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    Written by Fouad Husseini, founder at The Open Insurance Initiative.

The first whitepaper of The Open Insurance Initiative, promised that a series of research papers will be published to develop the concept of an international open standard for open application interfaces (APIs) in the insurance sector. This article coincides with launch of the second whitepaper, aptly titled, “Open Insurance: a foundation for platform ecosystems”.

All signs to date indicate that we are at the nascent stages of open API adoption in the sector. The Open Insurance Innovation Lab has collected a significant amount of data on the adoption and usage of APIs by incumbents, new entrants and also companies outside the sector that provide data and services related to insurance services.

This ongoing research shows that in 2019, only 21% of incumbent insurers directly provided access to APIs, indicating that InsurTech startups are leading the way in providing accessibility to services and products. The overall picture is not a pretty one. The focus of this accessibility is on the distribution of simple insurance products with 78% of APIs doing one thing, albeit doing it very well, serve products and conclude a sale completely online. Only 10% of APIs allow for claims related functionality which clearly implies that an important element of the service still relies on offline intervention.

We expect a generalized improvement in 2020 with insurance carriers actively exploring and increasingly adopting more open platform strategies. There is so much noise though. Ecosystem orchestration has become a buzzword that generates anxiety for large and small incumbents forced to rethink business models and organizational cultures and technologies, to defend market shares threatened by big Tech platforms looking to disrupt new sectors and startups bent on dislodging well established companies.

Tech-enabled marketplaces and platforms

But the need to understand platform driven innovation is not unique to the insurance sector. We’ve already seen the rise of mega marketplaces and platform ecosystems and the resulting disruption of verticals in retail, telecommunications and travel.

Not surprisingly, tech platforms and n-sided marketplaces have become a major topic in business research. Entrepreneurs and investors alike look for cues on what factors make businesses like Google’s Android, Facebook’s communities or Airbnb’s network of hosts, outshine traditional business models and withstand the rigors of competition. There are examples a plenty of their forays into financial services that insurers view as a threat to their businesses.

Big Tech are obviously evolutionary Juggernauts with an unstoppable drive for growth and expansion. They provide obsessive customer service and a customer interface that for insurers, is hard to match with much of today’s offerings.

Their immense ecosystems were created with a powerful concoction of network effects, modularity, control points, tech and the resulting hundreds of millions of users that became locked into tools, communities and for many startups the platforms for building the next unicorn business.

Accelerating pace of change

For insurance consumers, the avant-propos is written by hundreds of startups using tech to transform every facet of the value chain. Billions of investors dollars support the development of new business models. In fact, US4.4 billion was committed in startup funding during the first 3 quarters of 2019. An ecosystem of accelerators and innovation hubs vie to attract and support cohorts of entrepreneurial teams.

Not surprisingly, many of the well-established companies in the insurance sector have sought to understand, explore and experiment in an effort to modernize and catch up with tech advancement and shifting consumer expectations.

With some foresight and anticipation, we can see that the next decade is already marked by the speed at which we are heading towards a world of hyper connectivity with data playing a bigger part in shaping the way we communicate with each other, with our homes, vehicles and with all things digital.

In Europe, open banking, by allowing easy and secure access to machine-readable customer data has become a major influence in shaping the future of banking services and has set an example for the insurance sector to follow.

There is also an interesting development going on in that some sectors, namely banking and vehicle manufacturing, where some organizations have started to realize that they can serve their own customers better. We’ve seen evidence of this at Tesla, Porsche, VW and Mercedes. Each has taken a different route to satisfy the needs of their customers, but there seems to be a trend developing driven by data analytics that these companies use to either influence the design of insurance solutions or to provide a platform and open APIs for third parties to develop new insurance products. The main focus of the trend has been on reducing the cost of insurance coverage.

