What is insurance API and how is it used?
The landscape of insurance is rapidly evolving, and at the heart of this transformation are innovations revolutionizing the way insurers engage with insureds. This shift toward a more seamless, integrated and digitized experience is made possible by the advent of technologies like application programming interfaces (APIs). APIs serve as digital bridges, enabling diverse applications and services to collaborate effortlessly.
In the insurance realm, APIs play a pivotal role in digitalizing operations, crafting an omnichannel experience that resonates with customers. Their main benefit is their ability to extract precise data when needed and present it in a user-friendly format. As businesses expand, the volume of data can become a challenge to manage.
This underscores a crucial need for insurance companies to embrace new back-of-house technologies, such as APIs to expedite their digital evolution and stay competitive. Consumer sentiment highlights the significance of this need. According to a survey from PricewaterhouseCoopers (PwC), 41% of insurance consumers indicated they were likely to switch providers due to a lack of digital capabilities.1
These tools not only signify a leap forward in digital transformation but also serve as the cornerstone for insurers aiming to deliver excellent customer experiences in an increasingly digital world.
What is API for insurance
According to the International Business Machines Corporation (IBM), “an API, or application programming interface, is a set of defined rules that enable different applications to communicate with each other.” At their core, APIs streamline the process of collecting specific data exactly when it’s needed and presenting it in a format that’s easy to understand and use. Initially, the insurance industry utilized customer relationship management systems capable of storing and delivering accessible and practical data. As the industry expanded, though, there was a surge in stored data, which complicated data aggregation into a functional format. Tasks like data extraction, compilation and deployment mostly relied on manual efforts. APIs offer a solution by automating tasks that are currently handled by humans.
APIs function like translators, enabling applications to interact and collaborate seamlessly. For instance, an insurance API can establish connections between discrete applications, such as linking a rating application to an internal system for document generation or integrating with a third-party vendor. To keep pace with ever-evolving market demands, many insurers are transitioning their technology platforms to API-focused architectures centered around microservices, ensuring adaptability and agility in a rapidly changing landscape.
Different types of API for insurance
As it relates to the insurance industry, there are four common types of APIs:2
- Public APIs, sometimes referred to as open APIs, are made available to external developers and the public without restrictive access controls. These APIs often don’t require formal approval for use and may be implemented to share product listings, quotes, educational resources and other non-sensitive information.
- Private APIs, sometimes referred to as internal APIs, share data between internal systems and applications. These may be used to connect internal platforms related to billing and customer management.
- Partner APIs are restricted to approved business partners via authentication. These are often used to integrate with outside agents or other third-party vendors.
- Composite APIs aggregate multiple APIs into one. They can be public, partner or private, and are typically implemented to streamline processes that require multiple backend systems.
How APIs can benefit the insurance industry
API integration brings forth a multitude of advantages for insurers. For example, APIs can:
- Enhance underwriting by providing diverse data sets, speeding up the process
- Streamline applications by pre-filling data, cutting quote times and boosting accuracy
- Form a secure tech backbone for insurers to plug into new ecosystems
- Enable low-touch processing for new markets
- Engage technical partners to ensure seamless, secure and optimized API integration for specific needs
Use cases for insurance API
APIs can be used for many applications in the insurance industry, showcasing their versatility and transformative potential across various facets of operations. Consider the following three use cases.
1. Effective claims management
Optimizing claim processing becomes pivotal in bolstering insurers’ profit margins and processing. APIs are catalysts in streamlining claims management and amplifying efficiency, precision, and productivity in the process.
The beauty of APIs lies in their capacity to foster connectivity, facilitating rapid and effortless access to information that’s verified. Insurance is the assurance of being made whole in the event of a claim, making the handling of claims the bedrock upon which an insurance company’s reputation is built. By streamlining policy data and claims updates, APIs can act as mediators in reducing the friction inherent in interactions among claimants, carriers and adjusters, who traditionally navigate disparate systems to access vital information.
Through API integration, a digital connection is forged between the carrier and third-party adjusting firms, the claimant and the adjuster, and ultimately between the carrier and the claimant. For insurance carriers grappling with claims processing challenges, APIs present a comprehensive solution, enhancing the customer experience significantly. Elevating customer satisfaction not only improves retention rates but also plays a pivotal role in enhancing profit margins.
Read more: Taking a closer look at personal lines claim experiences
2. Internet of Things (IoT) implementation
APIs serve as the linchpin in leveraging IoT’s data-rich landscape for insurers. This can lead to enhanced customer insights, as IoT empowers insurers with comprehensive customer data, enabling a deeper understanding of client behaviors and needs. This insight enables more precise risk assessments and refined underwriting processes, ultimately optimizing decision-making.
The marriage of IoT and APIs also facilitates the creation of personalized insurance products, such as pay-as-you-go offerings, catering to individual customer preferences and usage patterns. Importantly, IoT devices serve as vigilant watchdogs, notifying insurers of any damage. This real-time alert system significantly bolsters insurers’ ability to detect and prevent fraudulent claims.
Consider smart home technology as an example of IoT’s impact on insurance. In particular, water leak and electrical hazard detection sensors can help customers prevent losses from two of the leading causes of home insurance claims. A water leak detection sensor can help prevent damage from overflowing bathtubs, burst water pipes, sewer backups, sump pump failures, through continuous monitoring and real-time alerts. Through Nationwide, homeowners can order a smart water-leak detection device at no additional charge, and renters can purchase one at a discounted rate.
Read more: The Internet of Things could transform personal lines
3. Improve customer experience
Ensuring an exceptional customer experience is paramount in the insurance industry today. Insurers are actively striving to offer customized solutions and seamless interactions to their policyholders. The introduction of APIs has significantly reshaped this pursuit. APIs wield immense power, granting them unprecedented convenience and authority. By seamlessly integrating across an array of digital platforms and services, APIs empower policyholders to access their insurance information, file claims and manage policies effortlessly. This flexibility not only improves customer satisfaction but also instills a sense of empowerment, enabling customers to engage with their insurance provider on their terms.
When harnessed in conjunction with chatbots, APIs unlock even greater capabilities. For one, APIs linked to chatbots efficiently capture and store conversations between customers and the bot. This invaluable data enables insurers to analyze interactions, refine responses and continuously enhance the quality of service provided. Our Nationwide chatbots and virtual assistants enhance customer service by providing instant, 24/7 support, reducing wait times when it comes to answering routine questions, and guiding customers through processes such as filing claims or updating policies.
Read more: Insurance chatbots: How to improve the customer experience with AI
Stay on top of other insurance technologies
Insurance APIs are a transformative force, redefining agency processes and elevating the standards of customer service within the insurance landscape. These interfaces facilitate seamless integrations, empowering agencies to streamline operations, enhance efficiency and deliver tailored experiences to their clients.