Increased digital technology adoption continues to bring industries (and businesses) into a more competitive market position. With this as a backdrop, the integration of application programming interface (or API) tools enables two separate applications to seamlessly interact with each other.
This electronic communication link can set the stage for a limitless number of business and service enhancements. Within the insurance industry, game-changing API capability opens the door to many digitally-driven business growth strategies.
What’s Driving Industries’ Digital Technology Adoption
Many businesses’ migration to digitally focused operations has been spurred by a desire to deliver improved customer experiences. Many companies had begun to adopt this focus before the COVID-19 pandemic.
However, the widespread 2020 lockdowns accelerated this trend, as stuck-at-home customers drastically ramped up their online shopping purchases. Retailers responded by delivering customers’ products at a lightning-fast pace.
In early 2022, the pandemic-era lockdowns have been lifted. However, consumers still expect more efficient (and satisfying) experiences from service providers across the board. Digital technology increasingly plays a key role in these efforts.
In addition, the adoption of digital technology enables companies to streamline their business operations. With a more efficient operating structure, each company is in a better position to identify and act upon emerging opportunities.
Legacy Insurers Phase Out Obsolete Systems
The insurance industry is an especially good candidate for more efficient business operations. Many insurance agencies have long operated under an inefficient legacy (or traditional) organizational structure.
To illustrate, inadequate computer systems have often prevented the policy services and insurance claims units from working together. In other instances, manual customer data access has been painfully slow, limiting the scope of collaborative operations.
In 2022 Q1, however, the insurance industry has become more receptive to adoption of a digitally based business model. Each agency follows its own timeline based on priorities and available resources.
Three Benefits of Insurers’ Digital Transformation
Insurers that switch to digitally based operations will see three concrete benefits from this strategy. Policyholders will also benefit in several measurable ways.
Increased Operating Efficiencies
With digital technology, inefficient business operations will soon take their place in history. Thanks to artificial intelligence (or AI), predictive analytics, and machine learning, virtually every insurance operation can be accomplished much more quickly and efficiently.
Machine learning enables faster policy writing, and customers can instantly receive online service via digital assistant and live chat functions. When a policyholder submits a claim, a dedicated app instantly processes it.
Personalization of Services
Digital technology enables superb customer service that benefits agents along with policyholders. Through AI and machine learning, customers can view their policies, pay their bills, and file insurance claims. Agents can utilize a single system to quickly process customer requests.
Insurers’ marketing campaigns will also benefit from digital technology. With powerful data analytics and AI tools, insurers can develop a targeted program for each market. Digital social media will be an integral part of this strategy.
Increased Services Scalability
Digital technology enables each insurer to offer more flexible services delivery. Policyholders can use self-service apps and easy-to-use dashboards to execute common service tasks.
In turn, insurers can gather important customer data from the Internet of Things (or IoT)-enabled wearables or devices. This valuable data enables insurers to make better underwriting and policy decisions. This information also helps to identify the right new product offerings for a specific market.
The Story Behind APIs
The acronym “API” stands for Application Programming Interface. Essentially, an API is a software go-between that enables two applications to communicate with each other.
When this interchange occurs, developers can more easily design web applications by pulling data from multiple sources. The presence of APIs enables a company to share diverse digital assets with internal teams or external partners.
The API concept first emerged in the 1960s, and it has gradually been refined over the years. Today’s APIs are accessible, easy to use, and developer-friendly. The APIs are also standardized, tightly controlled, and monitored for performance and security.
How a Common API Operates
A mobile phone application is a type of commonly used API. When the user selects the application, it links to the Internet and transmits data to a specific server. The server quickly retrieves and interprets that data.
Next, the server executes the required action and delivers the result to the user’s phone. Finally, the application puts the data into a format the user can understand. This sequence of events takes place within seconds.
API-driven Insurance Ecosystem
Historically, large insurance agencies have operated standalone data ecosystems that supported their proprietary product generation and service activities. More recently, however, the companies have begun to move toward open insurance (or API insurance) data environments.
In this setting, the large insurer develops a common API platform that enables integration with external insurance technology enhancements (or insurtechs). Collaborations with third-party providers can spur the creation of new revenue streams and even entirely new business models.
This connected data environment also enables data integration from other industries. In turn, this supports new services offerings to policyholders. To illustrate, an urban walking tour company uses the Google Maps API to guide customers along established tour routes.
This development of open API platforms has largely been enabled by recent technological advances. In addition, an uptick in connected devices increases the number of potential platform participants.
What’s Behind the Open Insurance Trend
This open insurance ecosystem largely results from customers’ requests for more individualized insurance offerings. To reiterate, today’s consumers are not satisfied with generic products that may not meet their specific needs. In a highly competitive marketplace, customers will happily patronize a competitor who provides these personalized insurance products.
