Open finance, the new open banking

Allowing third parties to access business data will provide far more detailed information so brokers can more easily determine what insurance products are needed. 

In addition to pointing businesses in the right direction for products, the data could help a business manage a claim more efficiently. Businesses could load information onto a smartphone app and send it directly their insurance company.

Data from insurance could also feed into further business assessments. For example, the data may determine how environmentally friendly a business may be. It can look at details of the purchases made in the bank accounts and recommend changes for better practices. 

Through open finance it’s suggested that businesses will, to some extent, be able to better understand their entire insurance portfolio. The open finance service can act as a digital broker and look at whether they have the best balance of risk transfer and risk management for their needs. 

But with the introduction of digital brokers this raises the question of who will own the customer interface and be the first point of contact for the client? There’s a risk that the process may become so data driven that no humans ever touch it. 

Brokers need to decide where they want to sit within this process. Do they want to only look at traditional channels of advice e.g. face to face? Or do they want to compete in this digital space where skills, knowledge and experience may need to be delivered digitally? 

Ultimately, brokers will need to think about whether having access to data through open finance builds a better and more informed picture of their client's needs and delivers a better outcome for them.

Just because third parties get a glimpse into a customer’s account it still may not reflect the full picture of their financial position. For example, it might not show what their mortgage position is, or how much they're spending, or what they're insuring or how they're insuring it. 

But if the business allows access to more data they may see a bigger change. The end consumer benefits greatly because they're getting a lot more value out of the data they’re sharing. 

There's lots of potential ways open finance may help people and one way is by speeding up the process of buying insurance and make the decision making more accurate. 

However, it may not be as straight forward as this. There tends to be more subtleties that distinguishes insurance from other financial products. There are nuances to insurance and it tends to be more than just a matter of numbers.

Whilst insurance is quite different from other financial products in the banking sphere, lines of business within insurance are different from each other as well. And so, the commoditisation of something like car insurance could be attractive to the prospect of open finance. Whereas, businesses may require something more nuanced for other products so the advice of a broker can be extremely effective.

The access given to third-parties to suggest financial products and services may pre-empt the needs of a business. 

Looking at insurance, businesses can understand where they aren’t covered when they may think they are and help them address that. Pre-empting insurance needs may reduce the likelihood of underinsurance. 

The volume of data is increasing, and a potential risk is that the gap between a very risky customer and not very risky customer may keep growing. This growth could lead to the point where they become completely uninsurable or insurance becomes unaffordable. 

Bridging this gap between customers may become difficult. The majority of customers may say that they want to understand their exact risk and pay a fair price for it. However, there are customers who want their insurance pooled in order to get a fair price that way.

There will be differing levels of data businesses are willing to share. They may want a degree of control in the process and understand where the data is flowing through the system.

Brokers can guide customers through the ethical questions and processes so they can gain the benefits of open finance.