Feb 24, 20217 min read

Why Insurance Companies Need Open Banking 

Amadou Reibel

by Amadou Reibel

Industry executives and commentators in the finance world have increasingly identified open banking as an inevitable and accelerating industry trend. This is because open banking facilitates the free movement of financial information between banks and a growing list of approved third party providers (TPPs), including insurtechs and legacy insurance providers.

With 86% of insurers claiming to believe digital innovation must happen at an increasingly rapid pace to retain a competitive edge, and research suggesting that open banking boosts organic company growth by up to 10%, there’s a clear opportunity for open banking to make its mark.

Additionally, as the recognition of open banking’s value grows, insurers are actively in search of open banking platforms that streamline data access and enhance customer experiences. Continue reading to learn how open banking benefits your insurance company.

Open Banking for Insurance: What’s the Big Idea?

Insurance is one of the most highly-regulated and competitive industries in the world. Multiple insurance providers offer a broad range of insurance products and services, only adding to the competitive pressures.

Typically, a fragmented, inflexible, and complex legacy IT ecosystem is the root cause for sky-high IT costs, stunted efficiency, and poor use of data within insurance companies. 

But, the insurance industry is going through large-scale changes. Gone are the days when digital transformation was seen as just a pipe-dream. The emergence of insurtech solutions and open banking innovations has demonstrated to insurers why there’s such a pressing need to digitise their processes to streamline operations.

After all, today’s insurance customers have an appetite for effortless and individualised experiences. The good news is that insurance companies can use open banking to access data about their customers, from insights about their risk aversion, preference towards different policies and subscriptions, to their willingness to switch insurance providers. 

In order to stay ahead of the curve, insurers must align their products with changing consumer behaviour and rich data to see the maximum returns on their investments.

5 Open Banking Benefits for Insurers.

Finding the right open banking provider for your insurance company involves choosing a platform that opens doors to new opportunities, without compromising on reliability, integrity, or security.

Whether you’re looking to accurately identify customer legitimacy with Payment Initiation Services (PIS) or want to expand your company’s ability to profile customers with Account Information Service (AIS) and Klarna Account Insights, partnering with an open banking platform will help your insurance company scale to new heights.

Let’s take a look at five open banking benefits for insurance companies looking to partner with a leading platform provider backed by a proven track record and unmatched connectivity across the financial sector.

1. Streamlined customer onboarding.

PIS creates efficiencies for insurers through rapid identification processes that onboard customers smoothly and paperlessly. Insurance customers use PIS to make a simple bank transfer allowing carriers and providers to verify their identity by requesting customers pay their first instalment as a “light KYC” procedure. Additionally, PIS can be used by the customers to settle their monthly (recurring) payments. 

2. Comprehensive customer profiling.

Using data about consumer spending habits and behaviours, insurance providers have the tools to categorize, analyze, and more deeply understand their customers. 

Customer data gathered by AIS and Account Insights allows insurance companies to move away from basic customer segmentation. Instead, insurers can adopt a hyper-personalized, holistic approach that looks beyond simplistic demographics (like age and gender) and includes lifestyle as well as the individual’s personal values and preferences.

3. Personalised customer experience.

Insurers have to think strategically to deliver the ultimate customer experience. With the backing of comprehensive customer profiling capabilities, insurance companies can access relevant data to deliver the most suitable products and services tailored to individual consumer requirements.

On top of that, having the technology to efficiently process vast datasets can help reduce customer wait times and free-up customer service representatives for more value-adding or challenging tasks.

4. Reduced risk.

Harnessing customer data through open banking allows insurance companies to manage and minimise risk by properly determining customer legitimacy, identifying fraudulent behaviour, and ensuring compliance regulations are followed to avoid serious consequences.

Valuable customer data collected enables insurers to access more granular information that allows them to offer insurance policies that more closely reflect the risk posed by an individual rather than the demographic box they belong to.

5. Targeted marketing and upselling opportunities.

As an extension of the improved customer profiling that AIS and Account Insights offers, access to deeper customer data allows insurance companies to tailor offerings through targeted marketing or up-selling opportunities. 

While targeted marketing can help bring in new customers, up-selling your broader portfolio of products to existing customers is a surefire way to increase retention, demonstrate long-term value, and increase customer engagement.

Insurance and Open Banking: A Winning Combo.

Finding the right open banking platform for your insurance company involves choosing a provider that opens doors to the most opportunities without compromising on reliability and security.

With security and innovation in mind, it’s important for insurance companies also to recognise the impacts COVID-19 has had on consumer mentality. During the pandemic, there’s been a 10%-20% rise in digital banking use across Europe since April 2020, meaning it’s never been more important for insurance companies to embrace digital channels.

Today’s insurance customers require instant and bespoke support. For insurers, having an in-depth understanding of each customer’s financial health, affordability, and creditworthiness is the key to providing the personalised service they expect. 

At Klarna, collaboration and teamwork are critical to everything we do. We’re confident that our proven track record as a trusted bank gives us both the technical capability and market exposure to support fintechs and insurtechs with the latest open banking technologies.

Improving Customer Experience in Insurance with Klarna Open Banking.

Klarna Open Banking empowers insurance providers to minimise costs, fully-harness their data, and deliver seamless customer experiences. We provide all the tools needed to offer a great user experience without compromising security, compliance or the ability to collect, handle or process customer data.

Backed by 15 years of experience and our pioneering single API, Klarna delivers Europe’s most scalable and proven open banking platform to date.

Visit Klarna Open Banking to learn more about Open Banking, or schedule a demo to find out how your organisation can benefit today.