Insurance as an API

There are moments that transform industries. Inflection points in which the future is less certain, yet everything feels newer. Insurers are in an industry that is undergoing one of these shifts right now. As technology invades a historically slow-moving industry, new possibilities are opening up and new opportunities are being presented. I believe that insurance is going through an “AWS Moment” as insurance products themselves become API-enabled.

The most widely-known use of API’s within insurance is for quoting. Online quoting has been the obsession of the industry ever since the pandemic started, for obvious reasons. The pandemic accelerated a long-term trend of consumers preferring to purchase online and interact with humans less. Very few insurance companies were prepared for this and it has become the #1 focus for many.

But Insurance as an API is a relatively new concept. It is the idea that not just quoting but the entire policy lifecycle is available for external consumption. A handful of pioneering companies are just starting to roll it out, with remarkable results. The companies realize that in order to be dominant in the next phase of the insurance industry, they have to relinquish control of the customer to the companies that already have them. Vetting partners is certainly important, but if you connect with the right partners the opportunities are enormous.

If you can expose Insurance as an API, you are effectively making your entire product–and the business processes behind it–available to the outside world to use. It is a foreign concept to many insurance companies at this point, yet it is widely understood and used in many other industries. Because of it, you can start to embed insurance throughout all kinds of consumer touch points and sell through all kinds of new channels ranging from software applications to supply chain distribution partnerships.

Insurance as an API allows third parties to use their unique data to deliver quotes within their own customer experience, and even provide an integrated buying experience. (This is more commonly known as “embedded insurance”) It allows coverage choices to be tailored based on the unique knowledge of the customer, who they are, and their risks.

Insurance as an API allows the servicing of a policy–including claims and billing–to start to use modern customer service tools: conversational AI, advanced call center systems, and marketing automation tools. This results in lower expenses, happier customers, and higher retention.

Insurance as an API allows for adjacent types of products to be easily incorporated into the customer experience. From specialized risk improvement to premium financing, the insurance “package” becomes more useful, easier to consume, and becomes more accessible to a wider range of customers.

But perhaps most importantly of all, Insurance as an API provides exponential speed. By packaging the product within easy-to-use API’s, companies are able to lean on partners and not exclusively on their own internal ability to craft the best customer experience and reach the entire market. Again, this is perhaps a foreign concept to most insurance companies, yet history has generally proven this to be a smart approach, and the first movers are benefiting from many opportunities not available to others.

All of these things are not guesses–these are the same dynamics that have played out over and over in different areas. When Amazon launched AWS, for example, the entire hosting and development industries saw these benefits, and the entire industry had to react. We’re now in the process of experiencing an industry-wide shift to ensure that all business processes are supported by APIs, and easy to consume by whichever partners need to use them. The ability to play in this arena will determine who wins and loses for the next several decades.


Insurance’s Stripe and Shopify Moment

Facebook and Google’s ability to target specific markets completely upended the advertising world. They made it easy to surgically reach your target market.

Then came a wave of companies like Shopify and Etsy and Stripe and Square that made it easy to sell to your customers once you’ve reached them. Many of the hottest companies of the past decade have made it easy to sell to your market once you find them.

Then, 2020 happened:

According to most estimates, 2020 accelerated eCommerce by at least 5 years. One of the industries most affected by this shift has been insurance, with online transactions up around 50%

Much of the effort right within the insurance industry is focused on making it easier to sell. As sales move online, insurance companies are scrambling to provide API’s that can connect to digital sales channels. This is effectively the same as Stripe developing the pipes to collect payment. The most forward-thinking companies have a goal of offering insurance-as-a-service. (This is, in fact, what Dais helps companies do.)

Insurance is right now having its Stripe moment right now, where the simple, basic ability to sell is becoming more common. It’s fairly easy to predict what happens next:

Stripe Teardown: How The $36B Payments Company Is Supercharging Online  Retail | CB Insights
Will history repeat in insurance?

“Striping” insurance requires sellers of insurance to make it easy to he ability to share data across the supply chain, customize the customer experience (especially using data), and the ability to sell the right set of products in a targeted way.

The Insurance “Shopify Moment”

And as the infrastructure to support that begins to emerge, it’s bringing to light something else that is potentially even more interesting: the fact that the world is probably significantly under-insured, and there almost certainly going to be a large increase in the total amount of insurance per capita in the world.

If you’re not familiar with marketplaces like Shopify Etsy, they allow creators to make and sell whatever they want. And it has resulted in an explosion of niche products that would never have existed before. Many of these go on to sell millions of products.

shopify success stories - quadlock uses referralcandy
Quadlock, a Shopify merchant that has been wildly successful with a new, niche product

Shopify-ing insurance means making easy to create new products. And significantly, on top of that, making it easy to combine and bundle them with both other insurance products, other financial products, and even other physical products.

As it becomes easier to make new insurance products, new types of products will be available to sell. Those companies that are able to sell differentiated, targeted, user-friendly products will dominate the markets they pursue.

Shopify Gross Merchandise Volume (GMV) 2014-2020 - Marketplace Pulse
Will history repeat in insurance?

New products also mean that overall customer lifetime value goes us. A home remodeling company will buy insurance against construction delays for the first time because they’ve never been offered it before. A food service delivery service will buy insurance against spoilage due to refrigeration failure for the first time because the product never existed before. 

With digital scale, and partnerships to sell insurance through distributors, retailers, employers, and bundled with other products, there are going to be so many more at-bats to sell these differentiated products.

What’s even more interesting is that this is happening far faster due to the changes from 2020. Are you seeing this happen anywhere else?