Open Insurance (OPIN) can be defined as a set of rules and actions designed to ensure more openness throughout the insurance market. If that sounds good in theory, it is even better in practice. OPIN regulation is about promoting data security, a wider choice of solutions, and above all, innovation.

This post was originally published in Sensedia.

The benefits of open insurance afford greater transparency and financial inclusion within this market, as products become more flexible and tailored to each client’s needs. It also increases competitiveness among insurers and guarantees a more dynamic insurance market.

For example, when clients, who are the proprietors of their information, wish to take out insurance, they can decide whether the data in company X can be shared and used by company Y to ensure they receive the proposal that best suits there needs.

Additionally, Open Insurance should already be linked to the National Financial System (“SFN”), as occurs with Open Banking, and be part of the Open Finance ecosystem, which seeks to integrate several sectors and provide a wider range of solutions to the market.

For these stages to be completed securely and with the best user experience in mind, insurance APIs are critical for Open Insurance strategies, as they guarantee open standardisation across all processes.

Implementation Stages for Open Insurance

(Dates are as per information available up to the time of publication of this text, and may be changed by the regulatory bodies)

According to the Superintendence of Private Insurance (“Susep”), which regulates the Insurance market in Brazil, this process is scheduled to take place in 3 stages, starting in 2021 and ending in mid-2022. Each of these stages is described below.

Stage 1

The first part of this proposal is scheduled to begin on 15th December 2021, At this time, leading insurance companies will allow access to their general product data, such as prices, type of solution and negotiation terms. It is worth noting that client information will not be shared at this stage.

At this stage, APIs must be used to connect the interfaces of different systems of the participating companies and communicate directly with Susep, which includes sending metrics and performance data related to service channels, products, and services.

Stage 2

The second stage is scheduled for 31st May 2022 and involves the exchange of user information by the insurance companies. In other words, with the client’s permission, insurer X may request information from insurer Y to create a more appealing product offer.

Stage 3

In the final stage, scheduled to start on 31st July 2022, participating companies can begin contacting their clients to offer products and services with a focus on improving their clients’ experience with the institution.

One of the pillars of Open Insurance is ensuring a more democratic and empathetic market for clients. In this way, all the integration proposed by Open Finance will provide more solutions to people in different situations and ensure a more inclusive and open future, as well as boosting the economic and integrated development of the insurance market.

APIs in Open Insurance Regulation

As the agency regulating innovation in Brazil, Susep determines which APIs will be a part of Open Insurance:

  • APIs for products and services: allow access to open data associated to products and services offered by companies.
  • APIs for service channels: allow access to open data associated to public service channels, such as APIs of social media, chats, email, etc.
  • APIs for environment status: allow access to data on the current availability of API deployments. They must also grant access to data on scheduled downtime.

All APIs must follow the principles of ensuring a good user experience, the capability of being consumed in different languages and platforms, and providing security, among other aspects, as countless developers will have access to these applications and will also be required to follow these standards.

All the requirements, definitions, and recommendations can be viewed in the Open Insurance API Manual, provided by Susep.

The importance of API management

This entire scenario leads us to another crucial point in Open Insurance: API management.

If all these APIs are to be made available in an environment that is accessible by any company/developer participating in Open Insurance, they need follow a standard, to facilitate the process as much as possible.

The Susep manual indicates the minimum requirements for traffic request, performance (response time) and time availability that open APIs must support. This means that companies must manage all this volume of data, which includes monitoring and analysing the behaviour of each application.

Besides ensuring compliance with Susep standards and the internal policies of each company, API management can also centralise all the control of API-based strategies, from usage metrics to the workflow of third-party developers. 

One solution that will surely assist insurance companies, insurtech companies and other organisations in the sector to adapt to Open Insurance is the API management platforms, which consolidate all this information in a single place.

Sensedia’s API Platform, for example, provides a portal through which developers can easily access published APIs, features that enable communication with dev communities and innovation ecosystems, and many other add-ons.

Legacy Modernisation for Open Insurance

In Open Insurance, insurers have two options: to comply with the regulatory rules or to make the most of the opportunities generated. In this case, it is critical to consider the modernisation of legacy systems, which are often a bottleneck in operations.

