“Tones of Insurtech”: discussing the FiDA framework
Anne-Sophie Morvan, LUXHUB’s Chief Commercial Officer and legal expert, was recently featured in the “Tonalités Insurtech” (standing for “tones of Insurtech”, in English) Podcast, hosted by Florian Graillot, VC investor and Insurtech veteran. The two experts focused on the just-published FiDA proposal and on several Open Insurance use cases.
Anne-Sophie first explained how the Fintech company was born, a little more than 5 years ago. “LUXHUB’s initial goal was to create a mutualized API platform for banks to publish and manage their PSD2 APIs, underlines the expert, therefore our first focus was banking, but we rapidly considered that Open Insurance was going to be the next step. In this respect, we joined OPIN, the Open Insurance Think Tank”.
DG FISMA (European Commission Directorate-General for Financial Stability, Financial Services and Capital Markets Union) then launched a call for candidacy to take part in an expert group around European Financial Data Space, and, as a member of OPIN, Anne-Sophie successfully applied. As part of the expert group, composed of financial institutions, Fintech associations, scholars, etc., she took part in the crafting of the Open Finance Report, published back in October 2022. “In FiDA, you can actually find many of the aspects we discussed in this report, notably when it comes to use cases with great potential for the insurance sector,” adds the CCO.
Florian Graillot, the host, wondered: “did you expect that FiDA would include all types of financial services?”. “It seemed logical, replied Anne-Sophie, as in its Digital Finance Strategy, the European Commission mentioned finance in general and no specific sector. A specific legislation for insurance could also have been a solution, but I think that the goal of the financial service industry to open itself could not have been achieved. And since the overall goal is to have financial services companies share data between them, having one regulation for the entire industry makes a lot of sense if you ask me”.
Digging deeper into FiDA
FiDA stands for “Financial Data Access” framework. Once this piece of legislation is adopted, clients of financial institutions will be able to grant access to certain of their data to other financial institutions, or FISP. This new status will be regulated and is the new acronym for Financial Information Service Provider.
“Moreover, with FiDA, clients will have access to a dashboard that will provide them with a clear view on which companies have been previously authorized to access their data. And obviously, they will be able to revoke them if they want to. Therefore, they won’t lose control over their data,” highlights the CCO of LUXHUB.
As explained in the podcast, data will be available via APIs. Financial data sharing schemes will, in the meantime, determine several key aspects such as technical standards, contractual frameworks, how to monetize products/services, etc. “For instance, imagine you hold an insurance policy for your car in France and move to Luxembourg. Currently, it is complex to share data between insurance companies. With FiDA, we can envisage going to your future insurance company and ask them to get your information and data directly from your French insurance company. This is a major change that will facilitate the life of users!”
The FiDA framework defines a certain number of datasets that have to be made available by financial institutions. In terms of pensions and life insurance companies, specific rules apply and concern insurance investment solutions, pension funds, pan European pensions products, etc. And when it comes to non-life, all products are concerned, except the ones that deal with health and sickness insurance solutions.
The necessity to define standards
“Also, adds Anne-Sophie, FiDA introduces the concept of ‘perimeter’ to use data. It means, based on GDPR, that only natural person data that is essential should be used. The EC pushed for this concept and asked EIOPA (European Insurance and Occupational Pensions Authority) to craft guidelines in order to establish what types of personal data are needed to analyze the risks and pricing for life and health products”.
According to Anne-Sophie Morvan, FiDA will push for APIs to enable the sharing of data: “And for it to work properly, we need standards. For Open Banking, several standards exist, notably STET in France and Berlin Group which is widely used in Europe. But, if too many financial data sharing schemes emerge, we might have a problem of fragmentation,” explains the expert when asked about tech and standards.
The EC has set an 18 to 24 months deadline for financial institutions to comply with FiDA, once adopted. Yet, as highlighted by Anne-Sophie Morvan, “the most important thing is to know when it will actually start. For the regulation to enter into force, it first needs to be adopted by the European legislator. This raises a key question: will this proposal be adopted before the new European elections in mid-2024?”.
Also, we need to keep in mind that many digital finance topics are on the agenda, notably the review of PSD2, and the European Data Act. “These legal frameworks will also be important for insurers. For instance, the European Data Act concerns connected objects and are therefore inevitably linked to the insurance sector. It is a key topic and will be complementary with FiDA,” concluded the CCO of LUXHUB.