API Management is Fundamental to Modernizing Insurance Operations
The concept of insurance predates the printing press and the steam engine. So it's likely no surprise that the industry — as obviously adaptable as it is — often faces challenges related to the modernization of legacy systems. In the age of AI and APIs (application programming interfaces), streamlining operations and modernizing are paramount to success.
In this post, we'll discuss how insurance organizations leverage API management tools to maintain a competitive edge, gain market share, and increase profitability. I'll share some common challenges I see customers facing from my perspective as an Enterprise Account Executive at Kong, and I'll cover how leaders in the space are turning technology-related obstacles into opportunities for growth.
API management and the insurance industry
Some of the earliest adopters of API management products we saw at Kong were life insurance companies. Why? I speculate they may be the most risk-prone portion of the industry. To try and manage risk assessment better, life insurers are always looking for ways to innovate. In many ways, they represent the bleeding edge of the insurance industry, paving the way for others to follow.
Property and casualty and surveyors companies quickly followed suit in seeking API management. With property and casualty companies, there are socioeconomic and geographic factors that may increase risk over time. Surveyor insurance can cover a range of occupations from construction to property managers, and the inherent risk in the occupations may be the impetus that caused them to seek API innovation.
Health insurance companies are some of the more recent adopters of API management products looking to modernize legacy architecture, and more subsections of the industry continue to follow.
Regardless of your organization's focus, API management brings benefits to many of the common challenges faced in the insurance industry.
Common challenges in the insurance industry
Between current customers and inquiring prospects, I've met with representatives from various insurers across the industry. While each has unique use cases that they're aiming to accommodate, there are some persistent challenges that all companies are looking to overcome.
Reaching customers digitally
COVID-19 pushed many aspects of life to be remote, online experiences. For insurers, this posed a problem. Many of these organizations had traditionally thrived on in-person interactions and outreach.
Since the industry has been around for so long (I'd say the average age of the insurance companies I’ve interacted with is around 200 years old), many systems and procedures are legacy. The drastic switch from in-person to online forced insurance companies to quickly look at modernizing their approaches.
Risk assessment
In an industry like insurance, assessing the risk of unpredictable circumstances is paramount to ensure a company's survival. The industry is constantly thinking about what risks are present, how to value risks, and how to get ahead and plan for these risk factors in the future.
By augmenting the risk assessment process, insurers can gain an edge over competitors. Some areas of insurance are prone to more risk than others, but it's consistent throughout the industry. As time goes on, these risks are always evolving. Threats like cybercrime, new weather patterns, and catastrophes are just a few of the more recent disruptors. Different solutions could be implemented to get ahead of these risks, but there's one common thread at the core of these changes: technology modernization.
Benefits API management brings to the insurance industry
Insurers are being pushed toward technology modernization as a sign of the times. Without it, these organizations would struggle to keep up with the fast-paced environment that tech has created. With the advancements like AI, modernization and API management have become a must.
Personalized customer experiences
To combat the challenge of reaching customers, insurers are looking to give a new tech-like or ecommerce-like experience.
Risk assessment
API management brings many benefits around better building for risk assessment. Being able to build and scale APIs effectively can reduce time to market drastically.
The legacy setups of many insurance companies consists of centralized teams that build and distribute APIs by hand. Compare this to management capabilities of a solution like an API gateway, where users can easily build, scale, and distribute APIs themselves within their own teams. It seems like no question that API management would make a world of difference for these businesses.
Third-party collaboration and communication
Insurance is a partner-driven industry. Insurers often work with third-party businesses such as insurance brokers. In some cases, insurers sell plans through other insurers. There's a whole network of connections across the industry. And what does the whole backend of this network looks like? It’s all APIs!
Insurers are always looking for better ways to communicate within their businesses and with others. Having scalable APIs can help to meet mandates and promote communication methods altogether.
Security and industry standards
Another aspect of API management that benefits insurers is how these tools help strengthen security and help organziations meet industry standards.
Insurance is a broad industry, and it's the intersection of so many areas that require the utmost security and adherence to industry standards. Some examples include banking insurance companies handling valuable payment card industry (PCI) data or health care insurers writing policies that meet protected health information (PHI) or HIPAA (the United States' Health Insurance Portability and Accountability Act) standards. You could take this a step further and consider the geopolitical factors that insurers need to keep in mind like CCPA (California Consumer Privacy Act) and GDPR (General Data Protection Regulation).
Secure data transfers
Currently, secure data transfers aren’t as far along in insurance as they are in open banking, but the industry is heading in that direction. With open banking, banks are able to securely share customer information. Imagine a scenario where a casualty insurer is writing a claim for catastrophe or property insurance. The same information they need is likely helpful for a life insurer creating a life insurance policy, and that transfer of information could lead to a change in rates.
In the near future, I expect the insurance industry will see the same safe data sharing capabilities that open banking has now become commonplace.
Choosing the right API management solution
Now, let’s come back to the present. While modernization is a common goal in the industry, it's not always a simple process. Coming from a legacy stack, as many insurers have, the transition can seem daunting or tedious. However, some API management offerings can more easily be implemented than others without sacrificing benefits. This is where Kong comes in.
Kong keeps the insurance industry covered
There are many benefits that come with the breadth of Kong's API management products. With Kong Gateway, the world's most adopted API gateway, organizations get access to one of the most lightweight, performant API management systems on the market.
Given how lightweight Kong Gateway is compared to other solutions, issues around latency issues or downtime begin to disappear. This gives users the superior, rich experiences they've come to expect when trying to access your applications. Additionally, Kong Gateway can find a way to fit into even the most nimble of ecosystems.
Kong products are built for the cloud and modern DevOps. When we see customers opting for a federated API management model, they often implement self-service delivery systems for building and delivering APIs across different business units. Then, those business units can create and scale their own APIs and continue the delivery process, while still being governed by a centralized body. This function massively accelerates the time to market. One example we saw was with a life insurance company that implemented the federated API model. They were able to reduce their time to market from months down to a single week. In the modern age,
One of the most significant features of Kong's products is that there is no vendor lock in. Compared to other API solutions where companies have to narrow their solution accessibility, Kong allows for more flexibility and diversity with your API journey. This way, you don’t need to put all your eggs in one basket. You can diversify all your API management services and build toward a futureproof architecture.
Kong is focused on every step in the API lifecycle. Whether it's managing and governing API specifications or building, deploying, and proxying APIs, Kong always has a way to make the user experience better. Even service-to-service communication is covered with Kong’s service mesh products. These features (and many more) are all under the hood with Kong Konnect, the unified SaaS platform for API management, service mesh, and ingress controller.
Insurance success stories
For a deeper dive into how some of the most innovative companies in the industry have found success with Kong, check out the following success stories:
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