Why an API Architecture Accelerates Digital Transformation

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Smart agency owners and IT managers already know they need to automate marketing, e-payments, email, and SMS as part of their digital transformation efforts. They are well aware of the need for chatbots, self-service customer portals, and remote reporting. And it all needs to be accessible on a unified platform, available to agents and customers anywhere, anytime. The question now is how to get there. What’s the most efficient and cost-effective way for insurers to achieve all of this quickly, without disrupting operations?

Legacy agency management platforms often provide a basic set of tools, but they don’t make it easy to add new technology or functionality as an agency needs to change and grow. However, the prospect of building a digitally driven agency management system internally is not an option for the majority of independent agencies. The budget and resources required for an in-house build are simply too high. Then there is the worry of disrupting business processes, which negatively impacts customers and agents.

Imagine having the ability to quickly and easily build a custom agency management software platform without hiring a team of in-house developers. Thanks to advances in application programming interface technology, this is now possible and easier than ever for insurance agencies, brokers and MGAs.

What is an API?
An API is a software architecture that allows two or more applications to connect and work together. The architecture opens up access to back-end data and application functionality in the applications agents use every day. Having access to this data is like cracking the code to improve agency operational performance and customer satisfaction. It may sound too good to be true, but businesses in other industries such as banking, financial services, and retail have already seen massive growth thanks to open APIs. Building an open API architecture gives midsize agencies the first modern digital tools to compete with big insurance players.

APIs are a gateway to better employee productivity, modern customer experiences, and better integration between applications and business processes. They can unlock data silos in an insurance organization, paving the way for automation, innovation and digital transformation. APIs are essential to an agency’s digital transformation initiatives and the creation and development of innovative business models.

From banking to insurance and beyond
The banking and financial services industry was an early adopter of open API architecture with great success. Open banking, based on APIs, enables seamless integration between banking software and third parties to develop new applications and services that consumers use every day. The reliance on APIs has sparked an explosion of integrated digital banking apps that deliver top-notch customer experiences and streamline a myriad of processes. Today, banks of all sizes are investing heavily in API architectures to help them scale their services and attract new customers. McKinsey Notes that 90% of banking executives they surveyed plan to leverage APIs to generate revenue with existing customers, and 75% will use APIs to generate new customer relationships.

Likewise, APIs are essential to the development of modern, customer-centric open insurance solutions. APIs are key for insurers to build flexible and robust technology platforms that scale as the agency grows. The most significant benefit for insurers is how an API architecture can share vast volumes of data. Your agency’s customer and operational data is a gold mine just waiting to be deciphered and exploited. Research firm Celent believes that insurers that fail to integrate APIs into their platforms will not be competitive in five years. Access to valuable customer and business data critical to the mission of insurance is driving the search for increased use of APIs throughout the insurance distribution lifecycle.

The power of the ecosystem
EY recently published its Global Insurance Outlook 2022, highlighting several key trends that will shape the rest of the year for the insurance industry. One of the important trends highlighted in the report is what their experts call “The Age of Ecosystems and the Rise of Open Insurance.” The report states, “Based on current trends, we expect ecosystems to become a major business model in the relatively near future. As is often the case, what seems innovative today will soon become a standard.

What is an insurance ecosystem? Pwc defines it as “an interconnected system of offerings from various participating vendors, enabling customers to meet multiple needs through an integrated user experience”. We have already seen a significant increase in strategic partnerships between carriers, insurers and insurtechs. This is an exciting opportunity for mid-tier vendors to catapult into a new audience or create a new venture product. Agencies need to be confident that their technology is modern and robust enough to participate in an ecosystem with their partners.

The opportunity exists for insurers to expand their ecosystems beyond insurance. Pwc notes that 79% of insurance leaders surveyed agreed that “insurers will increasingly engage in ecosystems that serve extended customer needs, where insurance is only part of the supply chain. customer value”.

Learn about the new partnership between the credit monitoring agency Equifax and Truepic, provider of a digital inspection platform. The partnership will assist Equifax customers with the property inspection process for origination, inquiries and claims. It’s a perfect example of two companies from different industries coming together, using the power of their shared technologies to create a product offering. However, keep in mind that for these two companies to join forces, the open API architecture is crucial for them to work together and provide a seamless customer experience.

APIs are the enablers of insurance technology ecosystems, allowing partners to connect and collaborate. Not only can they connect partner agencies to a network of opportunities, but APIs can also address some of the challenges that nearly all agencies share. According CB Insightsmost insurance APIs tend to fall into four categories of functionality:

  1. Data aggregation gives insurers a comprehensive view of the most (and least) profitable lines of business, as well as the behaviors and preferences of current customers.
  2. Workflow captures all stages of an insurance business process from the beginning of a policy’s lifecycle, allowing insurers to automate certain processes.
  3. E-commerce facilitates a simple, all-digital experience for insurance customers, allowing them to compare policies and quotes, sign documents, set up electronic payments and renew policies without having to speak to an agent.
  4. Quote is a vital back-office function requiring access to larger pools of data, enabling insurers to perform smarter risk assessment, real-time fact-checking and faster underwriting times for customers .

These are stages in the insurance distribution cycle where we typically see a lot of friction. As the industry continues to evolve and new technologies emerge, the savvy, forward-thinking agents of tomorrow will be those who leverage the power of APIs today to reduce that friction. Think of the Open API Architecture as your agency’s à la carte menu, from which you can choose applications that address any or all of these four main areas.
Above all, remember that the future is a moving target. Whatever new processes and technologies you implement to modernize today, they need to be flexible enough to adapt to the next wave of change in our industry. Agencies that deliberately build in modularity from the start will never find themselves stuck with their technology. Open API architectures provide this future-proof modularity by allowing agencies to quickly plug in new capabilities and services as needed. They also allow you to iterate on your growth, adopting new tools (marketing, SMS, email signatures, chatbots, etc.) as needed, without lengthy onboarding or business disruption.

With the right API framework, your agency can access an ecosystem where thousands of applications or microservices create a fully interconnected, customer-focused business platform without major IT issues.

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