APIs a key component of insurance digital transformation

Fun fact: Many long-established insurance companies still rely on legacy mainframes computers running applications in an outdated programming language from the 1960s. That's not ideal, because today’s tech-savvy, smartphone-using customers are more mobile and expect real-time information whenever and wherever they are, without the assistance of an agent or a call center representative. Not good, because the modern agent requires new tools and applications to maintain productivity in a mobile environment, including instant policy quotes. And especially not good, because the “insurtechs” - new, innovative, and rapidly growing companies with social savvy marketing and modern technologies - are just waiting in the wings, ready to grab your market share.

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Workings servers inside pod one of IBM's Softlayer data center in Dallas, Texas, U.S., on Thursday, Jan. 16, 2014. Photographer: Ben Torres/Bloomberg

You have to adapt and evolve in record time to create a seamless customer experience while improving employee productivity to remain competitive and increase customer retention. By implementing APIs and microservices, you can extend those insurance backend systems to mobile, web, and cloud rapidly, and cost-efficiently, all with low risk. By using the “art” of the API, you:

Accelerate Digital Innovations
Microservices breakup monolithic legacy applications into smaller, independent business processes. Application programming interfaces (APIs) can then be used to open up this data from legacy systems so developers can use it to create digital applications for mobile, the Internet or cloud. Organizations can bypass complex existing architectures, access systems of record directly, and get it all done with Java programmers using familiar, open-standards tools.

Ease the Pains of Digital Transformation
Digital transformation initiatives involve multiple business processes and a variety of technological solutions from different vendors - resulting in extremely complex, lengthy, costly, and risky IT projects. Disparate applications, an out-of-date “legacy modernization” stack with an ESB and SOA, or different application platforms like in-house and cloud can slow transformation. Moreover, critical business functions involved in the integration - claims management, policy management, document management, and other applications like CRM, finance and accounting - often don’t perform well when ported to the cloud or mobile devices.

Using APIs and microservices to modernize your service offerings results in better performance of legacy applications; fewer layers of complexity (microservices are designed to be independently deployable) for quicker processing of transactions; and reduced modernization or migration risks.

Succeed where past transformation options failed
According to an article in Forbes by Peter Bendor-Samuel, “The record of studies on digital transformation indicate a high failure rate, with a notable 2013 McKinsey study finding that 70% fail. That is a lot of wasted time, money and unmet expectations.”

Organizations have tried several different ways to make their applications more responsive to business-driven changes. These include:

  • Rip and replace (writing applications and business flows from scratch with the newest technology stack, replacing existing legacy hardware and software)
  • Re-platform or re-host (deploying the same software on new hardware); direct integration between applications (writing custom integration code in every application that needs to be connected);
  • SOA and ESB platforms (deploying new middleware).

While offering initial promise, these options ended up offering only the downsides of cost, risk, and time consumed. On the other hand, APIs and microservices proved that they can be built cheaply, tested quickly, and integrated without much change to the pre-existing legacy application. Because they’re modular, insurance providers no longer have to choose whether to integrate or rip-and-replace an obsolete service.

Today’s insurance customers expect a higher level of service and customization. Insurance providers who have implemented APIs and microservices can ride the digital wave and create fully functional digital services within days or weeks instead of months, benefiting from speed of implementation, low cost, and software quality and security. APIs and microservices allow you to be:

  1. Customer-centric - You can provide a seamless, personalized, and effortless customer experience by integrating an intuitive user interface containing data and processes from disparate systems and applications across the organization;
  2. Mobile-centric - You can give customers and employees anytime, anywhere access to the information and services they require; and you can do this across devices, locations, and applications;
  3. Innovative and agile: You can support rapid business and technical innovation, implement new business functionality and user interfaces quickly to stay ahead of the competition, and introduce new business models such as direct-to-consumer and independent agents and brokerages.

With the “art” of the API, the insurance sector, like other industries, can look forward to solving common challenges with legacy mainframes, midrange systems, and applications and provide customers with the more modern and advanced applications they have come to expect.

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