Blog: Reimagining insurance by learning from API innovation in other financial services
In today’s highly competitive business environment, insurers are challenged with creating the most innovative and effective products for customers. For well-established insurers, that means keeping up with nimble new market entrants like managing general agents, unencumbered by legacy technology. For MGAs starting with a clean sheet of paper, it’s a question of how to deploy new technologies quickly with comparatively few resources.
On both sides of the spectrum, APIs are changing the way insurance products are built and delivered.
APIs democratise access to many specialised third-party services - from identity verification to payments - and enable developers to create new products at speed, without the need to build every part from scratch.
Insurers can draw lessons from related industries that are in the midst of their own technological revolution. In particular, banking, investment and loan underwriting companies are embracing APIs to reduce the cost of delivering their services, and leverage a competitive data advantage through the likes of Blend, Plaid and Stripe.
Driving innovation in financial services
Incumbent banks are realising that APIs can hold the key to legacy modernisation, and enable them to innovate just as fast a new digital players. In the same way that leading digital banks like Tide and Revolut are leveraging APIs to rapidly unlock data and functionality, more established companies are now beginning to follow suit.
One recent report from Accenture found that areas of financial services like banking and loan underwriting have transformed their product offering through the adoption of APIs. Traditional banks, for example, are now effectively using APIs in response to competition and regulation.
APIs expose data in a way that protects the integrity of legacy systems and enables secure and governed access to the underlying data. This allows organisations with older systems to adapt to the needs of the modern consumer, and, more importantly, quickly adopt new technology.
Accenture’s report notes that banks with a clear API strategy are best placed to compete with new market entrants and win in the evolving digital banking industry. This same trend is now emerging in insurance.
Innovation in insurance
APIs can help to solve a variety of challenges that insurers have faced for many years. Adopting a platform approach can lead to a decreased time to quote, streamlined IT systems, automation of low-level tasks, improved customer experience and improved portfolio analytics to guide strategic decision making.
Reducing the amount of questions for customers to answer is a relatively simple way to improve customer experience, but is historically difficult to achieve due to the information needed to provide an accurate quote. With APIs, customers can provide a much smaller amount of information (a company name, for example) and the insurer can access the additional data needed through an API.
In practice, this means customers only need to confirm the accuracy of information given to them, rather than filling in the form themselves. This also increases data quality, meaning customers are better represented.
As well as improving customer experience, APIs can also help insurers reduce the time taken on repetitive tasks like data acquisition and form filling, which currently take up to 50% of underwriters’ time.
On average, it takes three to four hours for underwriters to make a decision about providing coverage due to the time-consuming nature of data acquisition. Automating these tasks through APIs creates an average time saving of 89%.
Flexible pricing is a big factor too. In the same way as the cloud is enabling banks to move away from expensive legacy systems, APIs are ensuring cost can scale to usage in underwriting. If a book of business has zero fixed cost and is not performing, it is much faster and easier to remove it, so portfolio appetite changes are no longer constrained by cost.
Digital-first MGAs entering the market are also embracing API technology. For these companies, APIs give a single access point for underwriting data and analytics product, increasing the efficiency of the complex underwriting journey.
APIs for future success
According to Accenture’s report, the API economy is key to unlocking new sources of value for financial institutions. The organisations embracing this technology are future-ready - whether they are insurers, lenders or mortgage providers. With the right data infrastructure in place, even the most traditional firms can digitally transform.
We are heading towards a future where insurance is programmable. Repetitive jobs like gathering data or verifying documents can be done instantly via an API, meaning underwriters can spend more time on what’s important: customer relationships, risk assessment, and building the best risk portfolio possible.
Cytora summit
To learn more about how insurers are becoming technology companies , you can attend the upcoming Cytora Summit, for which Post is the official media partner.
Taking place on 28 November 2019 at LSO St Luke’s, London leaders from finance, insurance and engineering will explore how technology is transforming insurance - and why it matters now. Visit the Cytora Summit website to find out more and register for your free pass.
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Copyright Infopro Digital Limited. All rights reserved.
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