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API & Open Banking are driving the digitization of the insurance industry

API & Open Banking are driving the digitization of the insurance industry


 

Digitization is a massive challenge for all industries. For insurance companies, digitization offers enormous potential for new business models and an improvement in the customer experience.

The announcement of Allianz's in-house venture arm for a new customer portal has caused quite a stir in the professional media. "Iconic Finance" is the working title of the platform, which will also focus on other topics besides insurance. As reported in the industry media, the aim is to offer customers 360-degree analyses of all aspects of retirement planning and finance. The idea is to provide a "complete ecosystem".

 

Open Banking opens up new perspectives

Even though the launch date of this platform has not yet been determined, this step points to the future of the insurance industry. Allianz is leaving familiar territory and entering into direct competition with similar portals that deal with rate comparisons and the management of customer contracts. At first glance, this might appear to be a risky move. But digitization also means that the German saying, "a cobbler should stick to his last", no longer applies.

There is no doubt that Allianz and its brand are well known and trusted by consumers. The slogan „Hoffentlich Allianz versichert“, which has been widely used for many years, is still effective and the trust that Allianz has earned should be transferred to the platform. The credibility of the analyses, and the recommendations that consumers receive about them, is therefore excellent right from the start.

At the same time, a platform of its own offers Allianz the opportunity to position itself as a reliable partner to customers over a longer period of time. This strengthens customer access and creates more points of contact with the insurance company. And this has a positive effect on consumer loyalty, which is eroding in all industries.

Technologically, the platform is based on the Payment Services Directive2 (PSD2). This means that the banking industry loses exclusive access to its customers' data. Accordingly, other providers must also be able to access the account data via standardized interfaces, if authorized by the customer. This phenomenon, now also known as "Open Banking," is the basis for comprehensive financial analyses. Instead of relying on approximate figures, now advisors and AI-supported systems can develop concepts for customers based on concrete data from account information.

 

Interfaces are the new DNA of the (insurance) industry

The PSD2 is an example of the power of defined interfaces. The success of large platforms such as Facebook or Google based in part on the definition of APIs (Application Programming Interfaces). APIs enable third parties to develop their own offerings around a central service. In this way, they increase the attractiveness of their core offering and attract users. The advantage for the API provider is that there are no development costs for these additional offers. At the same time, such additions and extensions can improve the user experience for customers.

 

Saving costs on claims processing via API

As recently determined by the "Branchenkompass Insurance 2019" study, insurance company managers are aware of a great potential for savings in the area of claims settlement. Costs can be permanently reduced with the help of automation, the online reporting of claims and the use of AI for fraud detection.

Modern customers are now accustomed to using their smartphones to shop around the clock or to get information about products. For this target group, the ideal process for reporting a claim would be for the insured person to report their claim online or to report it directly in the insurance company's app. Using their smartphone's camera, they would then immediately take photos of the damages and upload them. The insurance company saves time and money by avoiding a media disruption and by automatically transferring all necessary data. And the insured person experiences a smooth interaction with the company.

The API automatically checks the data for plausibility and analyzes it by means of an AI system. And all this is done much faster than would be possible for clerks to perform the same tasks.

It is not necessary for insurance companies to develop processes that cover all of these details. Image analyses, plausibility checks and AI systems can be purchased as a service from third parties, such as system houses or insurtechs.

However, in order to turn the individual modules into a continuous process, it is necessary to use APIs that enable the free exchange of data. Systems connected via API perform their respective functions and work autonomously, i.e., they return the result via the interface after completing a task.

In order to benefit from the new opportunities offered by the interface economy, insurance companies must meet two criteria: They must have the courage to think about new business models and thus venture beyond previous boundaries.

They must also streamline their IT systems for greater permeability, for example, eliminate singular data pools, replace proprietary applications and begin using APIs.

 

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