Insurers must embrace APIs—or fall behind

Insurers that are late to integrate application program interfaces (APIs) and artificial intelligence (AI) into their offerings will suffer adverse selection scenarios over time, according to Hamzah Chaudhary, director of deployment at Cytora.

Presenting a session titled ‘Building The Underwriting Of The Future’ at Intelligent InsurTECH Europe 2019 in London on October 14, Chaudhary said the technologies will increasingly deliver deflationary economics over time and allow insurers to scale up their services much faster. Providers that fail to keep pace with their peers in implementing this tech will be at an increasing disadvantage, he warned.

By automating processes and price generation and enabling machines to talk to each other directly without human involvement, APIs and AI will help insurers improve their underwriting accuracy, increase efficiency and improve customer experiences, said Chaudhary.

It will do this by solving problems that insurers have wrestled with for many years, such as incomplete data. In the past such problems have slowed down the underwriting process significantly, as insurers look to find missing data themselves, or contact customers—to the detriment of their experience of the transaction.

On average it has traditionally taken three or four hours for underwriters to make a decision about providing coverage, due to the time-consuming nature of data collection, said Chaudhary. Implementing API technology creates an average time saving of 89 percent on the initial underwriter’s decision, he said.

As well as speeding up underwriting decisions, APIs improve the customer experience by reducing the number of questions insurers need to ask customers. Customers can provide a small amount of information, such as a company name, allowing the API to make educated guesses for much of the remaining information it requires. Customers have only to confirm the accuracy of pre-filled out information, rather than filling it in themselves.

Not only does this save time and effort for the customer, it also creates the sense that the insurer knows the customer and understands their business, said Chaudhary.

“Research shows that the number one reason SMEs do not buy insurance is they feel insurers do not understand their business, and what makes it unique,” he said.

Embracing APIs and AI will allow insurers to achieve the same level of convenience and scalability that mail services have achieved for people sending and receiving letters in the post, concluded Chaudhary, simplifying processes, increasing speed and driving down costs.