As part of the new European payment directive ( PSD2 ), the banking sector has initiated the opening of its information system through APIs ( Application Programming Interface ). Due to the change in consumption habits (appetite for digital, need for instantaneity and personalization), a similar wave of “APIsation” is strongly expected from insurers. The exploitation of new data sources (such as those from open data or partners) presents the opportunity for insurers to transform their model and deliver the most value. Many players have started this transformation.
What is an API?
An API, translated into an application programming interface, is a concept that simplifies the dialogue between 2 computer programs. Thanks to a set of functions, it allows the software to offer services or data to other software. Thus, the developers of a company will be able to request the databases of a partner (external publisher), without going through the latter’s web interface.
Interest in these new technological bricks is growing because they promote the open use of data.
3 main use cases identified in the insurance sector
To date, the initiatives identified can be classified under three categories:
- New distribution channels for insurance products
- Insurance integration for a consolidated customer experience
- Improved operational efficiency thanks to the sharing and valuation of data
1.First use case: Insurance-as-a-service
While policyholders are looking for a personalized and responsive service offering, it is important to offer each customer the channel that meets their expectations at the right time. Thus, the boundaries of the insurance ecosystem are expanding to integrate new distribution channels. APIs allow insurers to market their products through any website, mobile application, or another digital medium. These channels complement sales in branches or through institutional sites.
Many insurers make public APIs designed to fit into any digital ecosystem. They range from the simple integration of insurance products to the complete automation of transactions. For example, Axa assurance (Asia) or the insurtechs Cover and Lemonade, offer public APIs aimed at offering customers real-time insurance opening via digital channels such as the website or mobile applications. Another example, all the offers of the IPaaS platform (Insurance Product as a Service), launched by Parisienne Assurances, are in API format. The distribution partners of this company can directly integrate insurance products and services into their catalog of offers.
This model attracts the support of insurers who are convinced that tomorrow consumers will no longer necessarily have to go to an insurance company or a broker to subscribe. An insurance product will be spontaneously offered to them during everyday acts. Thus insurers sell their products, in their name or white label, via banks, insurance distributors, travel agencies, real estate agents, etc. The latter then only have to include a few lines of code in their own. solutions to allow the establishment of an estimate, to conclude a contract, and to record the payment of the premium.
While this positioning offers access to new distribution channels, sources of new income, it entails a considerable change in business models. Customer relations are no longer in the hands of insurers.
2.Second use case: marketplaces
While online sales are struggling to take off and the agency network remains the primary sales channel, intermediation platforms between buyers and sellers present an opportunity.
Marketplaces aim to offer a complete experience by enriching the services available to their customers on their interfaces. By integrating APIs, public or partners, the platform can offer insurance coverage in addition to other products and services. Linux Market, an innovative financial services marketplace, offers, among other things, real estate insurance products. Or BlaBlaCar registered as a broker with Orias (association created to approve insurance intermediaries) which sells insurance products to its users under the BlaBlaSure brand in partnership with AXA.
This positioning presents the opportunity to access a large volume of consumers and enrich the customer experience.
Comparators are part of the same framework. In the context of rising premiums, consumers are more inclined to compare offers. Specialized sites or applications, called comparators, integrate the data of their partners and allow users to compare the prices and guarantees of numerous insurance offers. If one of the offers is interesting, the consumer is put in touch with the insurer.
Despite the advantages they offer in terms of saving time and optimizing the choice of insurance, these tools face technical obstacles. The first difficulty, technical requirements make it impossible to subscribe to offers on the comparator’s platform. This would amount to integrating numerous APIs (a hundred or even thousands) on the same platform. The second obstacle results from the complexity of insurance contracts. The products offered are, in fact, more and more sophisticated and involve regular updating of their algorithms. To date, the price estimates made by the comparators are carried out based on a basic algorithm.
3.Third use case: open data platform
Third use case, platforms intended to share and enhance data. To enrich customer knowledge, insurers resort to cross-referencing data, starting with that located on their servers, and then collecting other data from public platforms.
Euler Hermès, a credit insurance specialist, launched in March 2019 an Open Data portal containing around 1.8 million pieces of data. This aggregated and anonymized data allows businesses to assess the likelihood of defaulting business partners. For its part, Axa has innovated by creating a site, Give Data Back, to provide advice to policyholders with a prevention objective. The company publicly shares its data on water damage and burglaries in six European countries on this site. Everyone can therefore measure the risks to which their home is exposed. For lack of having aroused the interest of policyholders, the platform was shut down by Axa. However, the concept has been replicated in Singapore to explore accident risk areas, as well as in Mexico,
This new strategy allows insurers to improve risk assessment. With this type of analysis, they will be able to know a little more about the customer and adapt their prices according to the profile and the nature of the claim. New platforms where information would be instantly available (based on connected objects) would improve risk prevention.
If the use cases seem multiple and ambitious, the initiatives taken by traditional actors remain timid for the moment. One of the explanations could be the complexity of the standardization of flows mainly due to the multiplicity of stakeholders (manager, broker, intermediaries, distributor, mutual, etc.). Harmonization and collaboration work certainly awaits these actors to meet this challenge.