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Top 6 Insurance API Use Cases to Leverage in 2024
General Insurance

Top 6 Insurance API Use Cases to Leverage in 2024

By Rajarshi April 01, 2024 - 119 views

What is API insurance? Or more precisely, what is the big deal about insurance APIs anyway? First things first, it should be mentioned that APIs stand for application programming interfaces. They have carved their own niche as a next-gen technological upgrade which promises to help several companies and industries gain a more competitive edge over their rivals. They seemingly have immense prospects in terms of transforming and streamlining workflows in addition to paving the way forward for the launch of various innovative products and solutions.

But why and how does it relate to insurance? Well, for starters, APIs offers a comparatively affordable mechanism for an operational transformation that enables insurers to increasingly adapt to market uncertainty and a rapidly evolving digital ecosystem. They may help insurance companies unlock new revenue channels while making underwriting, claim processing and other processes considerably simpler. What’s more, they can potentially bring multiple legacy systems into one platform. This is a matter of heartburn for several insurance companies, since most of them already deal with numerous ageing IT applications that are no longer as agile as before.

What Are APIs In The Insurance Industry?

Understanding API insurance requires a thorough delineation of several aspects. Some of them are listed below for your understanding.

  • An API means application programming interface.
  • It is a software component which enables various applications to share their functionality and exchange data without risks to data security or exposing the inherent business strategy in question.
  • There are four kinds of APIs that are accessible to insurance companies.
  • Public APIs are those that can be used by third parties without needing approval formally.
  • Partner APIs can only accessed by a selected group of companies and developers approved by the owner.
  • Private APIs can be used only within an organization for internal data exchange and functionality sharing.
  • Composite APIs fuse two or more types within one codebase.

Usage of APIs In The Insurance Industry

In the insurance sector, APIs are usually intermediaries between numerous applications of insurance companies or their systems. It may also cover external software of business partners of insurance companies. To give you an example, customer data monetization may be increasingly possible with APIs. This will be done by securely sharing the same with specific partners with the consent of the user. At the same time, insurance companies may also leverage APIs within the architecture of newer solutions. It will enable centralization of their siloed data across numerous systems internally.

Embracing insurance APIs has the potential to bring about what we know as open insurance. This will mean that insurers will release their data to other players in the industry along with non-insurance entities and related stakeholders. It will greatly reduce entry barriers while also empowering price comparison and tracking platforms. There will be new revenue streams like sharing of data with partners along with a 360-degree perspective of the consumer with more behavioral predictability and personalization. It will also bring about better underwriting and risk modeling along with streamlining products in the embedded insurance segment.

While Chatbots and IoT (Internet of Things) have already become major technologies leveraged by the insurance industry along with AI (artificial intelligence) and machine learning, APIs also have the potential to bring about a positive transformation in the near future. There are several use cases for them to consider.

Workings of an Insurance API

Here is how an API insurance technology usually functions:

  • The application dispatches a request for particular information to the API whenever there is another trigger or action taken by another user.
  • The API will evaluate the request and forward the same to the server of the other application or its database.
  • The server/database will process the request and authorize/decline it. In case of authorization, the server will send back the data to the API.
  • It will then send the data to the sender of the request.

Let us now look at a few compelling use cases of APIs in the insurance sector.

