After the advent of open banking, the insurance technology landscape became exposed to the concept of open insurance. Both these digitalisation approaches facilitate the process of sharing data between different stakeholders within the finance and insurance domains. The goal of implementing open insurance is to enhance the services that companies within the industry provide to their customers. This article aims to explore the implications of this trend for the sector and how APIs in open insurance help achieve the conditions for a thriving ecosystem business.
An overview of the concept: what is open insurance and what are its benefits?
In theory, open insurance is a new concept focused on bringing changes to the insurance industry. It attempts to do this through distributing data and services among various participating bodies such as insurance companies and startups, customers, and other third-parties. By taking advantage of technology, open insurance improves the accessibility and affordability of services commonly found in the market, benefiting companies and consumers alike. This decentralisation of data and services creates a comprehensive, digital-first ecosystem that overcomes the limitations of the conventional models of the industry.
Advantages of an Open Insurance strategy
Some advantages of open insurance are:
- Better customer experience through the implementation of user-friendly digital processes. Documentation and paperwork become easier to navigate for customers and insurers alike.
- Encourages collaboration and enriches the partner ecosystem between insurance companies and other external stakeholders.
- Due to the broader range of data sources, insurance companies can efficiently manage risks by assessing and strategising well before they occur. A hypothetical situation could be a car insurance company tapping into data from traffic management or telematics systems to accurately vet and process claims.
An overview of APIs
An Application Programming Interface, otherwise known as API, are protocols that developers use to allow different applications and systems to interact with one another in a coordinated manner. They outline how a request and response for data should be orchestrated, facilitating smooth communication between various software components.
Popular API architectural styles
There are many types of APIs, but the two most common API architectures (or methods to tackle API design) are:
- Representational State Transfer (REST): these APIs handle JSON, XML, or HTML payloads (the data that’s being transmitted between endpoints) while adhering to the HTTP protocol and using the request methods that it contains (GET, POST, PUT, and DELETE being the most widely used). REST APIs are fundamental to web-based communication, allowing remote clients to receive, send, delete, and change data.
- Simple Object Access Protocol (SOAP): SOAP APIs are less flexible and more heavyweight when compared to REST APIs. A mandatory requirement of the SOAP architecture is using the XML format for return messages. They are found in many legacy systems due to their structured, strict nature.
-This article may interest you: What are the differences between REST and SOAP?–
Advantages and applications of APIs
A big reason why APIs are useful is their assistance in borrowing functionalities from different applications that offer them instead of building everything from scratch for your project. For instance, if your project requires a messaging app for businesses, using an API to a platform like Slack is the right way to go. Considering this, it is self-explanatory as to why APIs play a big part in integrating disparate applications and creating a harmonious IT ecosystem.
Some other advantages and applications of APIs are:
- Improved scalability: APIs are significant to the implementation of microservices architectures. Private APIs (available only to developers within an organisation) are used within a microservice to establish communication between its internal components. APIs in microservice-based architectures enhance reliability and modularity, which in turn makes more room to scale functionality up or down seamlessly.
- Enhanced security: particularly in multi-cloud set-ups, following good API security practices can bolster data security as well. APIs are also essential for the implementation of schemes such as Single Sign-On (SSO) which can authorise access to crucial pockets of data.
- Opportunities for advanced technologies: APIs could be a way to leverage more complex and futuristic tech like Internet of Things (IoT) devices to transport data from real-world environments like households and roads to the cloud.
- Reusability and cost-effectiveness: since APIs can help developers tap into existing functionalities, it encourages the practice of reusability and thus decreases expenses spent on redundant development efforts.
APIs in open insurance: how are they connected?
The insurance industry, just like any other, emphasises customer experience, which is intrinsic to the revenue prospects of all organisations. First, clients need to be assured that their dedication to a particular insurer will result in everyday value. Secondly, consumer demands are increasing by the day, whether that be customised health insurance plans, discounts for safe drivers on auto insurance, automated pricing and coverage for property insurance, and so on. Lastly, customers expect timely insurance distribution activities through their preferred channels—a lot of them remote—especially in today’s digitally-forward world.
The use of APIs in open insurance for insurers
Since APIs have revolutionised the way we use web and cloud-centric technologies, they automatically assume a place in the digital transformation of the insurance sector. APIs are the backbone of the open insurance movement, as they are critical to the following objectives of insurers:
- The development of robust and secure platforms that facilitate data sharing between insurers, customers, and partners.
- The boost in innovation of insurance products and services due to the greater levels of performance, functionality, and scalability exhibited by API-based platforms.
- Amplifying customer experience by allowing them to receive insurance services through their desired channels, ranging from mobile apps to online websites and platforms.
Types of APIs in open insurance
It is also interesting to note the three commonly found types of APIs in open insurance—although they each serve a different purpose—are:
- Private APIs: these APIs are only for internal use by in-house developers to enhance communication within an organisation.
- Public APIs: these APIs are also known as open APIs. They are publicly available to all developers, including external ones. The purpose of public APIs is to fuel innovation and collaborative efforts. They may or may not lend access to a proprietary application.