For perspective, the insurance industry’s API utilization has lagged far behind that of many other industries. The financial industry has been a leader in API integration, with over 2,000 APIs available to diverse market players. In contrast, insurers can currently access fewer than 200 APIs.
Major Driver of Increased API Adoption
During the past three years, however, insurance companies have ramped up their API integration. In turn, this attracts additional third-party providers to this wide-ranging marketplace.
This increased API acceptance may partially result from the insurance industry’s influx of tech-savvy younger workers. To attract a new generation of insurance professionals, large universities have partnered with insurance industry advocates.
These educational institutions now offer well-rounded risk management and insurance degree programs. Besides de-mystifying the insurance industry, these curricula appeal to younger workers who gravitate to technology-rich professions.
How Insurers Can Benefit from API Integration
Insurance companies can realize three types of benefits from API integration. Taken together, these advantages can position each insurer to take the business to the next level.
Faster Claims Management
At its core, an insurance policy is built on the insurer’s promise to make the policyholder whole after a claim. The insurer’s speed and efficiency play a key role in the company’s reputation with its policyholders.
During the claims process, the policyholder, insurance carrier, and insurance adjuster are accessing different databases to obtain their information. An API can enable more efficient data retrieval and eliminate conflicts about the claim’s processing time.
Specifically, one API can facilitate smoother interactions between the insurance carrier and the policyholder. Another API can enable better communications between the policyholder and third-party insurance adjuster. Finally, an API integration can bring about more timely engagements between the insurance carrier and the insurance adjuster.
Collectively, these API integrations can help to elevate each policyholder’s claims experience. In turn, customers’ increased satisfaction will result in higher retention rates and subsequent insurer profit margins.
More Mutually Beneficial Partnerships
Insurance carriers who embrace API adoption will realize new product opportunities. In addition, integration with complementary industries will open the door to even greater growth potential.
Inside the industry, APIs enable mutually beneficial broker-carrier connections. With the elimination of manual underwriting data submission, a broker can easily request quotes from multiple carriers at once. Because carriers can access customers’ risk profiles, they will be better able to provide targeted quotes to prospects.
A well-placed API also enables the insurer to reach potential partners outside the industry. To illustrate, an API that connects insurance agents to local real estate agents can have benefits for both parties. The real estate agent can offer potential home buyers a homeowner’s policy estimate. In turn, this provides the insurance agent with additional chances for new business.
Device-based Risk Mitigation
When insurers can proactively reduce claims’ severity and frequency, they are providing a huge benefit to the policyholder. To implement this process, an API gathers data from the policyholder’s IoT-enabled devices. Properly interpreted, the data can uncover hidden risk exposures.
In a private home, for example, an API can access sensors designed to detect changes in water, temperature, and humidity. Based on the results, the insurance agent can recommend mitigation strategies to provide protection for the home and its contents.
In the workplace, GPS trackers in sales representatives’ vehicles can identify previously unknown on-the-road risks. The insurance agent can present recommendations to mitigate these risks and potentially prevent auto accidents.
Staying Current with API Changes
Fortunately, the emergence of multiple insurance industry APIs does not require each insurer to keep track of product evolutions and software updates. Most platforms automate their own integrations and ensure their own functionalities. Therefore, insurance agents who use the software tools don’t need to take any action at all.
About Hauser Insurance Group
Hauser Insurance Group’s API adoption reflects its active engagement in the insurance industry’s digital transformation. Headquartered in Cincinnati, Ohio, this privately held firm is nationally recognized as a premier provider of commercial risk management and insurance solutions. The company also offers unparalleled employee benefits management services.
Extremely Diverse Client Base
Established in 1971, Hauser Insurance Group has developed well-known private equity market expertise. Specifically, the company provides second-to-none due diligence services for firms considering a near-term merger or acquisition.
This well-regarded firm also serves public companies (including publicly traded retailers) and family-operated industrial firms. Multinational corporations and special-purpose acquisition companies (or SPACs) also make up Hauser’s client database.
Consultative Approach and Accessible Solutions
Using a consultative approach, Hauser Insurance Group identifies risk exposures along with coverage gaps or other liabilities. The company designs targeted solutions that frequently result in long-term cost savings in addition to decreased risks.
With full-service operations in strategically located cities, Hauser Insurance Group effectively serves clients across the United States. The firm’s Atlanta and New York City offices are well-positioned to assist East Coast clients.
In addition to Hauser’s Cincinnati corporate hub, the Company maintains Midwestern operations centers in Chicago, St. Louis, and Kansas City. Hauser’s Los Angeles office is ideally situated to serve West Coast clients. Finally, electronic communications enable seamless service regardless of the client’s location.
All Hauser Insurance Group clients benefit from the highly skilled advisory team’s services. Recognized risk advisors, merger and acquisition specialists, and private equity brokerage experts stand ready to address each client’s specific needs. On many occasions, multiple team members work together to provide each client with optimal service outcomes.