EIOPA Consults on Various Aspects of Open Insurance Framework
EIOPA published a discussion paper on open insurance, with the comment period open until April 28, 2021. In the paper, EIOPA explores questions on whether and how far insurance value chains should be opened up by sharing insurance-related and specific policyholder data among insurance and non-insurance firms. The key focus areas of the consultation paper include definition and use cases of open insurance, risks and benefits of open insurance, regulatory barriers to open insurance, and possible areas to consider for a sound open insurance framework. In this context, the paper notes that EC, as part of its Digital Finance Strategy, is expected to present a legislative proposal for a new open finance framework by mid-2022, building on and in full alignment with the broader data access initiatives.
EIOPA highlights that the initial analysis indicates that the exchange of both personal and non-personal data through (open) Application Programming Interfaces has started to emerge in the insurance sector. This can not only facilitate industry-wide innovation but can also give rise to new or amplified risks such as data security, cyber risks, interoperability challenges, and liability, ethical, and broader consumer protection issues. Increased data-sharing, especially if combined with artificial intelligence or machine learning tools, could also increase financial exclusion. A key consideration for possible open insurance solutions is finding a balance between regulatory objectives related to data protection, insurance, and competition while supporting innovation, efficiency, consumer protection, and financial stability. To find such a balance, EIOPA believes a broad multi-stakeholder discussion is needed and strongly encourages stakeholders to provide views to the discussion paper.
The paper sets out certain high-level and interlinked areas, from a supervisory perspective, where further elaboration may be needed, to ensure that open insurance initiatives can be properly grounded technically and practically, to promote consistency with overall consumer protection, financial stability, and sound prudential regulation objectives. Possible open insurance, or open finance, initiatives could include discussion around the regulatory perimeter or licensing regime, taking into account different level of openness; for example, sectoral or cross-sectoral data-sharing could be envisaged with different level of regulatory and supervisory intervention. Compulsory access to and sharing of data, based on the explicit consent of consumers, could be envisaged in the framework of already regulated entities or for certain lines of business—for example, in insurance it could mean accessing and sharing data across insurance undertakings and intermediaries already under the remit of Solvency II Directive. Data standardization might be a prerequisite to support this. Meanwhile, the paper notes that infrastructure for some services similar to open insurance is partly in place: for example, some companies are providing white-label and "insurance-as-a-service" solutions, building on open banking data; some firms are providing open application programming interfaces; and some jurisdictions are facilitating dashboards/aggregators.
In the discussion paper, EIOPA also highlights that different open insurance solutions could further facilitate the uptake of suptech, as it may require that supervisors access consumer insurance services-related data and/or product information data, including ultimately on a real-time basis, to improve their oversight capabilities. This may allow compliance with regulatory goals to be automatically monitored by reading the data that is exchanged by providers via standardized Application programming interface, thus reducing the need to actively collect, verify, and deliver data for supervision. The possibility for supervisors to obtain a whole new range of information previously not available in a standardized and accessible format would also require, from insurance undertaking, a stronger data governance to ensure timeliness and quality. National competent authorities are still at the beginning of investigating how to collect such data in an efficient and proportionate manner. The paper also specifies that national competent authorities expect open insurance theoretically to have the biggest impact in the next three years, with the biggest impact envisaged on supervisory reporting and other data/document collection on an aggregated level.
Comment Due Date: April 28, 2021
Keywords: Europe, EU, Insurance, Open Insurance, Regtech, Suptech, Digital Finance Strategy, Cyber Risk, API, Data Sharing, Solvency II, EIOPA
Insurance product strategist; insurance domain expert; extensive experience developing risk assessment frameworks for insurers
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