API Integration in Insurance: Connecting Disparate Systems, Transforming CX, and Beyond

Application programming interfaces (APIs) are powerful. They bridge the gap between disparate systems. Before jumping into the definition, let’s first look at one of their most impactful use cases.

For example, when booking a cab on ride-hailing platforms like Uber or Lyft, we enter our pickup and drop-off locations or select markers on the map. But the cab app doesn’t have a built-in maps system. Instead, the platform relies on Google or Apple Maps API to fetch the route, distance, and estimated journey time. This is all happening in real time; for end users, every second counts as they book and wait for cabs to arrive. In the backend, the cab app requests Google Maps through its API. “Hey, can you give me the best route and travel time between Pioneer Museum and Starbucks in Fredericksburg, Texas?” Google Maps then processes the requests and shares the answer back to the cab app.

This is just one example. API integration benefits many industries, including insurance. Like others, the insurance industry has seen rising customer expectations. People now want the same convenience, 24/7 availability, personalization, and quick responses. But the challenge is that the systems powering most insurers are often decades old. Policy administration, claims management, and underwriting platforms usually operate in silos. It’s challenging for insurers to keep pace with today’s fast-paced environment using legacy tools. The existing disconnection between expectations and current operational possibilities can only increase inefficiencies and hinder innovation. Additionally, the advent of insurance aggregator platforms has intensified competition, as they’re completely online and designed to cater to the preferences of modern-day consumers.

This is where APIs are helpful. API integration enables insurers to modernize their operations without discarding existing on-prem systems or replacing tools. In this article, we delve deeper into the role of API integration in legacy modernization, explore its business advantages, discuss implementation best practices, and more.

Understanding the Current Challenges

Insurers face challenges due to siloed data in PDFs and spreadsheets that are spread across disconnected tools that don’t communicate with each other. The result? Fragmented data. No 360-degree customer view. Cumbersome workflows. Some of the most pressing challenges include:

1. Manual Interventions

Underwriters and claim adjusters often need to enter data across multiple systems manually. They need to check and verify the details numerous times. Because one error can lead to customer dissatisfaction. Not only that, but it also increases turnaround times.

2. Slow Claims Settlement

In this age, where customers are surrounded by devices and technologies powered by AI and its subsets, they expect fast claim resolution. Hoping for them to wait patiently on hold or stay calm while your agents respond to them via chat or email is not at all possible. But this happens more often than not. One reason is the existence of disconnected systems, as insurers need to spend significant time verifying, reconciling, and validating information. But can your customers still stay loyal after such an experience?

3. Difficulty Bringing New Products to the Market

To stay ahead of competitors and engage with more customers, an insurance business needs to develop innovative products in response to market demands. However, that’s seldom possible with legacy systems. These systems are rigid and outdated.

4. Lack of Customer Service

We’ve all heard this adage: “The Customer is king.” However, when policyholders don’t receive real-time updates or self-service capabilities, it can negatively impact the business. As we have observed, technology is evolving rapidly, and so are customer habits. To serve them, providing the best policy is not enough; offering self-service systems is just as crucial.

That’s why it wouldn’t be wrong to infer that the siloed environment leaves insurers at a competitive disadvantage. Especially when the other brands are setting new benchmarks for speed, efficiency, and customer experience with each passing day.

How Does API Integration Helps?

API integration offers a practical and scalable solution to these challenges. API integration uses APIs to connect enterprise software applications, systems (whether legacy or modern), and workflows for the exchange of data and services. APIs can be used for simple integration. Like enabling an online food delivery app, such as DoorDash, to communicate with a payment system like PayPal.

Whereas, in an enterprise system, such as an insurance business, APIs can be used to integrate larger, more complex, and legacy architecture and workflows, facilitating the real-time exchange of data. Let’s now look at some advantages:

Understanding the Role in Legacy Modernization

Legacy architectures, such as COBOL and IBM’s AS/400, have been serving enterprises for many years. Discarding or replacing them entirely isn’t only expensive but also challenging, as they contain critical business information and details that have been powering operations for years. This is where APIs prove invaluable.

I. Extends the Life of Legacy Systems

APIs unlock data and functions trapped within legacy apps. And make them accessible to modern platforms such as CRMs, apps, and new-age AI solutions. So that insurers can extract insights in real-time and make more informed business decisions.

II. Facilitates Phased Modernization

No more massive “rip and replace.” Because APIs act as a bridge between heritage and modern systems. Instead of overhauling everything in one go, insurers can first modernize workflows that are in dire need of a transformation. Say customer-facing apps. Because that’s how you get the revenue running. Upgrading such a function enables more people to interact and convert.

III. Supports Low-Code/ No-Code Platforms

Instead of building new workflows or apps using a traditional coding approach, insurers can leverage low-code/no-code platforms like Salesforce and Microsoft. As APIs let different systems talk to each other, they will also support these apps/ systems. This can help accelerate innovation and reduce workflow bottlenecks.

This is how APIs pave the path for sustainable modernization.

Business Benefits

1. Faster Claims Processing

As insurers can view information in real-time thanks to APIs on a single dashboard, they can make decisions faster and update policyholders on the claim status.

2. Cost Savings

Integrating APIs to connect to different systems and utilizing low-code/no-code and automation tools to build new-age apps without replacing legacy systems is a cost-effective strategic move.

3. Enhanced Customer Engagement

Consumers benefit from real-time updates and digital self-service portals. When people have more visibility into the claims that are filed and policies being issued faster, it naturally makes them happier, increasing overall satisfaction and loyalty.

4. Operational Resilience

API integration helps insurers gain complete visibility into their operations while reducing mundane, repetitive tasks. This, in turn, helps them adapt more quickly to dynamic market disruptions, regulatory changes, and evolving expectations.

Implementation Best Practices

While the benefits of API integration are compelling, whether it makes a difference to your operations relies on careful planning and execution. But with some key practices, insurers can uncover real operational value.

I. Begin with a Thorough Audit

Assess current systems and workflows. Identify areas, such as self-service customer portals or claims management workflows, where using APIs can be beneficial.

II. Iterative Approach

Although it may seem enticing to do a complete 360-degree API implementation, you can’t be too sure of the underlying challenges at the beginning. Such a process can cause operational disruption. To avoid that, focus on pilot projects and scale as and when you spot significant value.

III. Cross-Functional Collaboration

Everyone needs to be on the same page. From the IT department to business teams, compliance teams, and agents who primarily work on these systems and workflows. Because including all stakeholders from the outset enhances alignment and accelerates a much smoother adoption.

IV. Vendor and Ecosystem Partnerships

Have you selected a vendor yet? If not, you can partner with Damco. We are a service and technology provider for the entire insurance ecosystem. Our insurance technology solutions can help connect disparate apps, systems, and sources to access critical data quickly and securely.

Final Thoughts

If the choice is between continuing with the legacy systems or discarding them, what would you pick? It’s a hard decision. Persisting with legacy systems without modernization means attracting new-age, digitally savvy customers and retaining them can be challenging. On the other hand, discarding these systems could mean disrupting existing processes and incurring initial financial costs. That’s why integrating APIs is likely the most cost-effective option. It can not only help increase operational efficiency without an extensive IT overhaul but also empower insurers to address the dynamically changing expectations of the insurance policyholders effectively.