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In several countries, open banking has moved from a mere buzzword to a concept that has changed how people access financial services. This relies on participating financial institutions adhering to industry-level data-sharing agreements. The idea of “open finance” is now part of insurance debates, with several policymakers, innovators and industry actors considering what “open insurance” could do for competition, product innovation and consumer choice.
For inclusive insurance, the idea of open insurance presents a more pressing question to resolve: how could open insurance improve protection for low-income and underserved customers rather than help wealthier customers optimise their insurance choices? Beyond this need to determine possible use cases, how data sharing should work for a customer segment that needs better customer protection is also an important consideration.
What is open insurance?
Open insurance refers to making insurance-related data, services and capabilities securely accessible to third parties, via industry-standard application programming interfaces (APIs) and rules. This should enable third parties to build new products, tools and customer experiences. The data sharing arrangements can include access to policy and claims data, product information and even underwriting or claims functions exposed via the “as a service” approach.
Much like open banking, open insurance rests on three pillars: explicit customer consent for data sharing, technical standards on interoperability and a regulatory framework on accessibility. The intention is for open insurance to lead to an ecosystem where customers can share their data, easily compare products and benefit from a wider range of product offerings. Ultimately, open insurance should allow customers to benefit from more choice, due to increased competition, and more affordable insurance products.
Inclusive insurance’s tougher starting point
For inclusive insurance, open insurance does not immediately offer a set of new opportunities for either providers or customers. If anything, inclusive insurance starts from a much more challenging economic base than traditional motor or health products. The core challenge is viability: customer acquisition and servicing costs can be high, while awareness and trust are typically low. Inclusive insurance schemes often depend on third-party distributors such as telcos, microfinance institutions and co-operatives.
The business case for open insurance in microinsurance is unclear. In high-income markets that have embraced open insurance, price comparison sites selling other lines of insurance business have succeeded by spending heavily on marketing. Currently, most microinsurance services do not generate enough margin to justify similar marketing spend. Doing so online would also only work in certain markets, such as in South and Southeast Asia, and Latin America, where smartphone penetration is slightly higher. Any open insurance strategy for inclusive insurance must deal with these economics: APIs alone will not make small-ticket risk cover sustainable.
Lessons from Brazil and early movers
Despite the challenges for open insurance in markets with low penetration, a few examples have emerged where some progress has been made. Brazil is widely seen as a frontrunner in open finance and instant payments; it also offers valuable lessons for insurance. The central bank has a strong open finance agenda, and the launch of Pix, the country’s instant payment system, has transformed how people pay, including for insurance. Before Pix, many low-income customers relied on boletos, a cumbersome voucher system that created delays and churn. Integrating Pix into premium payments has reduced friction and opened space for new models.
Brazil’s open insurance framework includes “initiators”. These are licensed entities that can initiate payments or product interactions via APIs, for example, by running price comparison tools or triggering sales prompts on behalf of customers. Initiators have been able to lower intermediation costs and challenge entrenched distribution models where mandatory fees and broker dominance determined how markets functioned. For inclusive insurance, the idea that new intermediaries, such as digital platforms, agritechs, and co-operatives, could sit on top of open rails is promising – as long as regulators permit it and the economics work.
Understanding Africa’s reality: Careful regulators and unclear incentives
In contrast, much of Africa is still at a nascent stage on open banking and open finance in general. The enforcement of open finance across Africa is uneven, while the incentives to participate either offer little economic benefit or remain unclear. In some markets, open banking became fashionable long before there was clarity on what problem it should solve. Central bank initiatives have been mixed: Rwanda and Zambia have been cautious about open banking, while Ghana, Namibia and Nigeria are still developing regulations.
When considering insurance, which is a more conservative financial service and is much less digitised, there is an even bigger leap to make. It is unclear how many insurance regulators have an agenda on open insurance and how many might be driving it. Similarly with insurance associations in low- and middle-income countries, there is less clarity on their role. Perhaps this offers insurance associations the opportunity to take a stance on open data and learn from their banking counterparts. Data protection awareness tends to be stronger in banking than in insurance supervision.
At the firm level, the starting point for organisations is low too. Data sharing arrangements are a struggle even for sophisticated insurers, often due to regulatory and organisational silos. Most data sharing ends up being a consequence of bilateral agreements, such as between fintech lenders and data providers. There are few shared platforms or similar initiatives that multiple insurers can tap into, aside from mandatory regulatory management information systems.
What would it take for open insurance to work for inclusion?
The key starting point is to have a relatively mature market that has embraced and encouraged providers to compete and offer a range of products. Beyond this, several other conditions need to be in place for open insurance to play a meaningful role in inclusive insurance:
1. There must be a clear purpose
Regulators and policymakers need specific objectives to adopt open insurance, rather than pursuing it simply because it is a trendy idea. These include transparency on claims performance, portability of agricultural cover or better targeting of public subsidies.
2. Design choices need to be pro-poor from the outset
Data and use cases that matter for low-income customers need to be prioritised. This means embracing basic know your customer (KYC) checks, simple product attributes and straightforward claims data. There is no need to offer complex investment or wealth management features just yet.
3. Data holders need real incentives
Mobile network operators and mobile money providers sit on significant customer data. Some may respond to revenue sharing, co-branded propositions that strengthen their own customer relationships, or regulatory reasons that make participation commercially viable.
4. Consent mechanisms must be usable for real customers
Consent is often buried in online terms and conditions, which goes against the spirit of open finance. For inclusive insurance, consent may need to be delivered through existing unstructured supplementary service data (USSD) flows, encouraging greater app use (that offers a richer user experience) and agent-assisted processes that work in low literacy and low data contexts.
5. Shared infrastructure is critical
Multi-tenant, API first platforms that spread fixed costs across multiple schemes and distributors may be the only way to justify the investment needed to serve small-ticket risks. Otherwise, the cost of “going open” is likely to be prohibitive in most inclusive insurance settings.
From buzzword to building block
On its own, open insurance is unlikely to fix low levels of insurance literacy, limited trust or the complexity of using subsidies. However, its underlying ideas can help resolve some frictions in inclusive insurance. Standardised connectivity, shared infrastructure and user-centric data rights could target the issues created by high distribution costs, clunky payments and limited visibility over who is covered by what.
Over the next few years, the most promising use of open finance in inclusive insurance may be the role that infrastructure development plays rather than regulatory reforms. This includes integrating instant payment platforms (such as Pix or mobile money) into premium collection, building shared platforms that multiple schemes can plug into, and piloting consent-based data sharing for specific use cases. If these experiments show value for low-income customers, open insurance could help to improve resilience among the uninsured and underinsured.