The state of insurance API market

The OPIN Innovation Lab can report that globally, the largest number of available open APIs are auto insurance related (25% of total). These provide traditional as well as usage-based insurance and roadside assistance solutions. Travel insurance and parametric flight delay insurance make up the second largest segment (20% of total). Life insurance is ranked third (17% of total open APIs), however, 95% of life APIs provide a term life insurance product. In fact, simple, individual products dominate the range of all APIs available.

Despite the ever-expanding tidal wave of InsurTech startups, the pain of point to point integration is continuing, so is the cost and time expended in receiving regulatory approvals and so has the absence of truly disruptive platforms that can build financial ecosystems of significant scale.

Since the launch of the open insurance initiative in the latter half of 2018, I have been involved in initiating literally hundreds of conversations with policymakers, regulators, incumbents, startups, technology vendors and many others across the globe.

There is always great interest in how open insurance would allow for interoperability and platforms to emerge and ecosystems to form. In my research for the second whitepaper, it was extremely hard to find serious published work that examined with a holistic approach the factors needed for insurance platform ecosystems to emerge successfully. It is undoubtedly a complex topic requiring rigorous research, experimentation and foresight.

A need to understand how platform ecosystems emerge

The second whitepaper sets out to explore a specific range of variables in a complex formula. This included defining the model features for an open insurance platform, the roles of users and complementors, factors of growth and dominance and the strains that insurance platforms need to endure as the demands of hyper-connectivity increases.

Not only that, but the basic foundations also had to be covered. For example, how is an open standard defined? What role does an open standard play in creating network effects?  How do you improve data literacy of consumers and prompt them to trust open insurance in how and why their data should be shared? How do you capture external and internal open innovation logic?

Add to that the changing dynamics of business built around coalitions. For example, harnessing the demand of 5G driven hyper-connectivity that our things will require to make smart homes a reality, has forced the prima donnas of the platform world, to come together. Their aim is to co-develop an open standard to allow IoT devices of different manufacturers to communicate with each other in a realization that smart home equipment won’t reach the limits of their capability without such platform interoperability. Apple, Amazon, Google and the Zigbee alliance have come together to create the Connected Home Over IP initiative with the vision of a USB like plug-and-play protocol for the home.

In the UK, in order to enable multi-modal mobility-as-a-service, a group of companies have jointly created an open API standard to share customer data stored in different proprietary systems. This will allow data to be integrated and shared to provide a single view of a customer’s purchases and usage across multiple transport providers. The Open Transport Initiative created two API specifications. One to allow access to purchase, usage and concession data and another for transport operator information.

Travel and leisure related companies in an effort to transform to full digital ticketing and reservation created an open electronic messaging standard to ensure traveler and supplier information flow smoothly throughout the global travel, tourism and hospitality industry. The Open Travel Alliance includes a wide range of supply and service organizations including airlines, hotel, car rental, global distribution systems, solutions providers, and consultants.

These examples are extremely relevant to the insurance sector and to what the open insurance initiative is trying to introduce. The business world is increasingly converging towards open standards to allow for fast and reliable communication between different operators, systems, devices and cross sector operability. One repeating occurrence is the voluntary nature of these alliances. Another significant observation is the lower level of regulatory control and compliance that the travel, mobility and other industries enjoy. Perhaps a signal that insurance regulators need to reassess current regulatory frameworks with a view to provide better incentives for shared standards and messaging to emerge between different carriers and standards that allow for open innovation to occur at large scale.

Open Finance is around the corner

PSD2 in the European Union and Open Banking in the UK have laid the foundation for a larger financial ecosystem to develop. Most notably, The Financial Conduct Authority (FCA) in the UK, has published a Call for Input late in 2019 to explore the idea of extending Open Banking to encompass insurance, mortgages, investments and pensions to what’s called Open Finance.

The new whitepaper does not shy away from exploring ideas for platform specific supervisory oversight and the role that smarter regulation needs to play in shaping the future of cross-country platform ecosystems and international data flows.

