VIEWPOINT

2024

THE OPEN INSURANCECONUNDRUM: BRIDGINGI N N O VAT I O N & R E A L I T YTransforming an industry throughinnovation, collaboration & engagement

AUTHORS
Arjun Vir Singh

Open insurance — sharing insurer-held data andAndreas Buelow

capabilities within a specialized partner ecosystem

Ronald Engel— offers benefits to customers and industry players
alike. As a key enabler for embedding insurance
solutions within product and service purchases, it
provides customers greater convenience, flexibility,and personalization. For insurers, it allows for bettertargeting, efficiency, product/service enhancement,
and data accuracy. Yet there are significant barriers
hindering progress toward the open insurance
model. In this Viewpoint, we examine the building
blocks and priorities for overcoming barriers andmaking open insurance a reality.

Javier Mendiolea

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VIEWPOINT

WHY OPEN INSUR ANCENEEDS INSUR TECHSTechnology is crucial to making open insurance

Open insurance refers to sharing insurer-heldplay a pivotal role: they can prototype, test,

data and capabilities within a specialized

deploy, and adapt solutions at a pace traditional

ecosystem (see Figure 1). Similar to the banking

insurers find challenging. Moreover, insurtechs

sector, which is reshaping its field by enabling

are typically able to engage more frequently

third-party developers to create new banking

with customers than the traditional modeland “beyond banking” products and services,

allows. Collaborating with insurtechs not only

open insurance uses application programming

brings technological prowess but also createsinterfaces (APIs) to do the same for the insurance

a fresh perspective on product development

industry in all types of insurance (e.g., life,and consumer engagement throughout theproperty, auto, health). The reward for insurers

insurance cycle.

a reality, and insurtech start-ups, with their agile
frameworks and technology-first approach,will be twofold, as they will:

In addition to technology, open insurance requires

1. Become faster, more targeted, and more

a strong ecosystem developed around a specificembedded in their distribution and productpurpose. Insurance is not a standalone product;development through open insurance andrather, it exists only when a consumer satisfies

embedded insurance partnerships.

an underlying need or want (e.g., obtaining ahouse or car) that in turn requires safeguarding

2. Have access to better data and broader

in the form of insurance. Many options are alreadypartner ecosystems to enhance theirwell-defined, often with sophisticated digital

distribution width, underwriting, andstructures. Open insurance allows companies

claims management.

to tap into these as partners through existing

Both points will improve insurers’ total

ecosystems. In return, both expand their businessaddressable market, lower their customer-

opportunities and drive greater efficiency acrossacquisition efforts, reduce their claims cost(including fraud), improve their responsiveness totheir business models.

customers, and increase their capacity to manage
risk, which will, as a result, generate more value.
Figure 1. Openinsurance ecosystem
Figure 1. Open insurance ecosystem

PUBLIC DATABASE

Insurer B
niche line ofbusiness

Insurer A
multi-line

API

Claims manager
Third-party
financialmanagement tool
Ecosystem player

CustomerBrokerReinsurer
Data provider

Supervisory techs & regulators
Source: Arthur D. Little, Dealroom.co

THE OPEN INSURANCE CONUNDRUM: BRIDGING INNOVATION & REALITY

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VIEWPOINTBENEFIT S ACROS S
THE VALUE CHAIN
The benefits of open insurance are not just forincumbent or emerging businesses but also for

T O D AY ’ S C U S T O M E R S
S E E K G R E AT E R
PERSONALIZED AND
R E L E VA N T E X P E R I E N C E S

others across the value chain:- Insurers. Incumbent providers stand tobenefit across all aspects of the value chain,as open insurance will allow them to broaden
their product and service offerings, provide
more customized protection, and operate inunderwriting and claims management withmore accurate data. Moreover, open insurance
enables insurers to transition from only sellinginsurance to embedding the insurance productinto the underlying needs of the customers(i.e., corporates or consumers); we refer tothis as “embedded insurance.”- Customers. Today’s customers seek greater
personalized and relevant experiences.

Open insurance promises just that: better
engagement, more tailored products, realtime claims processing, and dynamic pricing
models. Access to a wider array of services
from third-party ecosystem providers
ensures a more seamless, closely integrated,customer-need-focused experience for
consumers as well as corporates. In addition,
insurers will be better able to understand how
needs change over time. Customers stand toacquire substantial value.

