Insurance APIs can spur innovation as never before
Embracing APIs can accelerate insurers' digital transformation in an age of disruption
Photo: Markus Spiske | Unsplash
The insurance industry is rarely noted for innovation. The traditional insurance business model has been in place for centuries, founded on stability and consistency of customer relationships based on sustained trust. Indeed, in 2007 the Competitive Enterprise Institute concluded that, “Since…1959, the [insurance] industry has not introduced a single entirely new property and casualty insurance product for individual customers.”
The insurance industry has largely escaped major dislocation. Insurers have felt protected by strong barriers to entry: strict regulation, the scale to create a risk portfolio based on the law of large numbers, the time necessary to establish a trust relationship with customers and, last but not least, customer inertia.
Yet, in the past several years, change has been accelerating, threatening the complacent ways of the industry. With new technologies rapidly evolving, consumers now expect insurers to deliver superior, personalized and seamless service across all channels. Customers assume carriers will have deeper insight into their individual preferences, as well as anticipate their wants and needs. In a recent IBM Institute for Business Value study, 41 percent of consumers surveyed told us they switched insurers because their previous carriers could not accommodate their changing needs.
To succeed in this new environment, innovative capabilities, once considered “nice-to-haves,” need to become central to insurance carriers’ everyday business. Innovation enables insurers to streamline operations, transform functions, create efficiencies and develop superior capabilities.
For customers, innovation can bring advanced products and services for new and compelling experiences. And innovation can help define new partnering and business models, disrupting traditional insurance industry value chains and enterprise models.
A fundamental way to introduce innovation and digitally transform insurance companies is through application programming interface technology. Better known as APIs, this system allows insurance firms to securely expose information and services to a wide range of related businesses to add value and gain new clients in a broader customer experience.
APIs are a key ingredient in the strategy to meet the challenges in the life insurance industry. They will be used to build life insurance partner ecosystems, to integrate with fintech and insurtech start-ups such as robo-advisor platforms, and self-service benefit enrolment platforms. APIs can also be used to improve customer experiences by reducing underwriting times through improved access to accurate risk data.
APIs can help make it easy for partners to do business with you. Providing APIs to an ecosystem of related services partners is an approach that is well-suited for generating new revenue streams.
These APIs are significantly reshaping the nature of insurance, bringing partners—banks, brokers, credit unions, employers, lawyers, accountants, financial advisors —into an insurance company’s platform, enabling those partners to deliver offerings and services to your clients and at the same time promote your insurance offerings to their clients.
These APIs, most importantly are allowing innovative insurtech companies to work as collaborators with incumbent insurers. The insurtech community has been rapidly maturing and traditional insurers face a stark choice – either ignore or embrace them. The most dynamic insurers are actively forming ecosystems to encourage insurtech and other partner engagement.
Those forward-thinking insurers recognize the mounting customer expectations, and that the technologies that enable them are destined to become more comprehensive and demanding. By embracing the philosophy of Digital Reinvention, the insurance industry will sustain its momentum by meeting and eventually exceeding customer’s personal aspirations and life desires.