Unfortunately, surveys to date have shown that there are roadblocks in consumer adoption of open banking with one survey indicating that only 1% of consumers have used or are using an account information service. Hardly surprising, if we consider the lack of consumer awareness of the cost savings that switching could bring them. Despite the fact that GDPR focused at giving consumers more control over access to their data, all signs so far point to that empowering consumers to share their data doesn’t really translate to more sharing of data but rather the opposite.

Consumers clearly need to trust open insurance in how and why their data should be shared if we are to avoid some of the pitfalls of open banking. That’s one of the reasons why the concept of Open Insurance Dashboards (OPIN’D) has been introduced in the second whitepaper and explained their role with use case examples. But the uptake of open insurance is not just a factor of consumer data literacy. For real uptake to happen, great apps must be developed to solve real and important problems.

That’s perhaps where an open innovation approach leveraging the external and inventive resources of customers, experts, developer communities, inventors, startups, and academics could lead to deviant solutions and killer apps.

Open insurance allows platforms, through modularity, compatibility and common standards, to become explicitly more open to external innovation. Platforms also need to provide the necessary tools for complementors -ranging from independent developers, low budget startups to heavy weight enterprises-, they have to engage with and bolster their communities. The platform age will probably unlock a larger economic pie than has ever been possible before and may usher in a new dominant financial leader.

Well established online marketplaces and platforms (the incumbents of the digital age) are constantly evaluating new opportunities to capture more transactions on their platforms and provide a unified experience leading to ownership of the whole supply experience. In many cases this will include financial components being built directly into their platforms that some are labelling as a move towards creating fintech enabled marketplaces.

Open technological interfaces in insurance will foster the Insurance-in-Everything paradigm with insurers gearing up their platform infrastructures with intelligent software components and tools to be able to interact with smart homes, autonomous vehicles, virtual courts of law and the smart cities of the future. Insurance will move closer to becoming ubiquitously embedded in everyday things.

As platform ecosystems and open interfaces advance and data is transited through thousands of connection points and applications simultaneously, we are bound to see equally inventive patterns of insurance fraud and cyber threats through data and software manipulation. Consumers must appreciate that they also have a role to play. In fact, the insurance ecosystem as a whole, must play a part in enhancing user awareness in order to change security behaviors in a meaningful way.

As the research of the OPIN Innovation Lab progresses on several levels, a third sequel is already under preparation to explore other elements involved in building open insurance interfaces. We are grateful to the more than 60 international companies that make up our community and support our research, projects and activities.

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The Open Insurance Initiative (OPIN) has sought to redefine the economics and mechanics of serving large number of customers in the belief that insurance ecosystems hold much of the transformation hoped for by consumers and financial services organizations.

The new paper is intended to be a defining document delivering a consistent thought leadership of the main aspects of The Open Insurance Initiative and its goals. It also dispels specific worries of data sharing and security laying the foundation for collaboration, trust, and transparency.

This paper will be released within the next few weeks and we would love to have a sponsor contribute to this work and at the same time provide much needed funds to continue the momentum of development. For further details please contact us here.

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Fouad Husseini is the founder of the Open Insurance Initiative (OPIN), that aims to be the largest open API project in the insurance industry. He took part in API DAYS Paris to connect with API architecture developers and experts to create an open API standard. OPIN’s objective is to allow the flow of data between insurers, customers and third party, as well as make data portability possible. What is ultimately at stake is to drive innovation and interoperability with InsurTech start-ups and established insurance companies.

Read the full interview here.

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“The movement towards open APIs in insurance is in its infancy and I believe that much can be achieved by the industry without the heavy burden of additional laws or regulatory pressures.” said Fouad Husseini, founder of The Open Insurance Initiative.

As 2018 draws to a close, its important to look back at some of the main highlights since the whitepaper was published on August 6th.

During those short five months, The Open Insurance Initiative has taken big strides in driving its message home, that Open APIs are set to radically transform the insurance industry and the winning companies will be those that recognise and utilise its potential. We were honoured to have been chosen as finalist for an innovation award, we have joined forces with the largest UK insurer for the development of open APIs and more importantly, we’ve made so many friends across the globe.

