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The group insurance industry was once fueled by monolithic legacy systems constructed and maintained in-house for years, even decades. Today, competitive digital ecosystems are driving insurers to retire legacy tech and seize new opportunities to leverage their most valuable asset: data.
To maximize competitive gains from emerging technologies and approaches such as robotic process automation, artificial intelligence, Big Data, digital self-service, and blockchain, insurers must design data-first digital ecosystems based on flexibility, openness, and interconnectivity principles.
APIs, web services, and microservices are the glue that holds digital ecosystems together, enabling data to flow freely between applications using common standards. Managing multiple disparate systems was once a system architect’s worst nightmare, often resulting in poorly synchronized and siloed information. Today, a digital ecosystem of dozens or hundreds of different applications offers a competitive advantage thanks to these tools.
Deploying APIs, web services, and microservices can help increase efficiency, unlock new revenue opportunities, provide a better customer experience, and further grow partner channels.
Group insurance leaders should understand APIs, microservices, and web services and their role in supporting thriving digital ecosystems – so let’s examine each in turn.
What Are Application Programming Interfaces, Web Services, and Microservices?
Application Programming Interfaces
Application Programming Interfaces (APIs) are the core of online automated connectivity. It is the medium through which multiple applications, devices, and data interact.
In practice, an API defines a set of rules and protocols that allows two or more systems to communicate with each other. Therefore, every API needs to have documentation specifying the information transferred between the two systems.
For instance, let’s assume you are working with an insurtech company to build software that integrates with Facebook to help you know if users are breaching a policy term. To create such software, you must use Facebook Graph API to access data inside Facebook, including users, comments, posts, and more. With this API, you will easily access the information you need from the new application.
Web services refer to the software that implements an API like the one described before. Simply put, a web service is a way for two machines to communicate over a network.
This software can respond to requests coming from .www (World Wide Web), hence the name “web,” providing responses (“services”) without requiring human intervention.
The HTTP protocol is implemented by most web servers available today. These servers can be configured to wrap the HTTP protocol in SSL (Secure Socket Layer) to encrypt the web service communication.
Microservices are one of the popular ways to build a complex software system. It involves breaking down software into smaller components rather than having one monolithic application covering several different functions. Microservices can help improve modularity, making even sophisticated software easy to understand and develop.
However, the success of a microservice implementation heavily depends on how loosely coupled the components are. In an ideal world, each component could be deployed and scaled independently. Unfortunately, this comes with the risk of multiple potential points of failure. Therefore, microservice implementations must be carefully architected.
Let’s assume that, for instance, your insurance company deals with employee benefits products. Instead of designing a monolithic application covering all functions and products, you could break down the software into two or more loosely coupled components (e.g., one for group insurance and one for worksite and individual voluntary products). This allows your developers to add new functionality without affecting existing functionality.
A decoupled approach also enables more granular scaling: you only need to scale up the component in high demand. This is more cost-efficient than scaling an entire monolith from a cloud hosting and IT infrastructure perspective. In addition, popular platforms like Docker enable developers to containerize microservices to be deployed independently.
Open vs. Private APIs
There are two types of APIs: open APIs and private APIs.
Open APIs are publicly available application programming interfaces that give other developers access to a software application or web service. They also manage how applications can communicate and interact with each other.
Unlike an open API, a private API is hosted by its in-house developers. They are mainly used for back-end data and application functions.
Open APIs allow insurance companies to showcase their services to the outside world so external partners can use them and bring added value to their customers.
For example, Nationwide offers a public API that enables customers to get a quote for an auto policy with minimal personal information such as their name, DOB, gender, car information, and address.
On the other hand, an insurer’s private APIs might integrate various backend systems, such as a policy administration system, an underwriting system, a claims system, and a CRM. In this context, private APIs speed up backend processes by reducing touchpoints and enabling data to flow freely between applications.
Applications of APIs in Group and Employee Benefits Insurance
Simplified and Faster Claims Processing
When clients purchase insurance, they invest in the protection and response by the carrier when a claim occurs. A quick and painless claims experience is critical to maintaining customer loyalty and brand reputation.