For this purpose, some new avenues can be explored to ensure insurers have the resilience and scalability they need for more agile, cost-effective and efficient operations. 

Breaking monoliths with microservices

The main disadvantage of monolithic applications is their inability to evolve quickly in response to business needs. Any change required demands a single, coordinated deployment that cannot take advantage of the flexibility of the cloud. When breaking a monolith, each microservice becomes an independent deployable component that can be scaled to meet specific needs and upgraded without disrupting the entire system.

This provides flexibility to programming languages and supports underlying technologies. But it can also create challenges in communication between microservices, as they may not necessarily be on the same network, and the complex problems that can occur in this scenario are often underestimated.

Rewriting a monolithic application with microservices boosts performance and economic gains. Moreover, it allows users to migrate their operations to the cloud, modernise their applications, and enhance efficiency.

When considering this new approach, observe the following:

  • Do not discard a monolith, but do not add anything else to it either;
  • Start with the least dependent or most dissociated services;
  • Make sure you have a clear script, after all, rewriting a monolith is no easy task.

APIs: the default communication format

Although APIs are not a new concept, they represent a revolution in the construction of modern, scalable applications. In this new, highly connected world, business systems integration is critical. APIs simplify integration, ensuring the exposure of services and facilitating their consumption by third-party applications.

One of the main advantages of APIs is their capacity to standardise communications. While it is important to share services, it is more important to focus on how they are shared. Developers who encounter hostile interfaces or difficult coupling processes will need to overcome connection barriers.

APIs provide an interface that enables easy integration, shortening development cycles. This is crucial when considering the speed of value delivery to clients or partners, whether they are consuming resources to develop an application or connecting to a business ecosystem.

APIs also provide additional security benefits. They manage data protection, access control, and issues related to authorisations and authentications, bringing peace of mind for regulators, companies and their clients. This elevates APIs, from a core technology element to a strategic business tool.

In addition to system integrations, APIs perform the following:

  • Distribute data/services through new channels, different interfaces and devices (IoT) or provide an omnichannel experience to users;
  • Compose data/services for new products, expand existing offers or market APIs with different forms of monetisation and reduce time-to-market;
  • Develop a new IT architecture and applications in a service mesh based on events and microservices to enhance agility and scalability, reuse, decoupling, small deployments, flexibility and responsiveness;
  • Explore new business models by combining features and strategies, such as Platforming (explained in more detail below);
  • Consume new technologies as services (AI, for example);
  • Build the foundation for Open Insurance and allow third-party developers to build their own applications and services from open APIs;
  • Create open innovation initiatives such as hackathons and co-creation projects with partners or startups.

Events where asynchronous is better

Event-Driven Architecture (EDA) uses certain actions (events) to trigger asynchronous communications.

But what are these events? They are specific actions that impact a business, such as when a customer makes an online purchase. In this case, the action is immediately detected and receives an automatic response without the need for validation through a request-/response cycle, relieving the pressure on computer resources.

When it comes to asynchronous events and communications, the main focus should be on how the EDA responds instantly to the customer’s activity. When companies can quickly react to specific events within the customer journey and trigger an action in real time, they will be better equipped to meet users’ needs.

This is particularly important in the payment and retail industry, where split-second decisions can completely change the customer journey. And while other technologies may appear to provide this service, none can manage and streamline the communication process in quite the same way.

The number of systems wanting to capture customer data (banks, acquirers, markets, ERP, etc.) creates additional layers of complexity. However, Event Notifications use a single tool to capture activities, such as a purchase, and notify only the interested systems ​​in this transaction, triggering a GET to the relevant recipients.

Once an EDA is in place, the business systems can identify specific user actions and target customers accordingly, whether through a quick purchase confirmation or the offer of products and promotions directly related to an event. This makes the business’s responses more accurate and ensures a better experience, while also reducing reliance on remarketing, which can be costly and invasive for customers.

EDA is more than simply benefiting from real-time customer activities, it is also about event monitoring and instant triggers that provide excellent opportunities for scalability and real business gains.

The Benefits of Open Insurance

We tend to associate technological innovation with smart connections in various areas of society. It is no different within Open Insurance. The digital experience is constantly evolving across all sectors of the insurance market.

The benefits of Open Insurance for companies

By using API (Application Programming Interfaces) architectures, insurtech companies and consolidated insurance corporations can share their information and data through a single application. 

