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Spotlight on open banking and SME: Open banking will play an important part in meeting customers’ needs

open vault

Despite slow progress to date there are signs that some in the insurance sector are starting to get a handle on the value of open banking. On the back of a survey, in conjunction with Crif Decision Solutions, Post highlights some of the benefits that could be realised by integrating this technology into systems and processes

Open banking offers huge opportunities for the insurance sector. But while access to the data may deliver benefits such as quicker risk assessment and improved customer relationships, take-up remains low.

According to a recent survey, Open banking and SME risk, which was conducted by Post in association with Crif Decision Solutions, nearly three quarters (73.9%) of respondents have no plans to start using this data (see figure one).


For those that have embraced open banking, insurers and managing general agents are slightly ahead of the curve. 10% said they’d already integrated, or were currently integrating the data, with a further 23.3% planning to do so. In the broker market, 8.6% of respondents have integrated the data, or are currently doing so, with 11.4% planning to follow their lead.

Slow start

The survey points to a variety of reasons for this slow take-up, with the main obstacles including granting consent to access client data (63.1%), lack of trust in sharing bank account data with insurance companies (52.3%), and lack of trust in sharing this data with intermediaries (50.8%) (see figure two).


There’s also the simple matter that respondents aren’t up to speed with this form of technology. Nearly half (48.1%) admitted they weren’t familiar with open banking at all, with this rising to 57.5% among brokers (see figure three).


Simon Lancaster, CEO and founder of SJL Insurance Services, isn’t surprised by this. He says that in the 25 years he’s worked in the insurance sector, it has always been slow to embrace new technologies. “Whether it was email, the internet or electronic data interchange, the insurance industry always lags a couple of years behind. I suspect it’ll be the same with open banking,” he comments. 

While there may be frustrations about the sector’s appetite for new technology, David Vanek, CEO and co-founder of Anorak, believes it’s not completely to blame for the slow adoption of open banking. “To be fair to insurers and brokers, even the tier one banks are just starting to roll-out open banking in their online banking apps and services,” he explains. “For a long time, open banking has been pre-empted by fintech startups that built the infrastructure and challenger banks like Revolut and Starling, which consume these technologies and build added value services with open banking.”

World events have also got in the way as Janthana Kaenprakhamroy, CEO of Tapoly, explains. Her firm, a commercial lines MGA specialising in the SME and freelance sectors, has been working on a project with some of the challenger banks to have access to customer data. “Covid-19 and Brexit have both been major challenges for this over the last 18 months,” she says. “Some have been forced to pull out of the market and plans to share data have been delayed as the banks have had focus on Covid-19 related products, such as business loans.”

Data overload

For Kaenprakhamroy, this hiatus has also highlighted one of the other reasons take-up of open banking has been slow in the insurance sector – the wealth of data that’s readily available. “There’s plenty of open source data available on the SME market, including all the data being collected through social media,” she says. “Data has become much more valuable for insurance purposes but it does take time to test whether it’s meaningful.”

Her view is echoed by Shaun Hooper, group CEO at Complete Cover Group. He recently worked with its new parent company insurtech Abacai to develop a non-standard motor product that has open banking integrations within it. “It’s partly down to the lack of experience in using the data that open banking generates,” he explains. “It will take time for insurers to understand the huge risk selection and technical rating potential that exists in open banking data.”

As well as determining whether or not data adds to an insurance proposition, there are also concerns around integrating the data, as David Sparkes, head of compliance and training at the British Insurance Brokers’ Association, explains: “We understand that open banking has not solved the problem of a lack of data standardisation. The insurance sector has a number of systems providers, so a need for a suitable taxonomy seems a prerequisite for a successful rollout. The terms ‘policyholder’ and ‘insured’ may mean the same thing, but IT developers know that, as data fields, they’re not recognised as such.”

Open benefits

But, whether due to the pandemic or a focus on other data streams, the insurance sector may be missing out on some of the benefits that could be realised by integrating open banking into its systems and processes.   

Having insight into a customer’s financial behaviours can enable brokers and insurers to target products more effectively, ensuring they have the right type and level of cover. “It’s good to know as much as possible about customers,” says Kaenprakhamroy. “A business’s bank balance can give us insight into its revenue and the types of risks it might be facing.”

Another example of this is Anorak, which is an online independent broker for life insurance that uses open banking data within its consumer proposition. Vanek explains how it uses this data. “We deliver protection advice to consumers, helping them assess their financial liability and match this with the right cover. Financial planning is at the core of our automated advice platform so having access to personal finance data via open banking is highly relevant.”

Using this data can also help with risk assessment at point of quote. As an example, Hooper says it allows for much greater accuracy when it comes to assessing a customer’s credit worthiness. “Over time, open banking should allow us to dramatically reduce the number of questions that are asked of the customer,” he adds. “However, at the moment there’s a trust barrier as many people struggle with sharing significantly personalised data like this with their insurer. There’s also a need for insurers to better structure the customer journey so that integrating open banking does not add a number of questions or time to complete the policy sale or quote request.”