- Insurtechs and other third-party providers.
Innovative players will gain permissioned

access to the unique capabilities of insurancecompanies to understand price and carry risk,
allowing them to create new and relevant- Reinsurers. Reinsurers may gain significantly
from the advent of open insurance byleveraging more precise and dynamic risk
models developed from granular data.
This supports better underwriting and thecreation of innovative reinsurance products
tailored to emerging market needs. Enhanced
operational efficiencies arise from automatedand real-time data exchanges, facilitatingsmoother claims processes and reporting.
Additionally, open insurance ecosystems
offer strategic partnerships and global
expansion opportunities, enriching reinsurers’
portfolios and revenue streams. The resulting
transparency aids in regulatory compliance,
leading to a more robust and stablereinsurance market.

- Regulators. An open system fosterstransparency. Regulators can leverage
open insurance to gain a better view ofmarket developments, consumer reactions,and the performance of individual insurancecompanies. Moreover, open insurance willallow a specific class of insurtechs to develop
solutions to enhance the efficiency andeffectiveness of regulatory compliance,thus reducing friction and costs in the overallsystems. The regulators will be in control ofthe speed of the required regulatory changes.

products for customers within a short productdevelopment time. These innovators aim toaddress potential market gaps and enhanceand enrich the consumer experience. In doing
so, they will add substantial overall value tothe value chain.

THE OPEN INSURANCE CONUNDRUM: BRIDGING INNOVATION & REALITY

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THE OPEN INSURANCE CONUNDRUM: BRIDGING INNOVATION & REALITYARTHUR D. LITTLE

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OPEN INSUR ANCE FUEL S
EMBEDDED INSUR ANCEBARRIERS TO GROW TH

Open insurance is a catalyst for the growthslow to gain momentum. Insurtech as a market

and evolution of embedded insurance, wherelacks strong funding, which is one reason for its

insurance is purchased as part of a commercial

modest growth. In addition to the record declinetransaction for another product or service.

in investment in the insurtech sector, several

Embedded insurance opens the way for moreother factors have contributed to the slow

innovative, accessible, and personalized

adoption of open insurance:

insurance solutions. Improved customer
experience is a key benefit; customers can use
the same channel to arrange insurance at thesame time as purchase of the product or service.

Despite its potential, open insurance has been

- Mixed interest from incumbent insurers.

Despite the significant benefits mentioned
above, open insurance also brings potential
threats in the form of increased competition,

The ecosystem nature of open insurance

eroded brand value, and greater dependency

provides an ideal environment for insurers,on third parties. Many insurers operate on

technology companies, and service providers

older IT infrastructures that aren’t readily

to collaborate and cocreate tailored embedded

compatible with the demands of open

insurance solutions. For example, travel platforms

insurance. Migrating to new systems isuse customer data shared in open insurance

expensive, time-consuming, and fraught

frameworks to offer on-demand products thatwith operational risks. Given the significant

only activate during travel periods. As anotherup-front investment, ROI may not be

example, car manufacturers with access to

immediately apparent. Furthermore, open

driving-behavior data are already collaborating

insurance could level the playing field,with insurers to provide tailored embedded

reducing the competitive edge that larger

policies customized specifically for individual

insurers built over decades. Transitioning

driving profiles to improve the customer

to an open model will usually require

experience and provide more accurate risk

upskilling and re-skilling staff, restructuring

evaluations and pricing models.

departments, and rethinking business

Embedded insurance models are also readily
scalable, as they can easily integrate into various
platforms. For instance, small business platforms
offering tailored coverage can take advantage ofopen insurance principles to provide automatedcoverage to precisely address individual
businesses’ specific requirements. The synergy
between open insurance and embedded insurance

strategies, all of which can slow down the
adoption process. And as with any majorchange, open insurance requires a substantialchange of mindset for everyone involved, inwhat is traditionally a conservative industry.
An incumbent’s interest and approach
will depend on its strategic goals, current
capabilities, and vision for the future.

is evident in various sectors, from automotive
to travel to e-commerce, where embedded
insurance is becoming increasingly prevalent.

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ARTHUR D. LITTLE

VIEWPOINT- Regulatory and data concerns. Insurance isa heavily regulated industry. Open insurance- Limited ecosystem. For open insurance
to thrive, it needs a robust ecosystem ofraises concerns about data protection,

third-party developers and service providers

consumer rights, and industry stability.

specializing in specific customer needs. Some

Regulators must tread carefully and recognizeof these structures are still in their nascentthat the pace of legislative change doesn’t

stages, and many do not currently feature

always match the speed of technologicalinsurers and their ability to de-risk.

evolution. Moreover, for the insurer, data
breaches in an open insurance environment
could have significant repercussions,
impacting brand trust and potentially
incurring hefty penalties.