There is plenty to do, the hallmark of the initiative will be its first class research which will continue into 2019 with a new comprehensive study. A careful and studied approach is necessary as we look forward to join forces with innovative insurers, expert developers and think tanks.

We wish everyone a happy new year.

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“I am proud to announce that The Open Insurance Initiative has been nominated by industry peers as a finalist for an Insurance Innovation Award” said Fouad Husseini, founder of the initiative.

The award is organized by Insurance Nexus in partnership with InsurTech News. The winners will be selected by an expert judging panel and a popular vote.

Fouad added, “I count on the votes and support of our friends to help us further raise awareness of Open Insurance around the world”.

A white paper was released by The Open Insurance Initiative providing an overview of the processes and strategies that will enable policyholders to securely share their insurance related data with third parties.

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As part of the ongoing research into advancing this initiative, a topic which might appear off limits to this work but had continuously aroused our curiosity, was the treatment of liability caused by rogue, AI driven systems.

We believe that despite the importance of the topic it is rather relegated to the sidelines of publicity while we are all glorifying InsurTech or dashing to build the next insurance unicorn. Liability is one area that could actually stun entrepreneurs and slow innovation. This could be economically disastrous.

The following represents my views (I am not a law professional) of the issues arising therefore I stand to be corrected if others have more legal and studied opinions.

Let us first consider the challenges faced by insurers and law professionals in dealing with AI as a source of liability.

Technically, the main challenges stem from the fact that AI technologies are developing at phenomenal pace reflected for instance, in increased autonomous capabilities and the accelerated deployment and integration of such technologies in many everyday gadgets, equipment and vehicles. AI will soon become so ubiquitous that much of the software and equipment we use will be communicating together independently without human intervention.

A robotic or an autonomous system might be referred to as an artificial computational agent. Legally, there is little body of legal research on the treatment of artificial agents and this explains the lack of regulatory guidance on such topic. For example, could existing legal theory be used to establish legal liability of developers of highly autonomous systems? Could they establish criminal negligence or criminal intent to commit a crime? Could some of these advanced highly autonomous robots qualify as legal persons and be punished for their unlawful actions? And how will the doctrine of strict liability apply in these instances?

It should be noted that some risks are becoming better understood in terms of the source of liability, as in self-driven vehicles (they are always designed with safety first in mind) where legal precedents are already being established given the numerous claims and accidents that have accumulated over the past few years. However, there are many other instances where the cause of liability may be very difficult to establish.

For Insurers, great effort is needed to establish the foreseeability of damage that could be caused by different autonomous systems. For example, do developers have knowledge of potential problems (misrepresentation / non-disclosure)? Could these systems use their acquired datasets to evolve into totally different systems with different intentions? What’s the level of protection that these systems have against highly concealed adversarial inputs and data poisoning attacks?

Most present day policies protecting against commercial general liability, auto liability, professional liability and products liability do not address these risks properly.

Is there potential for AI developers to be drawn into criminal or civil courts if their programs/platforms are deemed criminally liable/negligent?

Part of the challenges that AI introduces is establishing who is responsible for the damage or loss when an accident occurs. A prime example is autonomous vehicles, issues could arise in proportioning the amount of responsibility each of the passenger/driver, vehicle manufacturer and the system developers are judged to assume.

If a developer is deemed criminally liable or negligent then recourse may be pursued in both criminal and civil courts. It should be noted that causation, intent and responsibility get increasingly difficult to untangle when AI is involved.

The application of joint and several liability may mean the party with the largest resources end up footing much of the damages awarded, in this case the manufacturer.

How is AI going to affect the insurance industry in the coming years?

Insurers are looking at adapting their insurance policies to protect clients. Liability, property, auto, health and life insurance will need to better address new exposures.

Risk assessment has to continually play catch up with the uncertainties being introduced such as the impact of these new technologies and the potential for catastrophic events.

