Amazon. eBay. Salesforce. Twenty years ago, these companies were some of the first to launch their own APIs and thus made history, enabling businesses to run more efficiently by way of the internet and interconnected systems. Since then, they all have continued to shape and evolve the world of APIs as we know it today. While APIs have come a long way in the last two decades, there is one thing that remains true: those that evolve and transform simultaneously will win the API game, and thanks to the groundwork laid out by these big names, industries such as insurance can lead not only the conversation, but the innovation that comes with leverage such technology.
To demystify the API, let’s dive into what the term means, examples of APIs already in use in insurance today, and why they’re so important to the future of the industry.
What is an API?
API stands for Application Programming Interface technology. They enable two different digital systems to communicate with each other by consuming each other’s data, then subsequently displaying or using it in the way needed. To put it more simply, an API is a common language that two unrelated applications use to share information and then leverage that information for customizable use.
APIs are extremely beneficial to insurance because the infrastructure of our industry has traditionally been built upon monolithic technologies. APIs forgo the need to maintain these legacy systems and in turn, break down silos, enabling the flexibility required to scale digitally in a modern world. By connecting disparate technologies, APIs ultimately enable insurers to increase efficiencies, provide modern and better customer experiences, and grow revenue.
The API Potential in Insurance
Fundamentally, APIs are integral to putting the customer at the center of a business, which is everyone’s goal. They help do this in a variety of ways including: digitizing operations, expanding and personalizing offerings, and growing partner channels. This also means they can be implemented in a variety of ways, and thus APIs typically are categorized in three ways: public, private, and through partnerships.
Public APIs are usually the most obvious, as they show up in our everyday lives. For example, a retail brand may use the public Google Maps API to show store locations on their flagship website; or a city’s tourism bureau may use the API from the National Weather Service to inform people what the forecast will be while they’re visiting. Public APIs are typically available for anyone to use.
For insurance, private and partner APIs are really what help move the needle in improving business processes, diversifying offerings, enabling better customer experiences, assessing risk, growing revenue, and more. Here are some examples of their use.
- Telematics: Auto insurers may offer downloadable apps for their customers’ smartphones or sensors for their cars that track a user’s driving behavior, subsequently offering that user a “safe driver” discount. This monitoring is only possible through a private API that tracks the user’s activity and feeds those data points back to the insurer.
As automotive original equipment manufacturers (OEMs) expand into insurance and have the technology built within their vehicles to gather very specific and sophisticated types of datasets, they are beginning to share their arsenal of telematics data with carriers via partner APIs. This data is then used not only to inform the carrier about an individual’s risk, but also can inform how they take on risk overall, creating products that also become more personalized to the driver’s needs. - Wearable technology: Health insurers who leverage a private API to gather data from sources like an Apple Watch or FitBit can use real-time health and fitness data to inform policies. With user permission, they can share data via partner APIs to reward policyholders for making healthy decisions with things like gift cards or discounts, and all while, in theory, decreasing the need for health-related claims.
- Embedded B2B2C insurance offers: Embedded insurance, the real-time bundling and sale of insurance protection while a customer is buying a relevant product or service, brings coverage directly to the customer at the point of sale. This hugely impacts both the distribution and market expansion of products via the use of a partner API.
For instance, mortgage lenders may inject home insurance offers as part of their loan application process. Not only is the consumer presented with a relevant offer at a time when they need it most, but also, the insurer now has access to a segment of bottom-of-funnel buyers they wouldn’t necessarily otherwise have through a partnership with a lender, creating a B2B2C relationship that benefits all parties. - Ancillary products: Let’s say an individual has done business with a single carrier for many years, getting their auto and home coverage exclusively from that carrier. The insurer has a lot of data on that particular customer and also on “lookalike” customers that have characteristics and buying behaviors similar to them. To capitalize on this relationship, this carrier may want to offer products that the customer is likely to buy - like pet or life insurance, for example. Ancillary products like these enable the carrier to add distinct value to the customer and expand their relationship with them.
But, of course, not all carriers offer all products. By leveraging a partner API, the carrier can create an insurance marketplace to meet the needs of their customers, pulling together best-in-class offers from other providers that expand the carrier’s offerings. The carrier remains in control of the buyer’s experience and increases their revenue potential without having to invest in product development or take on more risk.
Regardless of how you implement APIs, they simplify the insurance lifecycle, full stop. APIs drive growth and efficiency for providers and offer critical insights into the behaviors and needs of consumers. On the consumer side of things, they make the insurance lifecycle easier to interact with, boosting consumer trust and retention.
Ultimately, offering your products and services (or another company’s products and services) via an API increases your distribution opportunities, thereby expanding your business footprint, your potential customer base, and, of course, revenue.
Interested in learning how Bindable may be able to help your organization? Contact us today!
