Open banking refers to the process by which banks allow the use of Application Programming Interfaces (“APIs”) to enable third-party developers to build applications and services around the financial institution – think about those spending apps that connect to your bank account and tell you to stop spending so much on coffee or designer handbags.
Not to be outdone by the banks, insurance companies in Latin America are now jumping on the ‘open’ bandwagon. Open insurance will see the industry providing services and data to partners, communities and start-ups with the primary focus of creating new services, applications and business models.
Brazil plans to launch a data-sharing system for the insurance industry on 15 December 2021 which is expected to be fully operational by June 2023. Consumers will be able to share their data with other insurers and third parties and will also integrate their systems with the Central Bank’s open system.
To this end, Provider IT, an IT consultancy for the insurance industry, is preparing to launch a solution that will support the established regulation in Brazil. Cesar Salema, CEO of Provider IT gave us more insight, “With the experience we have in the insurance market, we will launch in the coming months an API portal to facilitate the adaptation of companies to the new rules and help brokers to build the best solutions for their customers.”
The former VP of Latin America at an Italian insurance firm explained, “Open insurance brings a series of opportunities for the development of new products and services by third parties. This includes the issue of insurance aimed at the driver’s needs, such as protection against third parties, protection against civil damages, civil liability, protection against accidents caused by third parties etc.”
“Open insurance brings a series of opportunities for the development of new products and services by third parties.”
Former VP Latin America, Italian insurance firm
The Superintendence of Private Insurance (“SUSEP”) recently changed the rules for the treatment of automobile insurance in Brazil, giving more freedom of choice and the creation of products around customer needs.
Brazil’s regulatory environment is advanced by regional standards. There is legislation addressing issues that are still incipient in other countries, such as the issue of extended warranty insurance for household appliances, guarantee of instalment payments in case of loss of income, daily insurance for travel to highly dangerous places etc. Therefore, it is likely that other Latin American countries will follow Brazil’s example, but different regulatory environments may make it complex to implement.
Thus, open insurance will allow the industry to understand evolving customer trends and rising competition from digital players. Change breeds fear though, and some traditional insurance companies will see this as a threat, according to an insurance IT executive, “There will indeed be high resistance from the large insurance companies, however with the demand for specific products for customers, they will have to adapt.”
“There will indeed be high resistance from the large insurance companies, however, with the demand for specific products for customers, they will have to adapt.”
Insurance IT executive, Brazil
From the point of view of smaller companies, insurance techs and banks, this situation becomes a unique opportunity to learn from the data. They will look to build new products and, together with the Open Banking model, offer products that meet customer needs by allowing them to pay only for what they need, when they need it.