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The open insurance paradigm offers new possibilities.
It will help reinvent the traditional bancassurance business model and design innovative offerings. Data is at the core of open insurance, and data harnessed from ecosystem players offers banks opportunities to expand the bancassurance portfolio to include insurance products focused on individual customers’ needs, besides adjacent and contextual financial services. This, in turn, will help banks enhance customer engagement and cement loyalty through hyper-personalized propositions across the customer lifecycle.
To ably orchestrate value-chain services by leveraging ecosystem partnerships, banks must define the key structural aspects of a resilient, multi-sided, and digital bancassurance model. We propose an ecosystem-aligned bancassurance platform that can empower banks to gain unconventional insights and co-create contextualized offerings to gain a competitive edge.
Open insurance is an evolving concept, which is gaining wider attention in the European Union (EU).
Data is critical to successfully adopting open insurance given its importance in the insurance value chain across customer proposition, risk pricing and actuarial decision-making, policy and claim administration, and customer servicing. Open flow of data among participating players—both insurance and non-insurance firms—helps design contextualized offerings for customers’ unique needs by using personal, non-personal, traditional, and non-traditional (alternative) data insights. Also, interconnected value chains and new partnerships help identify new business use cases across the insurance industry. Adopting open insurance, however, comes with risks and will require insurers to strike a fine balance between risks and benefits. A prime use case of open insurance is bancassurance—the open insurance paradigm has the potential to significantly reinvent the traditional bancassurance business model. Easier data exchange among ecosystem partners and new insights can expand the horizons of bancassurance to offer products such as loans and investment and wealth advisory that go beyond insurance.
The open insurance paradigm offers the possibility to create a multi-sided platform or digital ecosystem.
The platform will connect different customer segments, aggregate products from partners through efficient intermediation, and unlock value through the network effect (see Figure 1). Open insurance has the ability to impact different areas in the insurance space, particularly bancassurance, where it has significant potential to create new business models and design innovative offerings. In addition to new distribution partnerships, open insurance facilitates a connected, digital bancassurance operating model and equips banks with the ability to deliver a simple, holistic, and integrated customer experience. It envisages a shift from monolithic point-to-point processing chains to orchestrated ecosystems to offer unconventional value propositions.
Open insurance envisages a new ecosystem-based bancassurance model. (see Figure 2) It helps banks in addressing end-to-end customer needs, delivering an integrated customer experience, gaining full share of customers’ wallet, and driving loyalty while enabling customers to pursue their purpose. Anytime, anywhere, democratized access to adjacent services expands the service potential beyond insurance to cover the entire gamut of the financial services lifecycle. Thus, the core construct relies on an interconnected ecosystem offering services covering banking, insurance, wealth, health, and lifecycle financial needs of the customer. These offerings can include safety or risk mitigation support for mortgaged properties or breakdown support for auto insurance. Similar offerings can be designed for health insurance (telemedicine, healthy living, and health protection tips) and accident insurance. In addition, embedded insurance is a new value enhancer that can help craft new, contextualized offerings bundled with assurance features.
By leveraging diverse transactional, demographic, and behavioral insights of individual customers, banks can identify event-driven engagement opportunities. For example, payment to a travel portal can be a potential case for offering travel insurance. They can also explore cross-sell and upsell opportunities across insurance, wealth, personal finance, health, and life needs. Event-led insights, customer self-service, and self-design of personalization features drastically change the entire engagement matrix. This can be enabled through basic functional features such as offering options covering subscription type, premium frequency, coverage period, co-pay, add-on riders, protection, and exclusion terms and so on. Exchange of data insights between banks, insurers, and other ecosystem partners such as third-party claims management services and insurtech companies can enable a whole new level of intuitive customer experience and help overcome limitations posed by channel-specific constraints, product complexities, product unbundling challenges, and inadequate customer awareness present in the existing model.
What banks must do
Insurtech players and startups are at the forefront in creating innovative products.
These new-age players are continuously innovating to offer new value propositions, improve customer experience, and ensure frictionless processes across the value chain. To thrive in this competitive space requires banks to formulate a well-calibrated strategy to transform business processes and IT platforms and build new capabilities required to move to an ecosystem-based bancassurance model.
Banks must comprehensively define the key aspects of a resilient, multi-sided, and digital bancassurance model. To build a forward-looking, ecosystem-aligned bancassurance platform, banks will need to focus on:
Customer journey: Define customer journey maps and ways to achieve end objectives across banking, insurance, wealth, and other related services for various client segments.
Business KPIs framework: Assess dimensions of impact on business and operating model and identify levers to achieve key performance indicators (KPIs) of the integrated bancassurance model.
Integration with ecosystem partners: Ensure integration of business processes with those of ecosystem partners to design client-centric services with in-built capacity to customize product features and offer unbundled pricing options.
Adaptive workflows and a shared data platform: Enable digitalized client profiling, due diligence, onboarding, and lifecycle engagement with contextual propositions, product design, risk pricing, and claims processing.
Digital operating model: Adopt a completely digital operating model to enable intuitive user experience across channels by deploying intelligent virtual assistants to support the customer journey. Design contextual offerings based on insights into customers’ life stage and goals and offer self-service tools for premium calculation, risk assessment, customization, and adding features.
Data integration and insights model: Build an integrated data ecosystem with ecosystem players to gather insights for product alignment, propensity-based predictive modelling, risk and suitability assessment, pricing models and product features as well as policy administration and service interventions. In addition, a connected ecosystem that delivers corelated and contextualized insights using data from the ecosystem players will enable the co-creation of new personalized products and services.
Platform capabilities: Envision an end-to-end platform and define a roadmap, establish key milestones and specified timelines to achieve them, and identify resources to build the platform. Some crucial points to be kept in mind include:
Process automation and data integration to support adaptive workflows across partners
Value realization from a plethora of data sources such as banks, insurers, and third-party data providers
Artificial intelligence (AI)- and machine learning (ML)-based intelligent tools for self-adaptable processing
Microservice architecture and application programming interface (API) frameworks for service integration with ecosystem partners
Innovative technology tools across telematics, geolocation, internet of things (IoT), imaging, facial recognition, and voice instruction among others
The way forward
The open insurance paradigm significantly alters the traditional bancassurance model.
To remain relevant and hold their competitive position in the bancassurance space, banks must define and implement a holistic roadmap to realize the vision of ecosystem-connected bancassurance. While the transition will come with its own set of challenges, it is well worth the effort given its potential for generating new revenue streams and enhancing customer experience. Quick action is imperative, and banks that move fast will benefit significantly from the first-mover advantage.