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Willian Pereira
November 10, 2023
min reading time

The Importance of APIs in Open Insurance

A crucial element in open innovation strategies, APIs become even more significant with Open Insurance.

In Open Business Models, companies use APIs to share information about insurance policies and other data. Insurtechs and big insurance companies work together using these shared tools to make new embedded solutions, allowing them to do things they couldn't do alone.

In the case of Open Insurance Models, Insurance APIs are critical for business success. Insurance APIs are as crucial to Open Insurance as an engine is to a car: without it, the whole thing doesn’t work. 

This new concept of sharing information takes the insurance market and the consumer experience to a new level. This open innovation model has revolutionized the insurance industry and initiated the age of embedded finance and digital transformation.

When we discuss an open innovation strategy, we automatically step into the field of APIs – specifically, Open APIs – a crucial tool for Open Insurance.

Just like in Open Banking platforms, Open Insurance APIs are the means through which companies share their policyholder data and other data on products and services. Therefore, knowing how to work with Insurance APIs is just as important as following compliance rules in every state where you do business. 

The Role of APIs in Open Insurance

As mentioned at the beginning, Open Insurance is only possible because of APIs. After all, they’re responsible for allowing data sharing, speeding up the creation of applications, and creating ideal environments to experiment and create new business models, bringing startups and innovation partner ecosystems closer together.

With Open APIs, for example, insurtechs and major insurance firms don’t necessarily have to compete with each other. Together, through Insurance API integrations, they can reduce time-to-market on new offers that would otherwise take years to roll out – that is if they ever became feasible in the first place.

A classic example is the U.S. insurtech Lemonade, which made its Insurance API public in 2017. Thanks to that company, several insurance companies could offer insurance via an app using an already-created interface.

What does that mean? It’s a win-win situation for everyone involved: for Lemonade, which expanded its brand through third parties; for insurance brokers, which were able to offer plans through an app that, without the API, would have taken years to develop; and for consumers, as it made it much easier for them to purchase insurance.

Embedded Insurance can mean business transformation for many companies in the industry. By developing a product’s API and making it public, other professionals can develop innovative services and solutions based on your service. This approach emphasizes the importance of safeguarding data privacy in financial services while fostering collaboration through open banking solutions.

Open Insurance APIs in the US

  • Insurance APIs for products and services: gives access to open data associated with products and services companies offer.
  • Insurance APIs for service channels: gives access to open data associated with public service channels, such as social media APIs, chats, email, etc.
  • Insurance APIs for environment status: gives access to data regarding the current availability of API deployments. They must also give access to data on scheduled downtime.

All Insurance APIs, including those related to the Financial Data Exchange (FDX), must ensure a positive user experience, the ability to be used on various languages and platforms, and provide strong security measures. API security solutions are important because numerous developers will access these applications and need to adhere to established standards.

The Importance of Managing APIs in Embedded Insurance

This whole scenario leads us to another crucial point in Open Insurance: API management.

Suppose all these Insurance APIs are to be made available in an environment for any company/developer participating in Open Insurance to access. In that case, they must follow a standard to facilitate the process as much as possible.

There are minimum requirements in terms of traffic, performance (response time), and availability by time that Insurance API integrations must support. Therefore, companies need to manage all this data volume, including monitoring and analyzing each application's behavior.

A solution that will surely assist insurance companies, insurtechs, and other companies in the sector to adapt to Open Insurance is API management platforms, which consolidate all this information in a single place.

In addition to ensuring compliance with SUSEP’s standards and each company’s internal policies, API management also enables all aspects of your API strategy to be centralized, from usage metrics to the workflow of third-party developers in partner ecosystems

Sensedia’s API Platform, for example, offers a portal where developers can easily access published APIs, features that improve DevOps practices by enabling communication with dev communities and innovation ecosystems, among many other add-ons.

Embedded Insurance is undoubtedly the future. Whoever learns to ride this wave will capitalize on this concept that has already taken the financial market by storm.

Learn more about how Sensedia can assist with your business transformation in the world of Open Insurance. 

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