This ultimately facilitates access to information due to standardised processes and fluidity for acquiring data and creating product offerings. It is also very user-friendly.

The adoption of an Open architecture is also associated with major advancements in security and technology standards employed by insurance companies, resulting in huge benefits for IT architecture maturity and integration of channels as a whole.

The possibility of integration with Open Banking can create multiple opportunities for improving products and services, ultimately leading to better monetisation possibilities.

One of the key points is that insurance companies with a more mature omnichannel experience, in compliance with Open Insurance, will also be preferred by users, which further highlights the importance of adopting a solid integration strategy.

User benefits of Open Insurance

Users will no longer have to check multiple platforms to select the best offer and can focus all their attention on a single place. But that is not the only thing APIs can do. They provide increasingly complete digital experiences by enabling connectivity for the latest smart devices and integrating the platform of insurance companies with your car and home system, for example.

To make it easier to understand, let’s imagine the following pre-Open Insurance scenario:

When you buy a new vehicle, the insurance consultant is often required to enter the buyer’s data manually into the system. This means that customers can only access the contract, card and documents of the insurance policy after the data has been processed. Due to this lengthy process, customers are more likely to leave the dealership without any insurance cover.

With Open Insurance, however, customer data is readily available and they can communicate in real time with the insurer, making the whole process faster and more secure. In this scenario, customers are already insured by the time they leave the dealership.

That is why APIs are crucial for the application of a new business model in Open Insurance. They enable a fully interconnected ecosystem that includes the insurer, the dealership and the customer. Here, we must stress that this chain of logistics is only possible when the customer consents to the use of their data.

Now, technologies like the IoT (Internet of Things) take the digital experience to a whole new level, as integrating platforms and users can lead to other options, such as voice-activated actions. Activating your home insurance through a voice command to Alexa, for example, is now an accessible reality in this context.

Besides broadening the range of offerings and expediting processes, Open Insurance can make the insurance market more accessible and ultimately more democratic, secure and technological.

Platform Strategies for Insurtech Companies and Insurers

Many major technology drivers, such as APIs, IoT, Cloud, AI and Blockchain, have converged and created opportunities for insurance companies that have technological expertise and innovative business models, such as Platforming, which expands the range of offerings and also increases customer expectations.

The assimilation of these technologies offers countless possibilities for improvement, as in the case of AI and Analytics, which can be used to analyse large volumes of data in real time, make assessments based on behaviour and trigger proactive actions.

Other examples are the use of bot AI for conversational interfaces with customers and RPA for routine activities. This means that most repetitive manual tasks can be automated, which increases efficiency, reduces the chance of errors and fraud and provides greater agility and a better user experience.

The combination of AI and Internet of Things (IoT) allows devices (sensors, actuators, wearables…) and drones to be remotely monitored and activated, enabling more accurate risk assessments and preventive actions, as well as the offering of custom products and services in real time.

In turn, Blockchain allows secure and traceable transactions in a decentralized and direct way. These technologies can be integrated through APIs to provide different types of services such as P2P insurance, microinsurance, real-time insurance, shared savings insurance, usage-based insurance (UBI), pay-as-you-drive, and many others.

These transformations also encourage insurers to seek new strategies to develop technological capabilities, access new channels and expand offers, such as platforming, which promotes the exchange, combining or creation of services among commercial partners so that ecosystem participants can capture value.

To be operational, these strategies require an efficient and responsive IT environment that enables agile and secure integrations through APIs and connects legacy systems, databases, devices, applications, cloud services and partners.

Positioning as a platform: importance and opportunities

With Open Insurance, competitiveness is not just restricted to companies with their own products and assets. It reaches other ecosystems, with partners who are able to combine services, orchestrate resources and coordinate actions (Platforms), a model in which system integration through APIs becomes critical.

Through a platform strategy, it is possible to:

  • Obtain new sales channels;
  • Provide interactions with new customers and clients;
  • Create and implement new products/services;
  • Expand the capabilities of existing products and services;
  • Use data more effectively by applying monetisation models.

Platforming requires 3 key changes in focus of strategies:

  • From company resources to orchestration resources;
  • From internal optimisation to external interaction;
  • From customer value to ecosystem value as a whole.

For Gartner, platform-based strategies can consist of 4 types (non-exclusive) with different degrees of openness (closed, restricted or open APIs):

  • Collaboration platforms enable integrated and collaborative operations with ecosystem partners in new ways.
  • Orchestration platforms enable the orchestration of shared resources and processes across ecosystem partners.
  • Matching platforms – facilitate the meeting of claimants and bidders.
  • Creation platforms allow partners to build their own apps, products/services, capabilities and business models on the platform.

Some platform initiatives in insurance and insurtech companies

Munich Re – The APIs (Digital Partners) platform allows its partners to work full-time with their clients by selecting the services they want from Munich Re.

AXA – Through the APIs, it offers real-time insurance to partners integrated with their clients’ schedules and digital channels (websites, applications, etc.).

Lemonade – Its public APIs allow companies from various sectors (property, finance, car dealerships, etc.) to offer insurance easily and simply on their websites.

Instanda – This self-service platform creates and distributes insurance through online channels (directly or through brokerage websites)

Kasko – The end-to-end insurance platform allows insurers to create, launch, execute and optimise digital products.

PolicyGenius – An independent market for insurance products.

Qover – Partners can sell insurance to selected brands through open APIs.

Trov – This platform integrates their operations with insurance companies according to geographic region to offer coverage for items protected in their application.

Slice – A platform that connects with partners to offer on-demand insurance.

However, to support a platform strategy (whether building or participating in an ecosystem), insurers and insurtech companies must develop an agile, services-based IT infrastructure in which APIs can integrate legacy systems, new technologies and ecosystem partners.

The growing complexity of IT infrastructures, and the importance of APIs, require the use of an API Management platform, which provides modern governance, security, API project support and developer engagement mechanisms.

In Brazil, the following platform strategies in the financial sector were developed with Sensedia consultancy and API Platform:

SulAmérica – a collaboration platform between partners to expand offerings, stimulate innovation and enhance the client experience.

Portocred – a credit market that matches bidders and claimants and promotes integrations with partners through APIs.

Cielo LIO – a payment and business management platform in which partner developers can create their own integrated applications in the platform.

Tribanco – a collaboration platform with their clients and fintech companies.

To implement these platform strategies, whether building or participating in a platform-based business, large insurers have valuable resources such as a client base, access to capital, a brand name and regulatory expertise. However, they also face some difficulties, such complex legacy systems, longer innovation cycles and stricter regulation.

Insurtech companies, in turn, have a more agile innovation cycle and can offer competitive solutions based on specific technologies. However, they lack a broad client base, strong and trusted brand names, access to economies of capital and scale, and the experience to deal with more complex regulations.

By collaborating with multiple insurers, they can acquire a range of capabilities and add services to their offerings, expanding their revenue streams, engaging clients and shortening testing and learning cycles. Insurers can find a broad client base in collaboration with banks, as well as the support of a consolidated brand, access to capital, support with regulations and economies of scale.

Insurtech Partnerships – The Financial Brand

This collaboration between insurers helps create a more competitive services portfolio and channels for a client base that is more consistent with data usage, and more effective monetisation, while also stimulating the creation of new products and business models in a more open innovation environment.

To achieve this effective collaboration, it is important to establish a shared business strategy and integrate processes and systems that deliver agility, security and scalability – and the best way to do this is  through APIs.

How can Sensedia help?

Sensedia specialises in integrations and modern development through solutions that ensure a more agile and scalable architectural evolution, with the use of existing legacy systems and cloud operations. The solution is widely used by large companies and serves as a basis for advanced digital strategies. 

In the context of Open Insurance, Sensedia’s solution meets all the regulatory requirements, enabling companies to swiftly keep up to date with the new regulations and take advantages of the benefits of this new model. In comparison with other markets, Sensedia was the only company in Brazil to offer a solution that fully complies with the Open Banking regulation, further reinforcing its expertise in APIs and modern digital strategies.

In addition to the platform, Sensedia provides all the necessary support for projects through its professional services teams from day zero. Our teams have developed materials that support the entire Modern Architecture model and serve as a guide for companies looking to evolve their architecture. Access the API Implementation Roadmap and the Microservice Implementation Roadmap and get a real sense of the challenges of Modern Architectures.

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