APIs in Insurance- Six Major Use Cases

  1. Data gathering from IoT-enabled devices-
    • The Internet of Things (IoT) indicates a network which links multiple devices like smart home devices, smart home assistants, smartphones, sensors, and wearables.
    • These are devices which gather and exchange information with other counterparts over the internet through APIs.
    • It is thus a goldmine for insurance companies with six billion such connected devices already estimated to be present globally.
    • Connected devices in cars can inform insurers about the timing of accidents and whether the user drives over the speed limit regularly or not.
    • Data from wearables and medical devices may help insurance companies assess risks and price policies accordingly.
    • Insurance companies can thus evaluate risks in an accurate manner while continually tweaking premiums on the basis of consumer behavior and several other circumstances.
    • Insurers can get valuable insights regarding consumer preferences and behavior for enabling higher personalization.
    • They can provide new insurance solutions like pay-as-you-drive auto insurance and even automate the FNOL or first notice of loss.
    • Insurers can focus on predictive maintenance/prevention strategies to lower the claim count.
  2. APIs in the shipping industry-
    • Major carriers in the shipping offer APIs to several developers.
    • These enable multi-carrier shipping for merchants in the ecommerce industry.
    • Insurance companies can also tailor more unique products with this system.
    • Shipping insurance providers can tap APIs for insurance purposes. EasyPost is an example where it uses this technology to enable coverage for more than 100 such carriers. These shipping APIs will verify whenever any package gets lost, thereby facilitating swifter processing of claims.
  3. Integration of Chatbots (Pre-Built)-
    • Insurance companies do not have to invest in developing Chatbots from the ground up for integrating them into their consumer applications.
    • They can now leverage generative AI and large language models with API integration.
    • They can thus add Chatbots seamlessly to their systems for claim notifications and processing, FNOL processing, customer support (self-service), customer service through social media networks and messengers, and even personalized calculation of quotes.
  4. Integrating customer-facing and internal insurance frameworks-
    • APIs help insurance companies enable smooth information flow with total security across applications.
    • APIs may help link a customer-facing application with the CRM framework and also the helpdesk.
    • APIs enable insurance companies to completely transform legacy applications into a more unified ecosystem at a lower cost. This will enable multiple advantages for insurers including data unlocking from silos and maximization of its usefulness through data analytics.
    • Some other benefits include real-time analytics for data-driven decision-making and a 360-degree view of the customer for improved satisfaction and lifetime value.
    • It will also help enhance operational efficiencies through doing away with the requirement to re-request and re-enter data.
  5. Damage assessment management-
    • Numerous third-party insurance offerings can be easily integrated through APIs into internal company ecosystems.
    • Damage assessment platforms can thus be created for claims processing through the analysis of videos and photographs of damages submitted by customers.
    • They can make use of AI-based computer vision along with video data and image labeling for this purpose.
    • Insurance companies can thus allocate more human personnel towards complex claims while streamlining damage assessment.
    • Claim processing becomes quicker while customers benefit from an improved experience and lower costs.
  6. APIs for automotive insurance-
    • This is one of the most effective use cases for APIs in insurance, since they integrate vehicle systems with third-party applications.
    • Users can thus unlock or lock vehicles with mobile apps while enabling higher road safety with sensors.
    • Automotive APIs may enable the FNOL (first notice of loss). Data on vehicle damage or airbag activation can be transmitted automatically to the insurance company, thereby working as the FNOL.
    • Data from multiple systems along with accelerometers and gyroscopes will help in reconstructing mishaps/accidents. It will account for damage to specific vehicle components while also understanding whether the behavior of the driver has led to any disqualification from insurance payouts.
    • Sensor-based data may help inform the prevalent algorithms about the best time to undertake maintenance. The driver is accordingly notified about the same.

How It Stacks Up

It can thus be stated that insurance APIs may help greatly in terms of smoother and streamlined claims management and processing. It can automate the entire procedure while lowering costs and combating fraud risks simultaneously. Other advantages include better customer experiences and operational efficiencies in addition to better performance and functioning when the claim count drastically goes up. To cite another instance, OpenWeather API enables easy access to historical, forecasted, and present weather data. Hence, when a claim is filed for any weather-linked damage, it can be used automatically for verifying, authenticating, and approving/rejecting the claim in question.

APIs make it possible to underwrite in a more effective manner. Insurance companies do not have to depend on static information such as profession and age for risk assessment and premium finalization. They do not have to spend more time on verifying data for underwriting. APIs help connect insurance companies with suitable holders of data for boosting risk assessment with more information and streamlined verification of data. Health-related data, that is shared via APIs, is also crucial for health and life insurance entities. This information will help in making risk assessment easier while also improving claim processing and underwriting.

Financial services entities can use these technologies for integrating insurance products into other applications and products. Insurance APIs can enable easier access to data that is relevant for legal professionals, which help them negotiate settlements that are fair and transparent. Automotive dealerships can also get embedded insurance solutions through APIs. This will help them avoid doing the whole insurance process for each customer.

Hence, going by the use cases and the immense potential of APIs in the insurance space, it can be stated that this technology is certainly here to stay. It will usher in multifarious advantages for companies in this space and will keep doing so with more innovation in the future.

FAQs

Are there any security concerns with using insurance APIs?

Some of the security concerns regarding insurance APIs include unauthorized access to information, data breaches, and exposure of sensitive information. These need to be addressed in order to ensure a smooth transition towards leveraging APIs smoothly across the mainstream insurance sector.

Are there concerns about privacy when using IoT data in insurance?

There are privacy-related concerns regarding the usage of IoT data in the insurance sector. This is because these devices may end up using and transmitting information of a sensitive nature without adhering to data protection guidelines.

How does Risk Assessment API contribute to insurance underwriting?

API integration has a crucial role to play in underwriting in the insurance industry. It will help in tapping data on a real-time basis along with streamlining data analysis and collection along with ensuring superior detection of fraud. APIs will thus help insurance companies to take better and more accurate decisions.

Why integrate IoT with insurance using APIs?

Integrating IoT with insurance through APIs is a good move, since it will enable insurance companies to gather vast information from connected devices. They can thus assess risks and take decisions accordingly.

How do Chatbot Integration APIs improve customer support in insurance?

Chatbot integration APIs greatly enhances customer support in the insurance industry. They can enable seamless notifications and processing of claims along with FNOL processing, customer support and service, and also more personalized quote calculation.

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