Open Insurance
7
min of reading
August 3, 2021

Impact of APIs on the auto insurance market

Hecktor Colombo
Content Creator
Marketing and Journalism student at Estácio de Sá in Rio de Janeiro. Content creator for blogs, social networks, websites and journalistic text producer.
More about the author
Back

Considering the transformation currently taking place in the insurance market, Sensedia has prepared a webinar that gives a complete understanding of this phase of open insurance. It also shows the extent of the impact of technology on this sector. I therefore decided to prepare a series of articles showing how APIs have created a revolution among companies in the sector and their impact on the auto insurance market.

Due to the complexity of the business models used by insurance companies, I have divided this series into different “specialties”, although the vast majority of insurers provide a range of services related to four main areas: Life, Health, Auto and Home Insurance.  In the articles, I address each of these areas more specifically.

In this first publication, I talk about some trends in the auto insurance market, which is perhaps the type of service that Brazilians are most familiar with. Since both sectors (Insurance and Automobile) are highly susceptible to technological innovations, it is perhaps the best known specialty in terms of the application of innovative features in the business model of insurance companies.

In all markets that deal with risks and statistics, the more accurate the data being analysed, and the greater the possibility of cross-referencing it with other, related data, the lower the risks and the better the forecasts will be.

For this reason, I researched on business opportunities that I’ve seen in some insurance companies, and that are helping these companies provide more personalised services.

These highly personalised services are perfectly tailored to the needs of policy holders, and the customer’s experience is considered a top priority for digital transformation strategies.

APIs in the auto insurance market provide opportunities

Preventing problems

If, when you opened your eyes in the morning, you could see how the next few hours of your day would unfold, I bet you still wouldn’t manage to avoid all the little problems that can crop up during the day.  But there’s one thing that would certainly change: your expectation.

Obviously, making predictions about your life and the people you will meet is very complex. But when comes to the behaviour of your car in the days ahead, it’s much simpler.

By cross-referencing data such as expected route, road conditions, date of last maintenance, oil pressure, engine temperature, vehicle driving pattern, tire pressure, and a host of other data that is measurable or available in some form, it is possible to reach fairly accurate conclusions about the longevity of a vehicle, and possible problems that could arise in the near future.

First, all this data must be available, whether through an installed device (acting as a sensor) or stored in an on-board computer, as in the case of many smart cars.

With the advent of cognitive computing, finding these patterns and learning from them has become computationally affordable.

Have you ever thought about getting a discount on your insurance because you carry out regular maintenance on your car? This keeps your car running smoothly, increases the durability of parts and prevents accidents, helping you to identify any faults with your car before they become major problems.

Besides helping to prevent accidents, regular maintenance makes it easier to diagnose any problems with your car.

The use of smart devices in the insurance market is nothing new and several insurers are already using locators and trackers to gather more data on the location of stolen vehicles.

This is not even all that innovative, since all cars now have on-board diagnostics (OBD) data available, enabling problems to be identified when connected to a scanner. But how much more convenient would this be if it simply notified your smartphone?

Emergency insurance claims

Whenever someone needs to call the insurance company because of a problem with their car, it means they are in some kind of difficulty. Some people may be in a very distressed state, due to a serious accident, or simply confused because they don’t know why their car has simply “left them stranded”.

When a person is overwhelmed or confused, one of the main concerns should always be the customer experience when interacting with the insurer.

Many insurers are already seeking to unify their practices across all channels of communication with their customers, including both digital and non-digital channels. Besides these channels, there are also other services associated with auto insurance, such as Towing, Auto-Electrical, Maintenance, Courtesy Car, and so on. This unified experience across all channels and services is, without a doubt, one of the biggest concerns for insurers.

Safety

Smart cities, safety devices and GPS are just a few of the many technologies that provide data about the policy holder, their car and the city.

This information includes data on regions with the highest incidence of theft, places with low lighting, deserted locations, faulty traffic signs, accidents, etc., which allows us to meet the needs of every customer.

When we talk about user experience (keep in mind a broader context than just the app interface), personalised experience helps win customers over. New, highly specialised services are being created every day, to meet the specific needs of every customer.

Partnership-based business models

In times of digital transformation, we see companies in various sectors dramatically changing the way they position themselves in the market.

Some companies see a business opportunity in assets that previously were of little value, such as marketplaces, where the traffic generated becomes an asset that can add significant value to smaller retailers interested in using these showcases to boost their sales.

This partnership-based business model has also gained strength in the insurance market, as it allows insurers to find service providers that complement their offer, or even bring new businesses from integrations to gain capillarity, whether through Online Brokers, integrated Towing Services, and many others.

The dilemma of data ownership

This discussion is quite a complex one. In some sectors, this issue has been resolved entirely, while in the insurance sector, there is still a lot to discuss.

I love to compare how this has been handled in the world of banking, particularly in companies that use Financial Technology, or Fintech, one of the richest ecosystems in new businesses. While banks initially viewed Fintech companies as a threat, they have recently come to be considered as important allies, due to their capacity to create services with fantastic experiences while consuming data from the financial institutions, practically turning banks into a platform for launching new business.

But none of this would be possible if the banks were not willing to open their data, and the way they did this was simply by allowing account owners to make decisions about their data. As the banks see it, account holders are the true owners of their own data, and so they should have the power to decide who will access this data - the banks and Fintech companies are responsible for providing secure integration mechanisms for the traffic of sensitive data, giving customers peace of mind.

Does this model meet the concept of “open banking” and will we see the first case in “open insurance” in the near future? These are scenarios for the next chapter! 

Let’s talk about your digital strategies


Thanks for reading!