Insurers have been urged to act amid a new EU directive that gives firms the chance to seize customers’ financial information and build new products. The directive, called the Payment Services Directive (PSD2), has gone under the radar but some are predicting it will have a massive impact and insurance firms are completely unaware. The new EU ruling came into force on Saturday meaning third-party providers – whether that be Amazon, Facebook, Google or any fintech challenger – will be able to access people’s bank accounts and transaction information. In the past, banks were the sole custodians of customers’ banking financial information and transaction data. But under the new directive, banks will have to provide third parties with access to customers’ bank accounts and transaction information via an application programme interface (API). And Accenture says this is a golden opportunity for insurers to get ahead of the game before others move in. Head of Accenture payment services Jeremy Light, said: “For insurers, this is an opportunity to harness newly-available financial data and use it to tailor quotes and products more effectively to their customers, and improve underwriting decisions. “Insurers are already beginning to use digital technologies to refocus their business models around an increasingly demanding customer base, with the risk of disruption remaining a constant threat for those who fail to adapt. “By tapping into this data, insurers can deliver products with a clearer picture on the customer’s financial health and behaviours, while also integrating into the all-in-one financial aggregation apps that will soon emerge as the market develops.” Brussels launched the directive to shake up banking across the continent and make it more competitive, throwing open the doors for competitors to build online financial solutions for European citizens - but some believe the knock-on effect will be huge in insurance. Webhelp’s director of operations Ian Fraser told Insurance Times last year, the directive would ’fundamentally change banking and insurance.’ “This will cause the insurance industry to become dis-intermediated,” he predicted.
Insurers are being encouraged to take advantage of new EU legislation that allows companies to use customers' financial information to construct new products. The Payment Services Directive (PSD2), which is now in force, could have a significant impact on the sector, giving third-party providers the ability to access bank accounts and transaction information through an application programme interface (API), rather than restricting access to banks. The information could help insurers to develop more specific, targeted financial products for customers as well as disintermediating the industry.