The ‘Open Banking Revolution’, triggered by the second Payment Services Directive (PSD2), will see new, API-connected services brought to European consumers around the traditional core financial services, creating a more holistic banking experience. It is not just the regulation that is pushing banks to deliver customer-centric products and services. It is also the changing customer attitudes in the way they engage with their banks. It won’t be surprising if insurers are faced with a similar regulation or challenged by competitors influenced by the disruptions in banking sector.
In the insurance industry, the demand for simple, transparent, pay-as-you-use products and services is higher than ever before as customers now look for true value for the premiums they pay, above and beyond the traditional products and services. They also appreciate carriers who support them in better risk prevention and management. It is becoming increasingly clear that experiences that help build loyalty and long-term relationships cannot be realized by pushing traditional products and services through a single channel or a traditional intermediary network.
To deliver personalized products and services of true value through multiple channels in a frictionless manner, insurers need an omni-experience modelto engage with its customers, distributors, and the wider insurance ecosystem. The boundaries of the insurance ecosystem will continue to expand to include non-traditional partners such as connected car manufacturers, smart home device manufacturers, wearable device makers, retailers, and real-estate agents while insurers try to deliver great customer experiences. So, the time is right for the industry to embrace Application Programming interfaces (APIs) with an open mind set as they can bring together multiple data sources in a flexible, reliable, timely, measurable and cost-effective manner.
Some insurers have already started leveraging APIs to deliver omni-experiences.
- AXA (Asia) has launched end-to-end insurance transactional APIs in late 2017, that can integrate seamlessly with the websites, mobile apps or digital channels of AXA’s ecosystem partners to offer real-time insurance cover to its customers. AXA’s ‘Insurance-as-a-service’ APIs for Home, Travel and Car insurance will make these products available for purchase by integrating these in to the customer journey of its digital ecosystem partners. One example of a recent partnership is with SATS Ltd. (SATS), where the insurance purchase is integrated with SATS’ Ready to Travel app that enables users to get access to insurance coverage at the point of sale.
- Lemonade, the NY based insurer that stands out with products based on behavioral economics and digital technology, launched The Lemonade Public API that can be integrated to anyone who wants to complement their offering with insurance products through their websites or mobile applications such as real estate companies, financial advisors, mortgage originators etc. to offer a friction-less insurance buying experience for customers through their own websites. Lemonade initially offers access to its homeowners and renters/tenant insurance with plans to expand the API further as they introduce new insurance products to market.
This is only a start. IDC expects more insurers to follow AXA and Lemonade in the industry’s API journey to deliver ‘Insurance-as-a-service’ in the coming months and years. There will be challenges on the way such as identifying the right use cases, choosing the right partnership models, and closed mindset within carrier enterprises. But those shouldn’t stop insurers from exploring the great opportunity that APIs offer to redefine insurance sales and service models to cater to the ever-evolving digital ecosystem.
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Sabitha Majukumar is Senior Research Analyst for IDC Financial Insights. Click here to learn more about research from IDC Financial Insights.