Although it is still not yet adopted by the European Union, The proposed introduction of FIDA is already stirring tension across the insurance landscape. It is prompting conflicting opinions and, at a broader level, sparking debate around ever-evolving compliance reforms. Is the controversy surrounding the potential introduction of FIDA justified, or as some would say, long overdue?
What is FIDA, in practical terms?
FIDA aims to extend open-data principles to financial services, including insurance. It requires insurers to make customer-permissioned data accessible to authorised third parties through standardised APIs, forcing insurers to rethink their data architecture, governance models, and operational control. The regulation seeks to increase transparency, competition, and innovation, while introducing new challenges around data security and operational readiness.
It is believed that consumers are set to benefit thanks to transparency forcing new fair competition, but critics counter this with burdensome regulatory changes having detrimental impact on business.
So, what effect will FIDA have on insurers?
Insurers are continuously mindful of the ever-changing compliance landscape, particularly insurance groups operating in multiple jurisdictions, and are having to allocate significant resources in order to meet the demands of the varying and shifting regulations.
Unarguably, FIDA is yet another consideration for insurers, especially as they navigate major digital transformation. Will this change push some insurers to breaking point or help others finally modernise? How much of the regulation will actually be enforced? And will insurers ultimately embrace the change or resist it?
Will big EU insurers decide FIDA’s future?
As with all new regulations, a consortium of major players plays a key role in determining realisation of regulatory changes. These industry leaders could be looking to streamline the response to FIDA with a universal mandate, but it could also be in their best interest to resist its practical implementation as it poses a threat to their control of market pricing. The wrestle for alignment tends to slow regulation down and this delay tactic could very well be deployed.
Is FIDA in the best interest of insurance companies?
Some large-scale EU insurers may welcome FIDA, insisting they have nothing to hide. Others will undoubtedly quietly fear that exposing pricing logic and data foundations could weaken their competitive edge or invite scrutiny over long-held market advantages.
What does FIDA mean for a small insurer? The transparency levels the playing field, giving smaller firms visibility to compete more fairly. This will be a welcome shift for many localised insurers trying to swim in big ponds, but for those that are trying to stay afloat, critics warn that another compliance demand requiring data structures they simply don’t have, could be a death blow.
The operational headache: Is FIDA pushing EU insurers past breaking point?
If FIDA becomes fully enforced, even major insurers will be looking closely at what options they have to minimise operational impact and cost. Many can rely on internal compliance teams to handle yet another regulatory overhaul, but the reality is, legacy systems aren’t likely to keep up. Digital transformation and the options SaaS solutions afford for compliance consideration, such as regular updates, are becoming more of a necessity. FIDA could well be a significant turning point for digital investment.
It is likely that large-scale insurers will question whether FIDA genuinely protects consumers. FIDA could simply produce another mountain of documentation that insurers must pay to maintain, and while increased transparency empowers customers, the counter argument is that compliance-heavy frameworks rarely translate to meaningful consumer understanding.
Compliance vs Innovation
From an innovation perspective, FIDA could encourage a slew of new products better tailored to consumers, meeting the changing demands of modern, digital consumers and thus supporting the customer-centric trend in insurance. But could such innovation be stifled by insurers being forced to spend their budgets on meeting data obligations instead of building new products? This brings us onto a most important question; At what point does the cost of compliance outweigh the value of compliance?
The debate continues, but one thing insurers universally agree on is this: keeping a constant eye on compliance is frustrating. It drains resources, shifts focus away from business-as-usual, and introduces constant uncertainty. Thankfully, modern core systems have insurers covered. We are proud to help our clients to stay ahead of the ever-changing compliance landscape, not buried beneath it, and we are ready to support insurers to navigate FIDA.
The real question is; why are insurers still spending money on chasing compliance when they could have it handled automatically by core insurance SaaS? Time to trust the experts.
About Fadata
Fadata boasts the super-power to build the future of insurance. With a heritage spanning over more than three decades, we are a leading provider of solutions for insurance companies globally and offer a highly flexible SaaS model. Together with our customers and our partners we have created an expert community that is driving customer engagement, innovation and business value, making change happen and impacting millions of people’s lives every day.
Fadata is embracing AI internally and cementing AI into our product roadmap. We also collaborate with clients on their own AI-driven business solutions—such as STP Claims—and offer AI solutions from expert partners via our ecosystem to support and accelerate our clients’ strategic business objectives.
Fadata has clients in over 30 countries across the globe. Headquartered in Munich, with international offices in Spain, Bulgaria, Denmark, Peru and Malaysia, Fadata is backed by the private equity firms Riverside and Lowell Minnick.
