Disruption in the insurance industry is being driven from two sides. Externally, consumers are demanding better digital solutions and are replacing agents and paperwork with mobile apps and integrated experiences. Internally, companies are rushing to leverage machine learning and artificial intelligence to improve underwriting models, which requires tighter data integration. Failure to innovate technologically could mean losing policyholders to more nimble digital-native competitors. In fact, a report from PwC says more change occurred in the insurance industry in 2021 than the combined past years.
Insurers must quickly advance their digital capabilities and focus on customer experience rather than products. This means becoming more agile, reducing the complexity of legacy products and processes, changing delivery models, right-sizing cost infrastructure and collaborating with partners for innovation.
APIs - Critical to Delivering Digital Consumer Experiences
As consumers flock to using digital platforms, insurance companies are now required to double as app developers. This requires building entirely new technological frameworks and skill sets, while working at a very different pace and with different methodology.
Where internal system engineering traditionally works on the company’s on-premise systems, with legacy data stores and slow and stable release cycles, delivering best-in-breed digital experiences requires adopting new technologies, deploying to the cloud and releasing in agile iterative cycles.
The marriage of internal legacy systems with new agile development can prove challenging -- and often hinders digital transformation. This is where an internal application programming interface (API) hub can accelerate the process.
APIs enable different pieces of software to “talk” to each other by sharing data and functionality. APIs serve as the “bridge” between the internal systems and new consumer apps, enabling the development of consumer software to work separately from the rest of IT while maintaining a clear integration.
APIs - Powering the Next Generation of Business Relationships
It is not just better apps that consumers expect. Modern consumers expect services to come to them and be integrated into their existing buying flows. A consumer renting an apartment, for instance, will expect a renters’ insurance offer to be available as part of the leasing process. A user buying a car will expect an insurance quote to appear in the checkout flow. A business buying machinery or hiring employees will expect insurance to tie seamlessly into their ERP/payroll systems with a 360-degree view of all data integrations.
See also: Open Banking APIs: A New Growth Engine
These integrations provide ample opportunities to introduce insurance into existing flows but also require tight integrations between businesses. The only way to power these integrations is by offering APIs and allowing partners to use those API to tie insurance into their systems. APIs thus open up crucial revenue streams.
APIs Are Necessary to Introduce New Technologies
On top of these consumer expectations, there’s also tremendous innovation happening at the core of the business, introducing more advanced AI and ML into the underwriting processes. As companies rush to hire top talent to build these models, it is critical to ensure that their models will have easy access to the data and systems they need to be useful. Even the best neural network is useless if it can’t integrate into the underwriting system.
APIs serve as that technological pedestal, acting as the layer connecting data stores and systems to new models and decision-making systems. An investment in good APIs and API tooling will accelerate the introduction of new systems by multiple factors.
APIs, APIs, APIs...
Whether you are thinking of delivering better digital experiences, creating better channel partnerships or improving internal processes, an investment in APIs is critical. In our company’s annual survey of API usage, we found that 94% of developers in the financial services industry (which includes insurance) plan to increase or maintain their usage of APIs. While many companies are funding digital transformational programs with APIs at the core of their strategy, they struggle to use APIs effectively.
A key hurdle for many organizations is they don’t know the APIs that exist across their business. Whether it’s due to organizational silos, disparate infrastructure and tools or lack of resources and ownership, companies fail to effectively implement an API strategy. Legacy API management vendors do not address modern API requirements and just lock organizations into their technology, restricting expansion and growth. That’s where API hubs offer an exceptional advantage.
API Hubs to the Rescue
Successful insurance companies are adopting next-generation API hubs to discover and connect to all their APIs more easily. This open, self-service, single hub is where development teams can publish and share APIs so others can quickly find and use them. A hub speeds innovation. For the broader organization, it helps to reduce the time to market of products—which brings new revenue streams.
Additionally, a hub enables initiatives like “open insurance” for providers that want to create an ecosystem with a common approach to securely share data through APIs to drive value.
Insurtech firms like Lemonade, Cuvva and CoverWallet are using APIs to gain footing in the insurance marketplace and provide simple and easy consumer experiences. We are seeing more and more big insurers incorporating APIs in their business models to remain competitive and provide service excellence.
Are you an insurer considering an API hub to serve as a catalyst for digital innovation in your company? Here’s how to get started:
- Inventory your APIs. Begin by understanding the APIs that exist throughout your organization. It is important to catalog your APIs and collect all the resources so you have an accurate inventory. Make sure you include all teams, including engineering, product design and back-office functions.
- Document your APIs. Next, for each API, generate documentation (preferably in an open format, like an OpenAPI Spec file). Without proper documentation, your team can’t see or use the APIs that are available.
- Establish a hub or platform for your APIs. Once you have the accurate inventory and associated documentation, the next step is to establish an API hub where all APIs can be seen and accessed. The structure can be simple, such as a web page in your intranet. Or it can incorporate advanced features like integrated testing and provisioning capabilities. You can build the API hub yourself or use an external vendor. Often companies soon realize the benefit of having an outside vendor create their API hub after trying unsuccessfully to build their own, mainly due to lack of resources, time, skills or competing business priorities. Once your API hub is in place, it’s important to make sure it is well-facilitated, orchestrated and managed while ensuring security.
See also: Making Inroads With Open APIs
APIs are the foundation for any application modernization effort, and they have the potential to help change the velocity of innovation for the insurance industry. Digitally enabled insurers that take an API-first strategy are more able to enhance the experience for their customers, policyholders, employees, partners, shareholders and others while keeping pace with changing market demands.