APIs can reduce the friction that occurs between claimants and carriers.
Insureds using mobile devices can use the functions of a phone or a tablet in conjunction with APIs offered by the insurer. Clients can use the camera, GPS services, and microphone to their advantage to validate claims.
For example, a plan member with voluntary accident insurance can use the phone functions mentioned above to take pictures of the scene of the claim and use the GPS with the insurer’s APIs to pinpoint the location of the accident. Clients can also use the voice recording application to record other information from witnesses.
Additionally, carriers can speed up claims processing wait times by integrating APIs with a third-party adjusting firm, the claimant and the adjuster, and the carrier and claimant.
For example, a plan member can take a picture of the receipt from their dentist or car mechanic and send it to their insurer if they’re entitled to coverage. The adjusters and insurer would receive this information seamlessly and either approve the claim or ask the plan member for more details.
Partnerships/Growing Business With Embedded Insurance
APIs and microservices can make partnering with insurance companies easier for different industries and insurers. A common practice is offering other businesses and organizations APIs so carriers can expand distribution channels and embed risk protection and insurance coverage into customer journeys.
For instance, Stride Health, a web-based insurance recommendation platform for independent workers, launched a partnership with Fiverr, an online marketplace for freelancers. The partnership enabled Stride Health to capture new markets while providing Fiverr’s users with personalized recommendations for healthcare plans.
Additionally, thanks to APIs, analysts predict Apple will enter the health insurance market in 2024 by leveraging fitness and health data gathered from millions of Apple Watch users to create personalized insurance.
Embedded insurance will continue to be an effective form of digital distribution as the embedded insurance market is projected to reach $3 trillion by 2023. According to Denise Garth, Chief Strategy Officer at Majesco, 40 percent of insurance will be embedded in the next 10 to 20 years.
Insurers offering point-of-sale APIs to different businesses and industry partners can simplify customer experiences and win new clients who may not be considering purchasing insurance products at that moment. Yet, because these customers buy products that often benefit from insurance coverage, carriers can target their ideal clients at the perfect time.
API-First Ecosystems: Improved Data Exchange & Flow
An API-first ecosystem prioritizes data flow between applications with the understanding that products and services should be synchronized across all devices and channels as part of a unified customer experience.
API-first ecosystems emphasize consistency and reusability, with standard API protocols used (e.g., REST and SOAP). Adhering to common API standards enables insurers to access a broader pool of microservices from different providers.
API-first development enables a best-of-breed technology strategy, meaning insurers leverage the best tool for each function, as opposed to an all-in-one or end-to-end technology strategy that emphasizes a single provider for most functions.
API-first ecosystems have proven to be successful for insurers. A report by Accenture says 82 percent of insurance executives agree that open ecosystems allow them to grow in ways that are not otherwise possible, and 58% are actively seeking ecosystems and new business models.
For example, AXA XL, a global P&C insurer, built an API-first ecosystem that connects every technology service and data point that it has between itself, customers, and other third parties. It essentially is a gateway that uses network elements while also using data enabled by APIs. This enables AXA XL to use the collected data to identify proactive and actionable risk management opportunities, attract new customers, and retain current ones.
The Future is Now
It is important for insurance thought leaders to understand, at least at a high level, how APIs work.
- APIs are software-to-software interfaces with a set of instructions on how to access and relay data.
- Web services are services between two end-points; they communicate over the internet and are optimized and encoded by formats such as XML or JSON.
- Microservices are where software is broken down into loosely coupled distinct components that communicate with each other through an API.
By emphasizing tight integrations and synchronicity using the aforementioned tools, insurers can simplify claims processing, boost market agility, and develop new business opportunities by integrating their insurance products into other industry platforms.
Insurance companies interconnected through APIs, microservices, and web services can create an API-first ecosystem to offer best-of-breed customer experiences by intertwining digital services provided by multiple companies.
Insurance APIs are changing how carriers do business. Contact us today to learn more about how APIs and Majesco’s Cloud platforms can carry your group and voluntary benefits business into the future.