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What is insurance API and how is it used?

February 5, 2024

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. APIs offer a solution by becoming integral to a company’s scalability—a fact underscored by Amazon, whose reliance on API technologies has bolstered its business speed and agility.1

This dissatisfaction 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, with over 40% expressing a willingness to switch insurers due to inadequate digital capabilities.2

The future of insurance hinges on the swift adoption and effective utilization of API technologies. These tools not only signify a leap forward in digital transformation but also serve as the cornerstone for insurers aiming to deliver unparalleled customer experiences in an increasingly digital world.

What is API in insurance?

According to the International Business Machines Corporation (IMB), “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.

How are APIs impacting 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 API in insurance

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

In 2020, U.S. property and casualty insurance companies found that 70% of their received premiums were allocated toward paid losses, investigations and settlement expenses.2 Optimizing claim processing becomes pivotal in bolstering insurers’ profit margins and processing. APIs are catalysts in streamlining claims management, 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. 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, smart leak detection can help customers prevent losses from water damage—a leading cause of home insurance claims. A smart home system can help prevent damage from overflowing bathtubs, burst water pipes, sewer backups, sump pump failures and more. 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. Chatbots are invaluable for Nationwide customers as well. Since 2020, NORA, Nationwide’s Online Response Assistant, has provided customers 24-hour access to answers—all without having to call Nationwide. NORA can help customers reset a password by engaging an insurance professional in a live chat, obtain product information and check on a claim status.

Read more: Insurance chatbots: How to improve the customer experience with AI

A transformative force

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.