Open banking has been transforming the financial sector, allowing for platforms to deliver customized digital products and the COVID-19 pandemic is set to accelerate this. It can ultimately help consumers better manage their finances and reduce person-to-person interaction, something that insurers are also increasingly seeking to benefit from, as well as gaining access to customer information, according to GlobalData, a leading data and analytics company.
Findings from GlobalData’s 2019 UK Insurance Consumer Survey indicate that only 18.6% of motor insurance customers chose to purchase motor insurance online via a smartphone or tablet. This is in contrast to the 49.3% of consumers who chose to purchase motor insurance via a PC or laptop.
Jazmin Chong, Insurance Analyst at GlobalData, comments: “The increased implementation of open banking and greater understanding of customers’ information will lead to an uptake of purchases through apps and mobile devices. This is due to the information exchange that insurers will have access to, allowing them to require less information from customers. It will also enable customers to use apps in a fast and more confident manner, as current app purchases still largely require extensive information that is more comfortable to fill out on a computer.”
ByMiles was one of the first insurtechs to implement open banking in January 2020, offering customized motor insurance premiums that only charge consumers for their usage.
Chong continues: “ByMiles sells insurance through both its personal app and website. But due to the unique aspects of its product, the provider needed to adopt open banking in order to understand the financial risks associated with potential new customers, particularly as its pay-as-you-go services could lead to fluctuating monthly premiums. It no longer has to rely on credit scores or extensive background information and can offer customers a much more accessible purchasing journey instead.
“Going forward, more insurers will seek to benefit from open banking through partnerships. The emphasis on saving consumers money, and mobile usage, in a post-pandemic world, where disposable income is down and distribution channels are digitalized, should make open baking thrive. This will lead to a reduction in direct information exchanges between the customer and the insurer, which in turn will make the purchasing journey less complex and more adaptable to mobile app-based systems.”