- Lack of standardization. Open insurance

necessitates standard protocols to ensure
data compatibility and seamless integrations.
Without industry-wide standards, it is hardto roll out protocols, which has led to a
fragmented approach across the insurance
landscape.

- Consumer awareness and trust. Though

BUILDING BLOCKSFOR PROGRES S
With these barriers to overcome, we cannot
expect that the adoption of open insurance will
happen overnight. To make progress, a concerted
effort will be necessary across insurers,
regulators, infrastructure, and service providers.
We recognize nine essential building blocks forthe industry to pursue (see Figure 2):
1. APIs form the center of open insurance,

the industry sees the potential, consumers’
current perspective might obscure it.
Changing awareness to recognize the valueof insurance in an open environment is aslow process.

facilitating seamless data exchange among
different systems and stakeholders. They
enable insurers to integrate their services
with third-party platforms for an enhanced
customer experience and to foster aninterconnected ecosystem for distributing
embedded insurance products. Companies
need to explore the increasing range of

Figure 2. Building blocks of open insurance

available insurance APIs.

Figure 2. Building blocks of open insurance

APIs

Regulatory
collaboration

Consumereducation &engagement

Data security& management

Standardization& interoperability

Cloud
infrastructure

Ecosystem
management tools

TalentMindsetSource: Arthur D. Little

Source: Arthur D. Little
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ARTHUR D. LITTLE

VIEWPOINTWE CANNOT E XPECTT H AT T H E A D O P T I O N O FOPEN INSURANCE WILLHAPPEN OVERNIGHT

and trustworthy; open banking regulations in
Europe under the revised Payment Services
Directive (PSD2) have inspired similar
frameworks in insurance to protect customer
data while simultaneously encouraging
innovation.

2. Data security and management practices
need to be further developed and enhanced.
Effective data-security practices protect
sensitive customer data and build trust
among customers while meeting regulatory
requirements. Data protection is more than atechnical necessity; it forms the foundationof customer confidence.
3. Key players need to develop and implement
better ecosystem management tools tooversee and manage all components of anopen insurance ecosystem, from coordinating
partnerships to tracking performance toensuring consistent operations. When usedeffectively, ecosystem management tools canenhance operational efficiency and encourage
innovation.
4. Industry players need to seek closer
collaboration with regulatory bodies. Thisis essential in a highly regulated market like
open insurance. Working in tandem ensurescompliance and creates an environment
conducive to innovation while shaping policies
to protect consumers and simultaneously
supporting the expansion of open insurance
models.
5. Connected with this, the industry
needs to accelerate the development
and implementation of standards andinteroperability requirements, to ensuresmooth integration across platforms
and stakeholders, allowing systems tocommunicate and share data efficiently, whileservices remain reliable and consistent. Strict
regulatory compliance requirements are also
vital to building customer trust. Adhering tosuch standards makes products more reliable

THE OPEN INSURANCE CONUNDRUM: BRIDGING INNOVATION & REALITY

6. Key players, especially traditional
insurance incumbents, need to invest in
the development of new talent, skills,
and experience in areas like data analysis,
cybersecurity, and digital marketing. A
talented, adaptable workforce of technicallyknowledgeable and creative thinkers is key
to a successful transition.
7. Consumer education and engagement
are central to adoption and perhaps oneof the most important building blocks ofall. Consumers must understand how open
insurance works as well as its advantages
and risks. An effective consumer-engagement
strategy ensures that offerings meet theirneeds and expectations.
8. A secure and robust cloud infrastructureneeds to be deployed and adopted. The cloudoffers the scalability, flexibility, and efficiency
required for efficiently managing massive
data sets and complex operations. The cloudalso facilitates rapid deployment of newservices while offering robust data analytics
capabilities and improving collaboration
across its ecosystem.
9. Last but not least, the leadership of key
insurance players needs to bring about a
new mindset, one that embraces change,
innovation, and customer-centricity. Without
this, open insurance will not be able to deliveron its huge potential. Open insurance’s
viability and successful evolution lie in theinterplay among these building blocks.
Each one is essential on its own but also
contributes to creating an interdependent
system that promotes efficiency, innovation,and customer-focused services.

