RL - Insurance

EXECUTIVE SUMMARY KEY RESEARCH QUESTIONS 1 What benefits should insurers look for from API technology? 2 How are leading insurers using APIs? 3 What risks must be managed? Market forces and regulatory mandates are changing the way financial institutions operate. Channel diversification and customer expectations mandate digital solutions that legacy systems cannot deliver. Regulation in the banking sector requires that financial institutions provide data to service entities that are essentially competitors. Controlling these interactions is a new requirement for most existing systems. Application programming interface (API) technology provides welcome solutions. Some insurers have led the way in adoption and are experiencing the benefits of increased speed to market, decreased costs, and improved customer experiences provided by API technology. This report examines the benefits, uses, and risks of APIs in insurance. Celent expects the following over the next 12 to 18 months: • The industry will continue to move toward an era of cocreation and competition for the seamless provision of goods and services. It will be increasingly difficult for a single insurer to deliver all the products and services necessary at an acceptable level of sophistication and speed for their consumers. Thus, the ability of APIs to allow the modularization and decoupling of products and services will increase in value. Many services, some peripheral and some not, will be unbundled and possibly assumed by entities such as IoT sensor, specialist data, and drone inspection providers. • Insurers will closely observe the developments in open banking and take note of both industry and regulatory actions. These results will influence the rate and intensity of activity. It is likely that they will also motivate more insurers to build or license an API platform so that they can integrate with partners via open APIs. • Investment in API management platforms to control risks will increase as use increases in scope and complexity. Given the breadth of the functionality required, it is unlikely that insurers will build these utilities. Specialist software / service firms that deliver competitive software will grow. • Insurtech startups and incumbent technology providers have an opportunity in the small insurer market if they can determine how to economically serve firms with limited scale. • Efforts to develop API insurance standards will continue and accelerate.

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