Cover certainty

While there may be some potential obstacles, this customer insight is something that Jason Chambers, head of underwriting transformation at Aviva, also sees as a major benefit. His firm has been looking at open banking for a couple of years. “Data is an emerging and incredibly valuable asset, allowing for high levels of personalisation and certainty,” he says. “A broker can identify an asset or change in payroll and support the SME with the cover they need.”

The value of this real-time insight was highlighted during the pandemic, as many SMEs were forced to adapt their business models in line with lockdown and government restrictions. “Often these businesses were forced to make decisions on the fly, without necessarily letting their insurance broker know what they were doing,” Chambers adds. “If brokers had had access to this data, they could have adapted cover for their clients. This would have reduced friction and given their clients greater certainty of cover.” 

Being able to adapt to an SME’s changing needs in real-time rather than at annual renewal has the potential to change client relationships permanently. Chambers says that rather than a 30-minute appointment once a year, brokers would become trusted advisers, able to deliver advice on-demand and at a time that is critical to the business. “The days of asking a customer for their sum insured at the beginning of the year are diminishing. The insurance sector can use data and technology to enable a business to deliver its ambitions without having to worry about whether it has the right cover in place,” he explains. “In addition, by supporting more automation, open banking also frees up more time to focus on vulnerable customers.”

As well as being able to provide a more personalised and responsive service, Lancaster says there is merit in simply embracing this type of technology within a broker business. “We work with SMEs from all sectors but the technology sector is growing,” he explains. “They need you to be on their level: embracing open banking will enable this and give us an advantage.”

It’s also interesting to see which key performance indicators respondents feel are important when it comes to measuring the benefits of having access to open banking data. Improved customer loyalty and retention is regarded as the most important, followed by SME data enrichment and customer satisfaction and engagement.

Priorities shifted a little when drilling down into the data. Insurers and MGAs put SME data enrichment as their key KPI with customer loyalty and retention in second place and enhanced risk assessment and higher click-to-sale ratio tied for third. For brokers, the top two spots went to customer loyalty and retention and customer satisfaction and engagement respectively, with SME data enrichment in third.

Customer buy-in

With the UK’s open banking regulations in place since January 2018, it may look like the insurance sector has very little appetite to embrace it. However, our survey found there was significant interest in some of the benefits that open banking could bring to insurance businesses. When asked whether they would consider using open banking and real time information to improve different elements of their business, the top responses were risk evaluation (58.5%), pricing (56.9%) and customer relationships (40%) (see figure four).


Among those expecting things to change is Chambers. “We see a lot of technology and opportunities in this area but we have to put the customer at the centre of our ambitions,” he says. “For open banking to be embraced by the insurance industry we need to demonstrate to customers the value of sharing data. Why would anyone share intimate data if they didn’t get something in return? Give them a clear benefit and they’ll be willing to share.”

To illustrate this, he points to the collection of one particularly personal piece of information, our DNA. By offering people information on their ethnic origins and helping them connect with genetic relatives, Ancestry DNA now has around 500,000 members and a collection of over 100,000 exclusive DNA samples, enabling it to gain much more insight into genomic science.

Potential wins for the SME market could include lower premiums, faster claims settlement or more personalised cover. The more responsive service described above would also be a game changer according to Lancaster. “Anything that improves the customer journey and experience is a major benefit,” he says. “We’ve already seen how providing them with risk management advice that’s relevant to their business can help with retention: using open banking data to extend this into a more bespoke proposition would be highly valued.”

Alongside winning customer buy-in to share data, Anorak’s Vanek says insurers also need to determine how they use the data from open banking. He warns that, if it’s used inappropriately, there’s a risk that it can seem gimmicky. “It’s not relevant for all insurance propositions and can bring very little added value,” he adds. “There’s no need to share bank data when buying travel or motor insurance: other data sets are far more relevant and allow insurtech to build usage-based or parametric products.”

Tipping point

Three years down the line, and with Brexit and the pandemic under control, the insurance sector’s relationship with open banking could be about to change. And, just as it’s proven to be an accelerant in many other areas, the pandemic is regarded as key to this.

This can be seen in the results of our survey, with respondents believing that post-pandemic, the SME market will be shaped by a number of key trends. The top ones are greater price sensitivity (84.6%); demand for more comprehensive cover (60.3%) and more use of digital platforms (57.7%). These are all areas where open banking data could help the insurance sector support the SME market (see figure five).


Chambers says these shifts give the insurance industry a real opportunity to put open banking into practice. “A couple of years ago we would have struggled to find the so what for the customer but the pandemic has changed everything,” he says. “We need to move away from the model where we ask questions and email information once a year. Open banking and real-time information will play an important part in meeting customers’ needs and expectations.” 

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