General Insurance (GI) is ready for open banking – and here’s why…

Published July 2022

Some say open banking isn’t ready for the insurance industry… 

In this article, we explore open banking use cases that challenge and provide evidence against this misconception. 

Before we get stuck in, it’s worth noting that this article is being written while we are on the cusp of the emergence of open finance. This is where more data points will become available, enabling access to savings, investments, pensions, mortgage data, and more. 

Another point to note is that the end-user (eg, account holder) must consent to any data being accessed from their bank. This data is read-only, and the end-user is always in control of who and what data is being accessed. In addition, all payments are consented to by the end-user, making open banking secure and reliable.


The power of data for the insurance industry


Improved customer experience

We all have experienced the irritation of needing to key in data at some point. And it’s especially frustrating when you find yourself having to key it in twice due to a poor user experience. An example of this process is when switching from one platform to another and the data not being carried across properly. 

Open banking data can substantially improve the customer experience. Through customer consent, you can use the data held within the source bank, and in real-time, auto-populate such details as their name, address, and contact information. This not only reduces customer friction during the onboarding journey but gives you confidence in the data’s accuracy. This data can also be used to complement existing Know Your Customer (KYC) checks, with the added benefit of the information being current. 

To further enhance customer experience, you could use open banking data to retrieve bank account details to automate the completion of a direct debit mandate. This negates the need for any manual entry, thus avoiding mistyped digits from customers or office staff. Using open banking in this way significantly reduces chargebacks and the need to contact the customer about something that may not be their fault.


More detailed, in-depth customer profiles

For years insurers have used traditional data points to create customer profiles and segments to understand risk. The hope is that at the end of the year they have underwritten more good business than bad. But what if you could understand the risk profile at an individual level and even monitor that risk – in real-time? Or even create bespoke products for an individual’s specific needs? 

Through open banking, you can access granular transactional information to create insights of the likes never seen before. These insights can help you drive better underwriting decisions, resulting in your book of business being more profitable. 

The information gained can help you determine a customer’s current premium, their likelihood to claim, as well as a more informed and personal risk profile based on their spending habits and behaviours. Where you once declined an individual, you may actually insure them. Likewise, where you once insured an individual, you may decline them, or adjust the pricing accordingly.


Enhancing the claims processes and informing fraud detection

Continuing on the theme of open banking insights, this data could support claims investigations as well as flag possible fraud.  

To complement existing methods of accessing a claim, the granular data could help to determine whether an insured is claiming for more than they should. For example, the data could highlight a regular income, yet they are claiming to be unable to work; or an injury claim yet they are still able to socialise and shop on the high street.  

Likewise, the data could reveal that in the lead-up to a claim they made some irregular purchases, which based on historical transactions, were out of character. 

This information is all in real-time, meaning you can make more informed business decisions and flag potential fraud much sooner. 


The power of open banking payments


Fewer payment fees, less processing, more premium

Traditional payment methods come with a series of additional costs such as card processing and transaction fees. For example, on an average car insurance premium of £639 for a 35-year-old* the processing fee**, excluding all other charges, could start from £8. 

By switching the payment method to open banking, the total transaction fee becomes pence not pounds, creating more than a 90% saving. If you scale that across 50,000 transactions, that could be a saving of over £350k on processing fees alone. 


Recognise funds faster with open banking

As open banking is an account-to-account payment, this means there is no middleman, resulting in you and your business receiving funds faster. The funds can be seen on the same day, even within minutes.   

This allows you to recognise the funds in your accounting system much faster, enabling the business to make improved decisions without having to wait days if not weeks for funds to arrive.


If this has raised a few questions or you would like to explore open banking with us, please get in touch. We have the knowledge, product, team and experience to get open banking data working for you.


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