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THE OPEN INSURANCE CONUNDRUM: BRIDGING INNOVATION & REALITYARTHUR D. LITTLE

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Open insurance in practice — Zurich Insurance & Swiss Re
Zurich and Swiss Re are both good examples

and collaborations with HealthLogix/HealthInsite

of large insurers that have embraced thefor mobile and Web-based heath solutions. Zurichprinciples of open insurance. Zurich proactively

also partners with AlphaChat, an Estonia-based

engages with insurtechs to cultivate essential

conversational artificial intelligence company.

capabilities in various domains, including healthtech/wellness, wearables, mobility solutions,risk mitigation (e.g., flooding risk, supply chain
resiliency), artificial intelligence (AI), digital
distribution, and fraud detection. For example,
Zurich has teamed up with Snapsheet, a US
insurtech firm, deploying its virtual claims
technology in Ireland with plans for global
expansion. Other examples include partnerships
with digital insurance companies such as Jetty(real estate) and MyPolicy (motor insurance)

Swiss Re embarked on its insurtech journey in2016, initially investing in a range of insurtechs
with both minority and majority stakes, and overtime transitioning to strategic partnerships.
Notable recent examples include Getsafe inGermany, Acko/Paytm in India, and Klimber Latam
Corp in Latin America. Health examples include
Shuidi in China, Biovotion in Switzerland, Granular
Insurance in the US, and Dacadoo, a Swiss digital
health-engagement platform.

THE K E Y ROLES OF
VC s & INVES TORS

invested in both data analytics and insurtech

Transformations of this scale will not happenof the insurtech. Clear exit strategies, whether

without adequate investment and funding, andexecuted through acquisitions, mergers, or public

venture capitalists (VCs) and other investors willofferings, can influence the trajectory of open

need to play a critical role. While macroeconomic

insurance start-ups. Investors can help shapeand geopolitical factors remain key factors

these strategies to ensure sustained growthin determining levels of investor activity, it isand industry impact.

undoubtedly true that success breeds success.
There are several ways that investors can help
shape the evolution of open insurance in apositive way.

start-ups could establish a partnership between
them, enhancing the open insurance capabilities

Investors can also add their weight and influencein advocacy for overcoming regulatory hurdles
and advancing industry policies conducive toopen ecosystem development, either directly

The most obvious investor role is providing theor by supporting industry consortiums. Focused

capital required for start-ups and incumbents toaction can make a real difference where

research, develop, and implement open insurance

investors are CVC arms of incumbent insurers

solutions. Financial backing will allow companies

or participants across an insurance ecosystem.

to hire talent, upgrade infrastructure, and deploy
solutions more rapidly. Beyond this, investors
can often add considerable value through their
expansive networks spanning industries, regions,and expertise. Start-ups can leverage these
networks to form partnerships, find clients, andgain regulatory insights. Investors, VCs, and/or
corporate venture capitalists (CVCs) can createsynergies by fostering relationships between
their portfolio companies. For instance, a VC

THE OPEN INSURANCE CONUNDRUM: BRIDGING INNOVATION & REALITY

Ultimately, investment from reputable VCs and/or the CVC arms of existing insurers serves asa stamp of approval, signaling to the market
that the venture and the wider concept havereal potential. Validation will, without a doubt,
enhance credibility, attracting additional
partnerships and customers going forward
and leading to a virtuous circle of change
and transformation.

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CONCLUSIONB R I D G I N G I N N O VAT I O N& REALIT Y
OPEN INSURANCE IS
N O T M E R E LY A T R E N D

Though still in a nascent state, open insurance is not merelya trend — it’s here to stay. The benefits are manifold, yet thebarriers to realizing these benefits are still very significant.
As with most industry transformations, there are no quick
solutions, but collectively the key stakeholders can start tobring about the needed shift.
The starting point is to seek wider acceptance of the need forchange across the value chain, especially among traditional
incumbents who are also the most exposed to the risks involved.
Evolving culture and mindset toward one more ambidextrous isfundamental — embrace innovation, creativity, and flexibility
while maintaining productivity and operational efficiency.
Developing new capabilities/skills and attracting new talent
are key to building momentum, as are building flexible businessprocesses and infrastructures to allow for new technologies,
market demands, and regulatory shifts. Data is the essential
fuel for open insurance, and action to further advance data
management infrastructure, standards, regulation, andanalytics is a prerequisite for progress. As the line blurs between
insurers and tech companies, a collaborative, open, andtechnology-driven approach will be the hallmark of successfulproviders. The industry stands at a precipice — its next decisions
will determine its evolution for years to come.

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VIEWPOINTNOTES

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