Exploring the difference between generic API connectivity and a connected insurance platform

Much has been said and written about the need for change in insurance IT architecture (notably our own blogs Why a 'fat' mid-office is healthy for insurers and Unconscious Underperformance) and the industry at large agrees that the need for change is now, that technology now creates the opportunity to do that in a migratory, yet fast manner and that a model based on API connectivity is the way to go. 

The next, less spoken about topic is then whether to go the 'white box' manner with generic API based connectivity technology or to go for API enabled technology with an embedded level of insurance assets and expertise. 

Let's take a little but relevant detour to wrap our minds around this very important issue. In the early days of payment hubs, all large technology houses promised the very large banks a way out for their complex and siloed payment infrastructures that were close to 'spaghetti junction'. It was not uncommon for a bank to run a variety of payment types - that in essence all run the same course once they go from initiation to clearing and settlement. Complexity further multiplied as a result of M&A activity. With payment margins under pressure and increasinly regulatory oversight, banks had no option but to modernize. Any technology firm recognised the vast market opportunity here and embraced Service Oriented Architecture to solve that very problem.

Soon however, banks figured out that the complex and detailed nature of payments required much more sophistication than 'a white box' technology solution could offer. Going that way would still demand a huge - and dangerous - in-house or outsourced effort to embed the necessary expertise around fraud, exception management, real-time, etc. in a new and modern solution. We all know the outcome: the battle for payment hubs was largely won by around five niche suppliers who each embraced open architecture combined with embedded payments functionality.

The Insurance Perspective

The challenges and opportunities in the insurance industry are much the same: regulatory pressure, complex and heavy installed base that is hard to entangle, increasing and intertwined distribution layers, a drive for insurtech collaboration to name but a few. Societal change and behaviour has led to new standards: instant, open and contextual experiences. New challengers can become competition if not embraced through an open API technology framework and, more importantly, open business culture. And this is merely the beginning of the insurer's strategy agenda today. 

So three things are simply inescapable in today's business climate: speed and agility in change, an open technology framework to embrace change and an open business attitude to new ways of collaboration with partners and clients. 

  1. Speed and agility in change

    Because of the complex nature of insurance - evaluating risk, long term contracts, (un) predictable settlements - it has longer than banking been shielded from external competitive forces. Those still came, and not just from new challengers, but also from an inability to keep up with today's high levels of expectation. Every research will indicate that people not just demand 'Amazon' and 'Airbnb' style experiences in their private lives, but also in business. They want to compare, they want relevant insights and consult with 'experts' they deem to be relevant. This, more than technology or regulatory pressure, sets the pace of change. And because the nature of insurance is still risk-based, uncertain and complex, this makes for a difficult marriage. So, in addition to speed, the insurance industry needs an agile approach to change and adapt as new opportunities and challenges arise. If we look for instance at the need for a trusted ID environment for on-boarding and fraud prevention/detection, there are many technologies that might set the standard for the future, but today we do not know the outcome. So an insurer should be able to work with a partner of choice: a stable digital migratory solution, an IoT-based app that attracts a mobile audience or experiment with a Blockchain-based initiative. All should be possible through one stable and open API connected platform without heavy investments when changing tags. 

  2. Open API enabled technology framework 

    The Roundcube Insurance Platform (RCIP) is an agile mid office engine where data becomes relevant information, where you can build experiences with the customer through relevant offerings. RCIP is an insurance-rich environment that allows the insurer to pull out relevant admin data without a need to 'rip and replace' at formidable cost, yet with the opportuniy to 'sunset' old technology over time. This insurance functionality based open API-based platform allows you to quicky connect to any insurtech, but can also embed critical external business services into your own business processes. It allows an insurer to pull data from admin and back office environments into the mid office to analyse it together with input from external sources to build relevant offerings or executre on point risk profiling, pricing, etc.

  3. Open attitude for new collaboration

    Our earlier post "Unconscious Underperformance" provides clear guidelines about how to acknowledge and embrace change to overcome underperformance. Much the same can be said for an open attitude to collaboration. Do not be misguided by the apparent lower volume of insurtech APIs compared to banking. The segment is rapidly catching up and the investment community is eager to invest. Also the before mentioned complex nature of the business only creates a temporary wall of defence, as machine learning and AI quickly beat their path into the insurance industry. An open culture for new collaboration demands in essence clear business processes and an open mind to looking differently at what appear to be partners, clients and competitors. Brokers become joint distribution partners with equal - not layered - access to client information, insurtechs are the new clients that bring more clients to your door, and competitors might be your innovation partners or the co-creators of an entirely new market segment. Do not rely on an innovation department to achieve that, new collaboration and revenue models demand an entire entreprise with an appetite and attitude for change.

Going vanilla or niche?

The difference in working with a white box industry vanilla technology framework and an API connected insurance platform is simple: speed to market. You can on-board not only a technology solution but also a team of insurance experts. Your in-house team can work faster on the necessary industry strategy rather than on migrating insurance functionality into a generic platform. You can focus on scanning the market for the most relevant insurtech partners for your strategy, rather than worrying about how, where and how deep to embed their functionality. You talk to like-minded spirits who understand the language and the challenges. 

The fundamental solution is obviously choosing an API connected technology framework. The niche embedded insurance functionality will give you the pole position, focus and speed to market your strategy deserves. 

 

Jan Bakker

Written by Jan Bakker

CEO of Roundcube. With over twelve years’ experience in delivering payment hubs around the globe, solid business & technical knowledge Jan Bakker builds strong organisations ready for delivering challenging transformational projects in complex environments. As a seasoned top exec sparring partner he is equally comfortable with the CEO as well as a CTO in large financial services firms. Being a people person with a mission, he builds teams that follow him on this mission.