Insurers know they face unprecedented challenges. This was confirmed by Accenture’s 2019 Disruptability Index which—in our analysis of more than 3,000 companies across 20 industries—found that insurance is one of the sectors most vulnerable to future disruption.
In this complex and competitive environment, carriers recognize the importance of ecosystems as a source of growth and value. New opportunities exist for partnerships and distribution in wider cross-industry ecosystems, and new customer-centric digital platforms are being built that are transforming customer value propositions.
But to truly unlock the benefits of ecosystems for both insurers and customers, and to realize their growth and value potential, there’s a fundamental building block that insurers have yet to embrace: open insurance.
Open insurance is the sharing and consuming of data and services across multiple industries by means of APIs which are externally accessible and openly consumable. Open business models based on APIs are already transforming many other industries, including travel and banking.
Taking lessons from open banking
Open banking has already had a transformative impact, as competitive pressure and regulatory action causes banks to open their data to third parties.
We estimate that by 2020, €61 billion (US$67 billion) or 7 percent of the total banking revenue pool in Europe will be associated with open banking. No fewer than 99 percent of banks plan to make major investments in open banking initiatives.
Unlike with open banking, there’s no regulatory impetus currently driving the growth of open insurance. Fixed attitudes and structural obstacles are hampering its development. Corporate and consumer data-privacy concerns, organizational constraints, legacy technologies and a lack of capabilities are among the key barriers.
Insurers are still in the early stages of experimenting with open insurance. But we believe those that sit on the sidelines could find themselves at risk. The European open banking journey showed that banks that chose not to embrace open banking created openings for fintech startups to establish themselves and seize market share.
A gulf between leaders and laggards
Insurers today face similar risks. To realize the benefits of their ecosystem strategies and position themselves to thrive in the years ahead, we believe they need to embrace open insurance.
Our recent Future Systems survey found that 63 percent of insurers claim they are effective at employing platforms or teams to connect with competitors and ecosystem partners using plug-and-play integration and APIs. Yet there’s a huge disparity between insurance “Leaders,” the top 10 percent of companies that are building future systems, and “Laggards,” the bottom 25 percent that are investing in—but not scaling—innovation. Ninety-one percent of Leaders say they’re connecting effectively with competitors and partners, compared to only 32 percent of Laggards.
Open insurance offers tantalizing benefits. It allows insurers to build innovative digital propositions and business models, develop new ways of connecting and engaging with customers, and drive operational improvements.
As disruption sweeps the industry, open insurance gives carriers the opportunity to enhance their traditional offerings and explore innovative new revenue streams. What’s more, it gives them a powerful competitive advantage over peers that are slower to respond. Those carriers that fail to keep up with the open insurance innovators not only turn their back on untold opportunities for new value creation; they also face continued erosion of their market value.