Creating an Insurance API Platform

Written by Alan Glickenhouse, Digital Transformation Business Strategist at IBM.

To misquote a famous old saying, “no business is an island”.

Recently I have seen a significant uptick in the number of questions regarding platforms, ecosystems and marketplaces - several related topics that deal with multiple businesses working together.

What about ‘platform’?  The term API platform has two related but very different definitions.  If you search on “API platform definition” you will find some results that describe an API management platform that help a company build, manage, and secure APIs.

The second definition as supplied by Rhys Fisher is:

an organization which brings together two or more distinct, but interdependent groups, through a programmatically consumable service or an Application Programming Interface (API), creating a foundation for automated interactions between them. These organization expose data and/or capabilities to become the defacto way by which others conduct their business; they are used as verbs in conversation; they are a catalyst for multi market disruptions; and they are what smart leaders want to become!

The two definitions are related in that API management platforms (definition 1) are typically used to create API platforms (definition 2).  Of course, this second definition is incredibly like having created an ecosystem and marketplace.  So, it all comes together!

How do these topics apply to the insurance industry?  Good question!  This is actually the purpose of this article.

Digital Ecosystems for Insurance

When we think about creating an ecosystem for insurance companies the first place to look are the types of partners we already work with – this is the “low hanging fruit”.  If we can generalize the types of interactions that we have with these existing partner types and create business APIs to enable this type of interaction, then the opportunity exists to expand our partner network, i.e. ecosystem, and drive additional business.

Typical partnering scenarios for insurance companies might include: agents, aggregators, risk management, underwriting, inspectors, claim management, repair / service providers, fintech/insurtech, banking, investments, financial advisors, and artificial intelligence (AI) technology providers.  You can probably name several additions to this list, but this is the general idea.

As I discuss in IBM’s Developer blog, digital transformation adds a customer centric focus to our efforts.  It is not about the insurance products we are selling; it is about what the customer is trying to accomplish.  So, to expand the ecosystem we need to look for scenarios where customers are buying something, and insurance can benefit or be part of the solution.  These become part of our ecosystem and drive new business or upsell scenarios.  Additionally, we might add new business models taking advantage of assets we have in the company that are desirable by other businesses and making these assets available via APIs – for a price.

These types of scenarios might include:

• Home related industries – real estate, construction, rental management, mortgage brokers
• Auto related scenarios – sales/leasing, corporate programs, better driver programs, automobile associations, driver education, safe driving behavior measurement devices (IoT)
• Vacation planning, travel related companies, airlines, car rentals
• Prevention scenarios – smart homes and sensors, home/business security systems, safety consulting and other preventive scenarios can mitigate or minimize risk or damage and offer discounts to potential clients making your offerings more attractive and reducing the probability of a claim.
• Additional tangential industries – other industries that may be interested in the data about your customers or requesting access that you have to your customer set. With appropriate security and privacy concerns managed this can enable new business models and opportunities.  Examples might include identification of high net worth customers, customers planning travel, or customers who have long commutes to work.

API Marketplaces for Insurance

I would define two types of marketplaces, simple marketplaces where only your company’s APIs are hosted, and advanced marketplaces where APIs from multiple companies may be offered.  Let’s look at each of these options as they relate to insurance.

As with all API projects and aligning with the digital transformation focus, we need to start with defining the consumer for the APIs.  In our simple marketplace, our consumer audience is our partners.  So, glancing back at the section above, now that we have defined our target partner audiences for our APIs, the marketplace is the location where we publish our APIs so that they can be consumed.

The term marketplace implies a commercial aspect which is referred to as API Monetization.  So, as we think about our insurance marketplace, we need to define the monetization models and how we will measure the value obtained.  Note that there are many potential models.  In the white paper (linked above) I describe and provide examples of over 20 different models.  At a high level they group into four categories:

• Free – these APIs are just a cost of doing business. You need to supply basic information about your offerings and this type of API does not directly drive revenue, although is often part of a larger context that does.
• Consumer pays – some partner scenarios may pay you directly for API usage. Typical scenarios are for access to your customers or data (specific or in aggregate) about your customers.
• Consumer gets paid – you may pay others to sell your offerings for you (commission model) or direct customers to you (affiliate model). The auto / home scenarios described above typically fit here.
• Indirect – indirect is the most common model. Generally partnering relationship models that benefit both participants may have other monetization metrics than API usage.  But the APIs still facilitate the integration between the partners, they are just not the metric for compensation.  Many of the current partner models and the preventive scenarios fit this category.

Your APIs should create a “win-win” monetization scenario for yourself and your partners.

Advanced marketplaces include other business’ APIs as well as your own.  Why would companies want to put their APIs in your marketplace?  There are two possible answers –1) your APIs and their APIs work together to provide a solution that would be attractive to a common consumer, or 2) the audience that comes to your marketplace is one that other businesses also want to target for their solutions.

For joint solutions, the logical place to look is the same partner communities we discussed in the ecosystem section earlier.  Think about who the API consumer might be and what solutions would be attractive to them.  For example, a financial advisor, Fintech, or Insurtech API consumer audience may want to include your APIs and other APIs from Financial institutions and Banks to put together their solutions.

For targeting a common audience, the key part of this is do you have enough traffic to attract other API providers to use your marketplace?  Typically, as businesses begin their marketplace, this is not the case.  So, focusing on solutions is usually step 1.  Once traffic builds you can explore your partner communities and other businesses in other industries that target the same developer community.

Platforms for Insurance

The most likely starting point for your platform efforts is the topics above – ecosystems and marketplaces.

Additionally, some companies look for new business opportunities by providing core functional capabilities as a service accessed via API.  As an example (not in insurance), Amazon started in the 1990s by selling books.  They realized that their competency was not selling books, but that they could sell any product.  Finally, they realized that not only could they sell products, but they could provide a platform where others could sell products as well.  Most would agree that this worked out well for them.

Encapsulating platform capabilities as microservices and providing access through APIs, enables an innovative approach toward new business models.  What are the core capabilities that insurance companies might provide?  Possibilities include determining risk, reinsurance, data access and analytics, image services, claim management, and many more.

Insurance companies undergoing a digital transformation are shifting from reactive risk
adjuster to proactive life companion for their customers. They embrace self-disruption and are taking a customer centric perspective.  Creating a digital platform including ecosystems and marketplaces can play a significant role in this transformation.

For additional thoughts on this topic (with incredibly lucky timing) the IBM Institute for Business Value just published an insurance industry paper on this topic - “The Platform Fueled Future”.