helping clients get equipped for facing the worst “what-if” scenarios.

Certain industries have more inherent risks than others. However, specific threats will continue to mount regardless of a company’s line of business. Climate change will likely accelerate or trigger many of them.

As Santenac mentions in this report, climate change has caused insurers to investigate innovative ways to mitigate the associated risks they face now or might soon. Some have considered parametric policies and carbon offsets to reduce physical climate change risks.

Actions with Greater Meaning

Showing a united front could also help make progress in the battle against climate change. In 2021, eight of the world’s top insurers created a net-zero emissions alliance.

The EY report recommended that insurers engage in meaningful, near-term decisions to show they understand their roles in creating a more sustainable economy.

It suggested linking action plans to specific targets and creating quantifiable metrics that indicate whether a company’s performance has become more sustainable. Besides showing the progression toward green targets, the report advised that chosen metrics relate to risk exposures and how the business creates value.

Another suggestion from the report was to make a company roadmap that shows how insurers’ environmental and social governance (ESG) strategies impact various parts of the business. It should clarify how they will carry out ESG plans.

The coverage of this trend noted that reporting and disclosures would become standard practices.

The report said companies that prioritise transparency will experience more customer loyalty, improved stock market performance and easier capital access.

See the full report for more…

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