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Innovating insurance through the power of API-led connectivity

With $135.7bn ​in global investment, Fintech is clearly one of the most attractive sectors for disruptors and innovators.

But, unlike banking, the traditional Insurance industry proved itself to be more resistant towards disruption, which is not surprising, since one needs volume and scale for the probability models to kick in. In the end, it’s math and actuarial science that make it possible to earn on risks. 

Mathematics, on par with industry regulations and all-pervading market coverage by industry “old-timers”, creates high entry barriers for new players. Ironically, the same factors also prevent traditional Insurers from showing significant YOY growth. This means that the companies need to optimise costs, find new market segments and offer personalised services that appeal to customers to stay profitable, and digital transformation is critical in delivering on these goals. 

“Traditional business models are being challenged and not by innovation in insurtech per se, but by technology shifts in other industries”, says Mike Randall, CEO at Ricston (an IT consulting company working with fintech). “Let’s take automotive, which was traditionally hard to disrupt. Technology innovation and the increase in IoT led to the ability to gain far more data inputs from vehicles. Given an ability to connect with these data sources, one could better assess risks and therefore drive premiums to the most relevant demographic“, he explains. “That’s a significant opportunity for insurance companies, allowing them to offer competitive rates, but also causing the industry to rethink their technology stack. Some of our clients recognised the need for such digital transformation early on and turned to an API-led connectivity approach, harvesting the first results today ”, Mr Randall concludes. 

For instance, multinational insurance provider Zurich Insurance is utilising the benefits of an API-economy by creating easy to use, purposeful APIs ​for their partners and customers to integrate their risk management systems and share data and information together. 

And it is not only B2B integration that can benefit an insurance company. APIs can also be used internally to connect backend systems to streamline business management processes and raise efficiency across all subsidiaries worldwide. 

"When you operate a diversified global business obtaining a 360 degree view of your customer base is very challenging", explains Kevin Jervis, CTO at Ricston; he continuous, "risk profiles and calculations associated with insurance products, and therefore, quotes and prices will vary depending on which geographic region of the business is handling an account, furthermore, subsidiaries may use different back-office systems". Jervis argues that "one of the solutions is to create a micro-services architecture to enable a common CRM to 'source' data from disparate systems and streamline federated quote-to-cash processes; for instance, the broad connectivity and data sourcing capabilities of MuleSoft's Anypoint Platform are being successfully utilised to enable process automation and end-to-end visibility in Salesforce today". 

Public insurance companies, such as icare, are focusing on unlocking their legacy systems and radically redefining end-user experiences to meet mobile-centric market demand. Kevin Jervis explains that this is also achieved with an API-led connectivity approach, “where APIs are used to wrap the core system complexities and enable the orchestration of processes to expose the required data to the consumer”. 

Meanwhile, shifting global economics and demographics, rising customer expectations and changing digital environment cause significant challenges and create additional pressure for the companies to become more adaptive. 

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“The need to adapt and adapt fast becomes crucial for traditional finance industry stakeholders, we’ve put our bet on API-led connectivity approach and are working towards achieving a composable enterprise vision ”, says Mr. Randall. 

For more information on all topics for FinTech, please take a look at the latest edition of FinTech magazine.

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