API Driven Insurance-As-A-Service Can Learn From Banking


In earlier posts, I wrote of the ecosystem opportunity in insurance with references to embedded insurance. A tangible strategy in vogue for capitalizing on such opportunities is through an insurance-as-a-service approach. This follows closely what fintechs have achieved in the banking-as-a-service (BaaS) space. To better understand the insurance context, I illustrate few banking trendsetters and extend to recent insurance examples.

Experience of banks shows two categories of winning “Open Banking” strategies: Platform and BaaS. In platform strategy, a dominant market position and privileged relationship with a large customer base helps aggregate customer data to offer a wide range of personalized products, as orchestrators or via a marketplace model. In BaaS, entities build on know-how of producers with competitive unit economics to offer products and services, with a partner reach that traditional distribution cannot reach or as niche experiences aimed at reaching new customers at time of acquisition.

In two years after UK’s big banks were persuaded by regulators to set up Open Banking services,  200+ financial service providers started offering services to clients of banks and generated 200 million monthly calls to information systems. BaaS sector growth is being increasingly driven by native digital companies seeking to deliver “embedded finance” in customer propositions. Platforms have emerged that allow FinTech to conveniently configure banking components and build propositions. While some are created by FinTechs like Gallileo, Bankable, Railsbank, others are by incumbents – BBVA’s Open Platform, Goldman Sachs’ API platform. What used to take months to design and launch, can be done in a matter of days.

Though banking-as-a-service is still to fully mature, it has broadly met adoption in three distinct modes based on engagement models.

  • API Stores: Traditional banks that are D2C but offer their products and services as APIs to third-party players to build innovative service propositions.
  • White-Label Platform (B2B2C): Companies offer APIs on these platforms to allow partners to offer specific banking services or fulfil compliance requirements, partnering with licensed banks in some cases.
  • Co-branding: FinTechs deploy their platform with traditional banks as a co-branded proposition, effectively becoming a distribution and on-boarding channel.

In addition to APIs and digital capabilities, these platforms provide pre-configured industry adaptations, standardized product templates, configuration tools with data segregation, support for alternative payment providers, network management and B2B capabilities.

In insurance, emerging IaaS are seen to inherit similar paradigms. TONI Digital is a European insurtech with an insurance-as-a-service platform for white label insurance (image below), enabling partners to rapidly enter insurance, leverage brand and customer bases while generating new revenue. It has partnered with Socotra, a cloud-native insurance core platform. By integrating with established risk carriers, it offers competitive premiums.

Boost is another white label B2B2C IaaS that has simplified offering digital insurance, be it a tech major or an insurtech. The IaaS platform provides data-driven insurance product development, products by an ‘A’ rated carrier, dedicated risk capacity, besides automated claims administration, compliance and data analytics for distribution partners.

AXA is an incumbent that has an insurance-as-a-service API store model for streamlined distribution, contract and claims management. It features a digital claim declaration, on-demand and pay-as-you-go products with automatic claim risk estimation/payment. This has enabled AXA to launch new products within 4 weeks.

As much as the success of IaaS hinges on the ability to deliver frictionless experiences, integration of operational processes is paramount. While some capabilities are business-as-usual for insurers operating white labels, effectively managing large partner networks needs industrializing management of the relationship beginning with partner acquisition. This requires positioning APIs as products and providing self-service API portals. Tools for managing relationships have to be redesigned. Identification of partners, service level management, systems for monitoring performance and compensation have to be near fully automated.

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