The medical profession, for example, has introduced new complexities for underwrites of medical malpractice covers. Digital health deploying AI in disease recognition, genetic testing, virtual nursing and surgical robotics introduce risks of mismanaged care due to AI errors and lack of human oversight.

The complexity introduced by AI in applying strict liability will mean new models of liability coverage will likely be adopted. These models will probably assume the focus is severely shifted to the manufacturers and software developers and less on the consumer.

Areas that AI is going to particularly affect insurers

The insurance industry itself is evolving through increased use of ML, VR and AR. The industry sees efficiency and enhanced customer experience as competitive advantages gainable through the use of AI. Many companies are already deploying chatbots, robo-advisors and instant underwriting algorithms to refine underwriting, claims settlement, fraud detection, marketing and customer servicing.

Is legislation keeping up with AI development?

There is no doubt in my mind that there is a growing case for modified legal frameworks due to the shortcomings of existing philosophy and legal theory in accommodating incidents resulting from sophisticated AI agents.

A clear liability framework must be developed to adequately address human interests to ensure justice for those who are harmed by autonomous systems.

While some in the legal profession are conducting research and providing studied opinions on the treatment of myriad of issues relating to liability and independent agencies, I believe initiatives could be setup and financed by stakeholders in the legal, manufacturing and insurance industries to work with policy makers in drafting an improved legal framework.

Fouad Husseini

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The insurance industry is firmly under the cusp of an exciting phase of transformation. Experimentation, innovation and InsurTech are now terms that define an industry that’s accelerating to overtake its image of the reluctant innovator.

Billions in investment dollars have been poured into startups deploying concepts that were so foreign to the insurance world few years back, blockchain powered parametric insurance, on-demand insurance, behavioral economics, try–before-you-buy and such like, creating what might appear to be two ecosystems, one composed of incumbents enjoying decades of high regulatory barriers and another of a tech startup culture bent on redefining customer experiences, business models and value propositions.

Evolving consumer expectations and increasingly mobile and interconnected services are being enabled by fast developing Application Programming Interfaces (API), authentication and authorization technologies. It was only a matter of time before data centric initiatives started to appear helping business unlock value and optimize services from treasure troves of data. Many governments around the world sought to release great parts of that data through open data projects. Europe has shown willingness in empowering consumers to share the data held by their banks and at the same time overhaul the payment services sector. PSD2 and Open Banking offered the FinTech communities and the banks significant opportunities to transform the way UK and EU citizens transact, save, borrow and invest their money.

“The insurance industry now has its own open initiative detailing in a whitepaper an overview of the processes and strategies that could enable policyholders to securely share their insurance related data with third parties” explained Fouad Husseini, the founder of The Open Insurance Initiative.
“Today sees the public release of the whitepaper. This initiative will depend on the active collaboration of a community of developers and financial services experts to see the development of a standard for open APIs for the global insurance sector” he added.

As digital consumers, it’s difficult not to notice the resultant effects of the personal data being collected on us as individuals, neither can we ignore the extent to which it is being used commercially and most notably politically (the 2016 US elections is one such example). This incredible growth of personal data distributism is designed to enable deeper insights into customer behavior, create new products and to substantively influence existing business models.

Marginal improvements in product and customer experience will no longer suffice. Insurers, brokers, agents, reinsurers, loss adjusters and so on must transform their organizations.
APIs have been the primary enablers in the shift to mobile and digitized services in almost every digital product we use. Open APIs will allow third party service providers, particularly InsurTech and Fintech startups, to have easy and secure access to insurance products and customer data. By enabling customers to share their data, they will unlock its value and force the transformation of the industry to one that is optimally transparent and innovative.

Fouad defines the scope of the initiative as two-fold. “There are two key facets to the initiative, the first, establishes an open API standard allowing data to securely flow between insurers, their customers and third party service providers. The second, recommends data portability by enabling easy, authorized and secure access to data and its sharing.”

Consumers exercising active data use
The concept of consumers exercising active data use, is not too dissimilar to that of open banking. Open insurance allows the customer to decide what data to be shared, when it is shared and with whom, subject to secure authentication and explicit consent mechanisms.