- Partner APIs: these APIs can be used by authorised partners or affiliates to help generate sales for the insurance company’s offerings.
Best Practices: Considerations to make while implementing an APIs in open insurance
Now that we understand what APIs mean for the insurance industry, let’s take a look at three concerns that should be addressed before APIs in open insurance are put to effect:
Using APIs in open insurance can open sensitive and personal user data to many new parties within the insurance sector. This should be done ethically and reliably at all costs, abiding any regional data protection laws and industry standards that are in place to protect customer data.
You must consider the diverse ecosystem of insurers, organisations, and partners before implementing universally compatible data exchange methods (standardised APIs being one such way).
Customer-centric API design
Prioritising customers while designing open insurance API capabilities can turn the slippery slope of sharing personal data into an advantage both for consumers and service providers. On the one hand, customers and policyholders can take charge by identifying their own coverage needs, logging claims, and gaining important information without needing to contact any middleman. This improves their customer experience, in turn elevating business opportunities for service providers.
Companies must focus their attention on these considerations before they can think about expanding the number of participants and members within their Open Insurance ecosystem.
How an API Management Platform facilitates the successful implementation of an open insurance system
API management is the process of nurturing your APIs from start to finish, from building and deploying them all the way to maintaining and monitoring them. An API management platform is the tool needed to achieve these goals. So why does the API management platform play a crucial role in facilitating the successful implementation of an open insurance system? The answer lies in its ability to act as a central hub for managing and orchestrating API-based interactions between different stakeholders. However, before we can take a look at what you must expect from your API management platform of choice, let’s explore three challenges of procuring and enforcing such a tool:
Challenges in implementing an API management platform in open insurance
- Legacy system usage: since the insurance business is an age-old one, it’s not unusual for many companies to have traditional IT systems in use to date. An API management platform must be robust enough to bridge the performance gap between these systems and modern-day APIs.
- Data quality: the API management platform should be able to handle high volumes of data across multiple systems and maintain consistency across all of them. This is to ensure that bad data does not negatively impact insurance activities such as underwriting, claims processing, and other queries from customers.
- Strain from partner ecosystem: as the number of stakeholder in an open insurance ecosystem broadens, an API management platform must be equipped to withstand disparate technical needs and effortlessly scale with this growth.
Extracting insights and best practices: the role of a good API management platform in open insurance
Since APIs are at the centre of all open insurance initiatives, an API management tool has a major role to play in its success—it safeguards your APIs and exposes it to the right people, the right way. API management tools and platforms are essential in progressing secure API usage by all parties involved.
So what should you look for in an API management Platform? Let’s reflect on three key points:
- Security is the biggest one that your API management platform must comply with. It’s all the better if it adheres to general compliance standards such as the GDPR, but also industry standards such as HIIPAA—mandatory if you’re a insurance company accessing healthcare data—or regional laws such as the Gramm-Leach-Bliley Act (GLBA) for example—mandatory if you’re an insurance company in the US utilising financial data.
- Your API management platform must facilitate collaboration and improve the expansion of your open insurance ecosystem through its ability to scale integrations of multiple applications and systems, all while maintaining performance.
- Lastly, an API management platform must be furnished with all the features that developers need to flourish, whether that be exhaustive documentation, an interface with strong user experience, built-in testing capabilities for APIs, a developer portal, and much more.
Chakray has partnered with many well-known API Management providers like Azure, Boomi, WSO2, and so on. If you’d like to understand more about API management platforms and what they entail, we’re the best ones to contact!
Success Stories: Examining Case studies of insurance companies implementing an API management platform
An example of a company that utilised the power of an API management platform to achieve their goals is CarFinance247. They leveraged Azure API Management to convert their workflows into a digital format by connecting various partner and in-house applications together. This project allowed the automobile financing company to see positive results in the scalability of their system and collaborate with a large pool of car dealers eager to further their business, as well as customers who are looking to purchase a new ride. Ultimately, this drove up their rate of service and revenue.
Missing more details on this case study? We’ve got you covered; click here to read the full story!
Chakray: your API Management partner
A partner versed in all aspects of the API lifecycle is a time-sensitive need as companies continue to multiply the presence of APIs in open insurance. Chakray stands out as an expert in API Management; we work with various API platform vendors and house world-class specialists to handle your needs, whether that be API development and integration, security and governance, traffic management, or monitoring and analytics.
Some of our previous stints include working with insurance companies to implement API-led solutions that improve their operations across the board. Thus, we are well-equipped to handle any challenges that you may face as a business while navigating the complex world of open insurance.
Thinking about it? Reach out to us when you’re ready. We’re always happy to help!
Open insurance is reshaping the insurance industry with a lot of help from APIs. These protocols are pivotal in making data globally accessible to different facets of the sector. However, it’s not enough to just add APIs to the mix; the success of open insurance hinges on whether they follow good security practices, allow room for scalability, ameliorate developer challenges, and foster customer-centric data usage.
Chakray, your API management partner of choice, has experts to support you through the entire API lifecycle. If you are an insurer looking to adopt open insurance and move towards an ecosystem business model, feel free to connect with us today.