In the final part of our “The role of digital platforms and ecosystems in insurance” series, Suresh Dhanushhkoti, Head of Insurance for CoreLogic, has some uncomfortable truths for insurers in the world of APIs.
It’s abundantly clear that the insurance industry is facing a rapidly changing landscape. The regulatory and capital barriers to entry are no longer the impenetrable safeguards they once were. At the same time, relationships with policyholders are changing from passive/limited, to the polar opposite: customer centric.
Addressing these challenges requires a ‘bigger picture’ perspective of customer journey and eco-system. It requires partnering up with players within and completely outside the industry, using a digital and consumer-led strategy.
This is a major challenge for a Sector defined by silos. It’s not pretty, but it’s fact.
Just as the concept of ‘insurance’ evolved historically, many insurers have evolved over decades – with their information, processes, systems, business and operational units built over time through acquisitions, mergers and organic growth building up business and technical debt. Individual business units may well be measuring and addressing customer experience and satisfaction, reporting say 95% or only one in twenty dis-satisfied customers. But if an end customer has five touch points along their way to actually resolving a claim, that’s one in four dis-satisfied customers.
APIs: the new way
Application Programming Interfaces (APIs) are entering the mainstream with a promise to address operational efficiency by connecting disparate silos within an organisation. They also go well beyond the organisational boundaries, connecting external links across the entire ecosystem as well.
In addition, APIs can address under-served (or un-served) market gaps by enabling innovation of new product bundles and solutions, micro transactions and new channels. Rounding out their impressive capability list, APIs can monetise data for the customers and platform participants.
API capability will become even more critical once industries regroup to form around ecosystems: “By 2025, as this revolution gains speed, McKinsey expects 12 distinctive and massive ecosystems to emerge around fundamental human and organisational needs. These 12 ecosystems will account for $60 trillion in revenues by 2025, or roughly 30 percent of all global revenues”  . According to a McKinsey estimate, as much as $1 trillion in total global economic profit could be up for grabs through re-distribution of revenues across sectors within ecosystems.
Such big numbers, yet worryingly - the number of firms with a mature API strategy remains low: most have around a dozen APIs instead of the hundred+ required for a more robust portfolio.
How's your API strategy looking?
Execution of enterprise level API strategy requires careful planning of internal initiatives, selecting and implementing partnerships and sourcing suppliers; but the most critical factor is that (internal readiness aside), management must be comfortable with the fact that the company does not need to own 100% of the value creation.
Reaching this realisation means understanding the role that the company would play in future platforms. Is it:
- As a sponsor or owner of the platform by owning the intellectual property, or
- As a manager or provider of the platform by providing interactions, or
- As a producer or consumer or the platform?
Moreover, as a number of these platforms emerge in the future - how many others should the company take a dominant position in or merely act as participant? A clear vision and platform strategy is required for both open platforms (like Google’s Android) and closed platforms (like Apple’s iPhone).
Just as Lloyd’s café opening back in 1686 created a new ecosystem to spread data (shipping news), APIs offer a transformational opportunity for insurers ready to innovate and widen their market access.
That concludes our 3 part series on “The role of digital platforms and ecosystems in insurance”. If you wish to talk to the CoreLogic team about how customised data and APIs can help to power your business, please contact CoreLogic. The author can be contacted at [email protected]