APIs in the insurance industry: Accessing a growing world of data
The insurance industry is vast and varied. It can be found in nearly every country in the world, with the earliest references dating back as early as 1750 BC. Modern insurance, however, started around 1686 with Lloyd’s of London and with the U.S. founding its first fire insurance company in 1732.
Much of the industry is heavily regulated, has multiple markets (U.S., London, Switzerland, Bermuda, Singapore, and so forth), and covers a plethora of risk types. Spanning across motor, health, pet, oilrig, terrorism, catastrophes, liability, and bespoke covers, each of these segments of insurance vary enormously and they are proceeding at different speeds on their digital transformation journeys.
In many regions, personal lines insurance is already adopting features like self-service platforms and paperless policies, working with aggregators and automated quotes, not to mention automating claim handling with same-day payments.
Innovators have created new products applying Usage Based Insurance, working with manufacturers to have insurance built-in, and offering dynamic insurance that changes according to an individual’s behavior and needs. The customer experience has leapt forwards in many ways, with no shortage of ideas of how it will further evolve.
However, commercial insurance is much more complex and has some challenges. For example, it remains document-centric and becoming data-orientated is a considerable issue that is holding the industry back from progressing beyond the constraints of today. Yet there is room for optimism here; recent changes in technology are starting to move the data ingestion issue forward through artificial intelligence and machine learning, and alternative sources of data are coming online like IoT, drones, augmented reality and wearables.
With usage of this tech widely forecasted to become pervasive in the next five years, it will further expand the data available via API-connected devices. It’s the data that is critical to insurance that is driving the push for more API usage.
From a business perspective, APIs are powering omnichannel capabilities that are increasingly important to ensure policyholders, agents, brokers and partners can consume data and insights during key processes in a way that suits them best. Beyond core operational processes, the industry is quickly moving towards newer capabilities that include different insurance models and a risk prevention focus.
These newer innovations only work by getting data that is distributed around the globe to the processor for decision-making and action. The application for data and APIs for the insurance industry is endless, together with the promise to decrease the harm, the inconvenience, and the inefficiency that risks bring when they materialize.
As the number of connected devices rapidly increase, APIs will be the default communications channel. Insurance will help drive both production and consumption of device endpoints as we strive to better understand and interact with our environment via digital means. The devices themselves will also need insurance for protection from physical damage, cyber risks, maintenance liability, and other relevant perils.
As the world continues to fill with data, until AI takes another jump forwards, we are likely to shift our focus from processing large unstructured data towards these IoT devices that will become authoritative, trustworthy, and respected sources of data in insurance.
By enabling data flow across the value chain more efficiently, individual processes become paperless and frictional cost is greatly reduced. Security will always remain an essential part of the APIs from development throughout the lifecycle, and with more distributed compute and edge devices, and more ventures appearing without the necessary organizational maturity, security will become more challenging.
While InsurTechs are starting to significantly impact the industry, the regulation, capital requirements, and ecosystem dependencies are slowing the rate of disruption as the barrier to entry is often too high to compete with insurers. While a number have managed to enter the market (e.g., Lemonade, Hippo, Ping An), the majority are tech and data providers that are supporting existing insurers, brokers, and agents with new services to enhance the ecosystem, and nearly every single one is data orientated and API enabled. So, with the explosion of data and API endpoints, where do we get started?
The purpose is not to produce APIs; they are not the target. APIs are the construct to enable data exchange between parties and across ecosystems. Done well, they can also be channel enablers, a key asset to your business, and a representation of your technical brand. This isn’t about writing some code to develop or consume an API. This is about developing a scalable capability within your organization to take advantage of the data-driven API explosion that is coming.
- Strategy: Be purposeful and explicit about what you want to achieve, what outcomes your business needs, your resources, tech preferences, and the capabilities you need. Plan to avoid common mistakes and minimize the rework. Plan the benefits and know your governance.
- Standards: Designing and building APIs in line with a functional and technical foundational core standard is a critical primary step. This is important for your customers (e.g., a single authentication model, a single use of HTTP options, consistent paging and searching) and internal reusability.
- Operational platform: Deployed APIs should be managed so that their execution is controlled, made secure, and operable for version-controlled change, audit, and insights. A good starting point in an API gateway is to make the full API platforms available, as requirements become more advanced.
- Adoption: Outcomes can only be achieved with good adoption, dependent on beneficial business features, discoverability, and adaptability. An adoption stream and a passionate focus on the developer experience (DX) is important to build a community and grow your ecosystem.
- Skills: APIs should not just be a development asset. For businesses that want to be leaders in their space, APIs should be managed as business assets. Providing the proper training, governance, role enablement and culture to the cross-technology, data, and business teams produces an effective capability.
- Scaling execution: Standards, tooling, automation, and repeatable processes are all good ingredients. A C4E approach has proven to be highly effective for larger companies and has tangible value longer-term where a quantity and longevity of work is expected.
- Stakeholders & partners: Business product owners, platform owners, data governance stewards, security architects, and ecosystem evangelists, to mention a few. These individuals are critical in realizing the benefits that APIs offer, in an effective and secure manner.
- Executive sponsorship: API insurance products will often require investment and focus over a multi-year program. Ensuring that the strategy is held to account and the broader teams stay the course is essential to realizing the benefits.
The insurance industry is changing, though not via a single disruptor or even at a pace that observers are calling for. However, it continues to move forwards with more acceleration than in recent decades, and with billions of endpoints to interact with, there’s significant opportunity ahead.