Insurance application programming interfaces (APIs) allow companies to connect different platforms and services to one another, extending the functionality of offerings.
Digital transformation has been a challenge for the insurance industry; in part due to widespread reliance on outdated, legacy systems. In many cases, legacy applications are so integral to daily processes that modernization would be too disruptive - and expensive - to be practical.
APIs can help insurers add features and functionality without requiring a completely new system, evolving to a more digitized, modernized, customer-centric business model.
Application programming interfaces (APIs) are short scripts that can be used to get two different applications to ‘speak’ to one another.
Because of the way that applications are built using different languages, configurations, and structures, it can be difficult to get two different applications to work together. And if applications do not work together, one of two things can happen. Data may remain siloed, preventing organizations from using information fully and gaining valuable insights from data analytics. Or else data is transferred between programs, usually by using manual, repetitive, resource-intensive, error-prone data entry processes.
APIs work like translators, allowing applications to speak to one another, and work together. An insurance API can connect a discrete application (like a rating application) to a different internal application (like document generation) or a third-party vendor (like DocuSign.)
To support a constantly changing market, many insurers are moving their technology platforms to API-centric microservice-based architectures.
Get the guide: Microservices Architecture and the Insurance Paradigm Shift
Imagine a P&C insurer wants to incorporate data from IoT devices into rating calculations, for example, a device that measures driver safety could be used to calculate the cost of fleet insurance for a company.
An API would allow the IoT device to send data directly into the insurance platform, where it can be run through the required algorithms to generate an updated cost of insurance.
Because APIs communicate with one another, they essentially automate the task of transferring data manually from one application to another. APIs improve productivity and efficiency, eliminating the need for businesses to spend limited resources on repetitive tasks. Instead, employees are free to focus on innovation, and higher-level strategic objectives. It also reduces the chance for human error during the data entry process.
If there is one thing businesses have learned over the past year, it’s that both customers and employees need access to information no matter where they are. But legacy systems are often limited to local access, on a desktop computer. APIs can help connect the data contained in a limited application to remote devices, securely, so that both customers and employees can access the information that they require, reducing service gaps and improving the customer journey.
APIs improve the customer journey in other ways, as well. As APIs reduce the administrative burden on employees, they are free to focus on customer service. Moreover, eliminating data silos and gathering more information to analyze helps insurance companies gain valuable insights, which can be used to improve the customer experience. And integrating data from different sources promotes access to real-time data, so that customer relationship management (CRM) systems have accurate, updated information. This helps to increase customer loyalty and retention over time.
Without APIs, processes become disjointed and hard to manage. However, when applications can communicate and work together, processes can be automated and workflows streamlined, further improving productivity and efficiency.
APIs help insurance companies innovate in new and exciting ways, offering new services and products and extending reach to new revenue streams. Categories of insurance APIs that can be applied to improve P&C commercial lines of business include: