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Open Finance – Don’t Miss Your Chance to Input

  • United Kingdom
  • Insurance and reinsurance
  • Litigation and dispute management

12-03-2020

Late last December, the FCA issued a Call for Input (CFI)[1] to explore the opportunities and risks arising from Open Finance. Comments are due by Tuesday 17 March 2020 – don’t miss your chance to have your say.

Open Finance

Open Finance is an extension of Open Banking data sharing principles to enable third party providers to access customers’ data and to initiate payments on their behalf, across a broader range of financial sectors and products, in a safe and ethical environment with informed consumer consent.

Open Banking only applies to ‘payment accounts’. Open Finance however is expected to impact a range of financial services products, including insurance.

Insurance Industry

  • Open Finance has a number of benefits for insurers and brokers, for example:
  • Proposal forms could be more readily completed/pre-populated following direct access to customers’ accounts;
  • Cross selling opportunities can be more readily identified;
  • Enhanced customer service and customer journeys in switching policies at renewal; and
  • Simplified claims process and enhanced customer experience, with claim payments being deposited instantly into customers’ accounts/payments made directly to third parties from such accounts.

Challenges

Whilst Open Finance has the potential to deliver transformative benefits to customers, there are a number of potential challenges. We see these including:

  • Regulatory Regime – How will Open Finance be regulated. Under Open Banking both the CMA’s Retail Banking Market Investigation Order and PSD2 have to be complied with. There will need to be a consistent set of rules which apply to all market participants in Open Finance and clarity as to which regulation applies to each participant, with the FCA and the ICO having the ability to control the activities of Third Party Providers seeking to provide services to customers.
  • Data – GDPR and customer consent will of course need to be considered in detail to ensure that all parties can maintain compliance but is your business also in a position to share all necessary data (e.g. policy coverage) to allow effective comparisons to be made.
  • Operational Resilience – Providing access to Third Party Providers will likely have significant IT infrastructure changes (including the use of application programming interfaces or API’s) and is an area where there is already increased regulatory scrutiny.
  • Fraud – It will be imperative for customers to know who they are dealing with and to ensure that the regulatory regime provides sufficient protection to customers, including vulnerable customers.
  • Conduct Risk - How will the regulators control arrangements, particularly the remuneration arrangements for Third Party Providers (who may be outside of the scope of insurance regulation) which may lead to conflicts of interest and how will they control the marketing activities of Third Party Providers to avoid the problems encountered with PPI mis-selling?

Your Say

If you have not already done so, we would encourage you to review the CFI and consider the opportunities and challenges that this may present to your business.

Eversheds Sutherland (International) LLP has broad experience in advising banks on the regulatory and technical build aspects of Open Banking and is well placed to use this experience to discuss with you the opportunities and challenges which Open Finance presents to your business.


[1]  https://www.fca.org.uk/publications/calls-input/call-input-open-finance

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