The Financial Conduct Authority (FCA) has published a consultation exploring the opportunities and risks of extending open banking to other sectors such as insurance.
Called “open finance”, it would enable customers who consent to a third party provider accessing their financial data to be offered tailored products and services.
It would also facilitate financial management applications that look across all products held by an individual or business, giving give them a holistic view of their financial circumstances.
Services that could be developed include personal financial management dashboards that show the customer’s overall financial position; automated switching and renewals that encourage shopping around; and new advice and financial support services for mass market consumers.
Insurance data that could be shared include product information (policy features, terms including fees or charges, exclusions), basic customer data (name, address, claims history data), and additional customer information.
However, the FCA paper also notes that greater sharing of data could lead to customers with certain characteristics being excluded from certain markets, the exclusion of consumers who opt out of data sharing, and those consumers getting less advantageous pricing (a so-called “privacy premium”).
Auto-switching, in particular, could lead to consumers becoming less engaged and, over time, unaware of whether their products are still suitable, as well as lead to consumers becoming focused solely on price over other factors affecting suitability, the FCA said.