This data would be conveyed in real-time and in machine readable format via secure APIs. KYC information, insurance policy data, accident and claims data and data collected by the insurer through telematics or wearable devices are examples of the information that a costumer could share with third parties.

An API standard to enable efficient, easy and secure flows of data
For the insurance carriers to be able to respond to digitally generated requests for data will mean reconfiguring not only their IT systems but also their strategies in doing business. Many insurers could be dogged down by systems that may have been developed over different eras raising concern over whether they’ll be able to share any data. Insurers deploy increasingly complicated automated back-ends creating an awkward web of legacy systems.

Many system transformation experts and software developers insist that a suite of secure API architecture utilizing the highest levels of data security and authentication in combination with microservices will be capable of overcoming legacy system setbacks and transform incumbents into digital players.

An open API standard has to be developed, this is a central proposal in the whitepaper. The initiative will crowdsource contributions and encourage collaboration to complete the first iteration of the standard. It is believed that a global standard will help reduce the substantial resources required by insurers in developing their APIs. Equally as important, third party developers will enjoy an always up to date and well-documented international standard, consistent design, properly versioned and visible APIs enabling efficient, easy and secure flows of data.

Alternative choices and competitive offerings
As a customer, you might be wondering, what advantages does this data sharing concept gives me! Alternative choices and competitive offerings would not be too much to ask for, or would it? If I can more easily access my data and push it through one app to multiple third parties, competing insurers, intermediaries, banks, mobile telecom operators and others, allowing them all a level playing field with my insurance carrier, I would stand to gain from easier switching opportunities and save on expenses.

Equally and just as important, if I enable InsurTech startups and app developers from different industries access to my data that would otherwise had been locked away, as a consumer, I would benefit from the results of better data analytics potentially providing a wider yet bespoke choices of products and services. Additionally, I could spur on those fast-footed new entrants allowing them to apply their innovations more effectively and at a much larger scale.

This hoped for exchange of data will be a major driver in the transformation of the insurance industry allowing new, better and more competitive products and services to emerge.

As the industry makes progress towards adopting open insurance, incumbents could choose different roles. Staying fully in control of products and services, distributing own services via third parties or distributing products and services created by third parties by acting as a platform for third parties resulting in a more differentiated service offering for customers.

About the white paper
The white paper evaluates several important aspects including:
– A look into RESTful API architecture and other emerging API architectures, authentication and authorization protocols.
– What constitutes insurance related data and how that data can be distributed to third parties while safeguarding data owner privacy
– Examining major perceived challenges obstructing the adoption of the open insurance concept
– A review of leading edge technologies that this shared data could power
– Recommending a proactive approach for advancing the initiative, from initiation until its eventual adoption

Joining the initiative
The project elicits participation to encourage and boost co-working to see the initiative succeed as an open source project. System architecture and API experts, website designers and content editors, cybersecurity experts, InsurTech experts, data scientists, intellectual property and legal experts, and other highly competent individuals are being encouraged to join the initiative.

This is a great opportunity, yet we need to acknowledge that many adventures lie ahead. The incumbents have to match the speed of change led by nimbler new entrants and at the same time, they have to shift control of the data they hold, to their customers.

An initiative of this nature would most certainly make markets more competitive than ever before, but where threats arise, opportunities will emerge. Ultimately its full impact may depend upon whether incumbents and regulators are willing to embrace the huge potential of data mobility.
Customer demand may not change abruptly but the expectation level is already set by the banking industry which has undergone a similar change over the last few months.

“I totally believe that the aspirations of one man will become the conduit for a collective of great minds to rally in pursuit of transforming a concept into a cathedral that yields standards, frameworks and research.” Fouad explains.

It’s highly plausible, rapid progress will be really possible. It will help industry stakeholders in their transformation to match tomorrow’s expectations today, overturning the pithy image of slow, untrusted, distant and unyielding corporations, an image that has encapsulated the insurance industry as a whole.

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