Integrating APIs and adopting a modular approach to upgrading legacy platforms can evolve the way a company innovates internally and externally, writes Charlotte Koep, Root Platform COO
It’s well known that many insurers and reinsurers continue to use legacy systems to operate their businesses and, in many cases, this results in clunky and inefficient processes. There’s jumping from one platform to another, manual inputting, the potential for human error, and an inevitable time lag. There are also limitations in what products a company can put to market and through what channels.
The insurance value chain has always been fairly complicated. The move to digital, the obvious potential of partner distribution and the ever increasing number of value providers across a policy’s life cycle has very quickly escalated this complexity. Now there are an infinite number of distribution channels with an infinite number of third party data sources and value creators. Just look at white label portals, claims and process automation, AI solutions, data sources, affinity programmes and embedded insurance to know that fragmentation is persistent in the value chain.
But remedies to create order out of the chaos do exist. The first is integrating an API (application programming interface). To say APIs are essential in the re/insurance industry is underplaying things. They’re essential in every industry.
Any industry that has complicated and fragmented value chains simply must integrate an API, or face getting left behind. Think about when a re/insurer brings a new product to market or wants to tap into a partner distribution model. The puzzle becomes even greater with more, smaller pieces added to the table. APIs solve this puzzle by centralising the value chain.
The benefits APIs bring to re/insurers continue. The role the right technology and APIs have in creating integrations with brokers, for example, highlights this. A survey carried out by the Observatory revealed that today, an integration between an insurance company and a distributor takes on average between nine to 12 months. APIs will massively speed up this transition.
From an internal perspective, APIs help to improve claims management and underwriting, which in turn will help reduce costs and aid profitability. They also help insurers extract valuable insights from their data, enabling them to make more informed decisions and improve their risk assessment capabilities. Most importantly, APIs enable the insurance industry to bring more value and more personalised value to their customers.
Done properly, integrating APIs that allow re/insurer systems to “talk” to each other and share data brings big benefits and delivers significant value to system users, with flexibility in how and where they integrate their data services, as well as for policyholders who will benefit from more joined up service thanks to a truly flexible digital ecosystem. It’s a no-brainer.
A modular approach
The choice to integrate APIs does not necessarily mean overhauling legacy systems end-to-end. APIs and API-powered platforms can be adopted alongside legacy systems and modern value propositions can be built on top of these. Modular platforms allow for a smoother transition, where the value chain can be digitised one step at a time, rather than undertaking a full core systems overhaul, which could result in major short-term – and probable longer-term – problems. Today, decision-makers can choose to buy modern technology while continuing to build their unique value propositions on top of these platforms.
Taking a modular approach helps to create a healthy, testing environment, too. Companies that encourage testing and bringing new ideas to the table, while investing in infrastructure that enables this, will achieve the speed and results necessary to stay ahead of innovation. This is just as important internally as it is externally.
There once was the notion that a complete system overhaul is what is required to ‘modernise’ insurance, but now the well-established model of cloud-based Software as a Service (SaaS) combined with the once humble API is creating a critical interoperability and interface approach that means legacy systems can continue operating, while evolution continues alongside.
We have seen how these two strategies, APIs and system modularity, have brought about healthy results for insurance businesses in South Africa, Mauritius and the UK. Insurance is tough, and companies that invest in the ability to innovate around their customers, as opposed to doing more of the same, prove real and future-proof revenues.
Simplifying to strengthen
Both approaches bring about simplification. An end-to-end API-first platform, for example, centralises the entire policy lifecycle: from distribution, administration, payments, claims, carriers and reinsurance.
An API-first approach, too, is very much the product, not the afterthought. It is an API economy, where products by third-party developers can be built as new apps and services on top of already-existing core systems. This simply wouldn’t be possible without APIs. They are the glue that brings the ecosystem together.
The leverage APIs bring to product distribution is clear. For example, APIs mean a business can sell the same product via multiple channels, be that call centres, websites, chatbots or embedded insurance, and across multiple geographies and via a myriad of distribution partners. Of course, new risks are brought to the table when sharing data with third parties through APIs. That’s why working with partners who have carefully considered and mitigated the security risk of APIs is critical. But above and beyond this, it’s also about validating the data being shared between systems – poor quality data being shared across one in-house system is bad enough, but the impact of poor quality data being transferred across the market is significant.
The risks can’t be ignored. But greater still, is the risk of not integrating an API, and missing out on all the possibilities they create.
So, why wait? There are an increasing number of players in this ecosystem, all playing their part in making insurance better. It’s competitive, and those who sit on legacy systems and don’t embrace change will fall behind. APIs are important now, but they will become even more important in the future as the industry continues to evolve with more and more puzzle pieces added.