Embedded Insurance # 10 | The API-fication of Insurance

Sibylle Fischer
October 16, 2020
Innovation, Startups, Products, Sustainability
Can the embedded model help insurance incumbents keep pace with start-ups and disruptors using open-API ecosystems?

Integrating new technologies and leveraging data assets to deliver better, more relevant products and customer experiences is already critical for insurers looking to stay competitive in what many are calling the open API revolution. But for an industry shouldering the complexities of deep regulation and a slow-to-change, legacy infrastructure, moving toward a more open architecture represents a fairly serious culture shift. Can open-API ecosystems help incumbents transition to a more modern approach to their products and services?

The Case for Open Insurance and Open-APIs

Today’s customers are more demanding than ever before, expecting real-time, personalized multi- and cross-channel experiences. Whether you’re looking at micro, usage-based, or peer-to-peer insurance products as an example, customers are generally looking for deeper engagement from their insurers. 

And while open-APIs have been powering the accelerated growth of the tech sector for years, in the insurance industry they are still in their relative infancy. Generally speaking, when we talk about Open Insurance we are referring to the creation of new insurance products, microservices and business models using data provided through an open Application Programming Interface, or open-API. In this model, insurers, insurtechs, banks and start-ups can share their data through automated interactions, enabling them to create new, innovative experiences for their customers (and revenue streams for their businesses). 

In Europe, the push for open banking combined with the changing customer base has worked to transform the way many incumbents are thinking about their business and business models. Thanks in part to the EU PSD2 initiative making customer data available to Third-Party Providers, open APIs are providing financial institutions with incredible, new delivery methods for consumption and countless opportunities for monetization.

Today’s customers are more demanding than ever before, expecting real-time, personalized multi- and cross-channel experiences.

Sibylle Fischer, Strategic Venturing & Startup Scouting

An Embedded Solution

But complying with the insurance industry's ongoing regulatory constraints complicates an incumbent’s ability to bring tech innovation in house, making it that much harder to keep pace with industry start-ups and disruptors. The embedded insurance model, therefore, represents both a compromise and a way forward, as insurers can offer their superior underwriting knowledge to distributors working with open applications and architecture, but without the encumbrance of overhauling their existing frameworks and protocols to create an end-to-end solution. 

API-driven embedded financial services use context-relevant and invisible transactions to create novel value propositions for customers and monetization opportunities for partners. That means rather than attempting to build new products on old systems, incumbents can seek out strategic distribution partners for a mutually beneficial result. 

While API-fication is powering the backend of these embedded transactions, front-end experiences simultaneously feel more natural, as direct API integration allows for real-time data transfers, even at point-of-sale, so distribution partners can continue to own and control the front-end, branded experience.

An Adaptive Approach

With technology in a state of near-constant evolution, insurers would be best served by looking at how open embedded insurance products in the API ecosystem can quickly transform their offerings and put their vast data stores to work. Smart investments and strategic partnerships with companies who already opportunizing open API architecture can help keep incumbents and their products and services nimble, competitive and future-focused.

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