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November 4, 2019

How APIs can Help Turn Incumbents into Software Companies

"For these companies, an API platform gives a single access point for underwriting data and analytics products..."

By CBR Staff Writer

It’s difficult to imagine building a digital business without using APIs, writes Richard Hartley, CEO, Cytora. APIs democratise access to variety of specialised third party services, such as payments, search and navigation, enabling developers to rapidly create new products without having to build every aspect from scratch. They are essential in driving innovation, both for established companies and for new entrants.

Many of the world’s most successful software companies, including Uber and PayPal, outsource key functionality through a rich library of APIs. Instead of investing resources into rebuilding something that already exists, they focus efforts on creating a differentiated product. For businesses, APIs unlock speed and scale. Access to data and functionality that is expensive to acquire or build in-house can usually be delivered via APIs at a variable cost, meaning businesses only pay for what they use. 

Richard Hartley, CEO, Cytora

Richard Hartley, CEO, Cytora

When building an application from scratch, new market entrants that are not held back by legacy technology are choosing to leverage APIs to access specialised functionality and move faster than the competition. APIs increasingly deliver deflationary economics over time, allowing businesses to scale up their services much faster.

APIs in Financial Services 

As new players continue to innovate through the use of APIs, traditional organisations looking for an edge are beginning to follow suit. Areas of financial services such as loan underwriting and banking have succeeded in transforming their product offering through the adoption of API technologies.

In a recent report from Accenture, researchers found that banks are now effectively using APIs in response to competition and regulation. The same report mentions that banks with a clear API strategy are best placed to compete with new market entrants and win in the evolving digital banking industry.

We are beginning to see the same trend in insurance.

 Spotlight on Insurance 

In insurance, APIs can help to solve problems that insurers have wrestled with decades, such as incomplete data and poor customer experiences. 

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Many insurance underwriters currently spend up to 50 percent of their time on repetitive tasks such as form filling and data acquisition. APIs can help insurers to automate these tasks and access better information about risks, improving the efficiency and accuracy of the underwriting process. On average, it has traditionally taken three or four hours for underwriters to make a decision about providing coverage due to the time-consuming nature of data acquisition. Implementing API technology to automate these types of tasks creates an average time saving of 89 percent.

Read this: Insurance 2025 – As Digital Disruption Takes Root, What Might the Future Look Like?

As well as speeding up underwriting decisions, APIs improve the customer experience by reducing the number of questions insurers need to ask customers. Customers can provide a small amount of information, such as a company name, and the insurer can access the remaining information required via an API. This means that customers only have to confirm the accuracy of pre-filled out information, rather than filling it in themselves. This also increases data quality, meaning customers are better represented.

Flexibility in cost is a significant factor too. Just as the cloud is helping banks move away from expensive legacy systems that hold back innovation, APIs are ensuring cost can scale to usage in underwriting. Portfolio appetite changes are no longer constrained by cost, so if a book of business has zero fixed cost and is not performing, it is much faster and easier to remove it.    

Crucially we see that new, digital-first, managing general agents (MGAs) are embracing this technology and driving innovation forward, unencumbered by legacy technology. For these companies, an API platform gives a single access point for underwriting data and analytics products, increasing automation of these low level tasks and making the complex underwriting journey far more efficient. 

Simplicity at its Core 

The impact for organisations of adopting a platform approach is significant. In insurance, it means the automation of low level tasks, improved efficiency and a better customer experience. 

What’s more, the adoption of an API platform is deliberately straightforward, so teams can start benefitting from new data and functionality in just weeks. There is no need for a “big bang” roll-out – instead, individual business units can adopt the technology at their own pace.

Looking Forward

There is little doubt that organisations embracing APIs are future-ready. Accenture’s report validates this, outlining how financial institutions around the world can unlock new sources of value from the API economy. 

With the exponential growth of high quality data in recent years, many industries are now benefiting from these new technologies. And whether in insurance, mortgages or lending, even the most traditional companies now have the ability to digitally transform, reduce complexities and become programmable thanks to the power of APIs. 

Read this: Google to Swap Cookies for Advertising APIs?

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