What are APIs in Open or Interconnected Insurance?

by | Jun 30, 2021

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APIs or application programming interfaces allow hardware and software to communicate and transfer information seamlessly, which can be extremely useful for open or interconnected insurance. The design and setup of an API dictate whether it can send or receive data or even do both. The information exchange can be used to update a single record or a dataset, which can be used to create reports or make decisions later on.

An insurance company can retrieve a policyholder’s automotive information from a system that works with car companies. The insurer can almost instantly send back information regarding the policyholder’s coverage of certain repairs to make the entire process efficient. The data can also be used to determine if a new car replacement is necessary, all through the power of API.

 

APIs and the Need for “Openness” in Insurance

At the very heart, insurance APIs make interconnectivity possible. Insurers and policyholders need to coordinate to ensure proper protection and care are provided. Without interconnection, the relationship between the insurer and insuree can be strained. Moreover, the insurer may be significantly affected by the increasing set of new entities that offer better services with faster responses.

Without APIs and before CLUE (Comprehensive Loss Underwriting Exchange) reports existed, communication was managed through personal visits, phone calls, fax machines, and filing cabinets. So, if a policyholder experiences car trouble and wants to have it fixed using their insurance, they would have to collect all the information needed personally, fax requirements such as maintenance history to the insurer, process an affidavit if required, and fax that as well, and coordinate all of these to the car company. On the day the car is brought for repair, the car company will have a copy of all these, including the insurance coverage details.

At present, this use case is a lot more complex. There are the CLUE reports. Insurers have their databases for auto insurance policyholders. Car companies have their bases about buyers, their cars, and the services they get to keep their automobiles in top condition. Important information is spread across lots of disconnected databases. Data must be made available to paint a complete picture of the car’s history to ensure financial protection. The same thing is necessary for other insurance coverages such as life, health, disability, house, and other liabilities.

 

The Power of APIs and the Use Cases in Insurance

APIs are being deployed for seamless information-sharing among all stakeholders in the insurance industry. They aid in creating a better picture of the policyholder to ensure proper care and protection are given. In return, APIs help in protecting insurers from fraud. Although they are not perfect, they provide an ecosystem for addressing complex insurance concerns.

To better visualize what APIs can do, here are some use cases:

  1. Improved Claims Processings
    The use of APIs removes the need to deal with phone calls and fax machines when filing an insurance claim. For instance, if a policyholder gets into a car accident, insurers can offer the option of sending a location of the accident through GPS and third-party APIs, setting a timestamp, and submitting photos online. Modern cars are loaded with many technologies that monitor driving behavior, assisting when a car accident happens. The information can also be used for other car problems and even theft.
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  3. Smarter Risk Evaluations
    With APIs, insurance companies can have quick access to information that will allow them to make smarter decisions, including risk evaluation and fact-checking to avoid fraud. For instance, insurers can access health-related data from a policyholder’s smartwatch to know “invisible” lifestyle factors such as resting heart rate, daily steps, exercise routines, and more to determine how they can get incentives for being physically active.
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  5. Customized Products
    Insurance companies run heavily on data. Insurers process and analyze information from devices and apps using machine learning tools and AI to create better products and provide accurate quotes. APIs play a massive role in ensuring that the data transfer from devices and apps is done in real-time to address policyholders’ needs quickly.

 

The Future of APIs in Open Insurance

The future of open insurance is bright, thanks to APIs.

The insurance industry needs to optimize openness without compromising on security, and it can only be done with the help of APIs. Insurance APIs will progress into even more helpful solutions—making information readily available for consumption. Through APIs in the open, insurers will allow policyholders to move around while transferring information seamlessly where it is needed—allowing other stakeholders like car companies to get more insight into the insurance coverage.

APIs pave the way to the experience of the Internet of Things in the insurance industry. A policyholder can simply use the GPS in their mobile phone or a fitness watch to track and transfer data with ease as proof of claim and make more accurate decisions. Essentially, APIs have closed the gaps in how the insurance industry sends, receives, and processes information.

Ultimately, there will be a need for trusted services like Profound Logic to unlock your data and business logic to build APIs and make sure that your business is capable of transforming to meet present and future demands.

Contact Us to Learn More:

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