The benefits of open banking remain largely untapped in insurance, though motor insurance start-up By Miles looks set to change that. The granting of an open banking license to By Miles, the first for a UK insurtech, will prompt other insurers to explore the opportunity and innovate.
Open banking is intended to encourage competition in the financial services space. The license will allow By Miles to gain access to a wider range of financial data from consenting customers.
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With this extra layer of information, By Miles could implement more flexible payment methods and better assist customers with lower credit scores who may otherwise be refused a policy. There have been examples of insurers selling products on open banking apps, such as that of Starling Bank, but By Miles is the first UK insurer to obtain this license from the Financial Conduct Authority.
By Miles is one of the companies examined in GlobalData’s Thematic Research: Digital Challengers in Insurance report. According to the analysis, By Miles’ value proposition is purely digital, and the company is already excelling at offering customers flexible, pay-by-the-mile motor insurance. Thus, open banking will likely only enhance By Miles’ product proposition.
In fact, insurtechs offering flexible products are narrowing the gap between customers’ needs and wants and the products and policies on offer in the market, an area where incumbent insurers have seemingly fallen behind. But gaining insight into more customer data through open banking platforms will do more than simply expand insurance providers’ customer bases and product offerings. Data mining can assist with policy customisation, streamline the claims management process – through improved data reconciliation – and prevent fraud.
Open banking platforms will become increasingly more sophisticated over time, particularly as uptake among consumers improves. They will enable customers to easily switch to a better deal from a different provider. Once the open banking movement paves into insurance, insurers will be forced to improve their pricing and services.
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