Universal APIs: Integrate,
Simplify and Modernize
![](/globalassets/limra-loma/trending-topics/publications/marketfacts/2024/august/0736-2024_mf-august_universal-api-integrate_705x400.jpg)
Universal APIs: Integrate,
Simplify and Modernize
August 2024
2024 is a transformational year for our industry. Artificial intelligence (AI) and generative AI (GenAI) have captivated the industry with the potential to deliver significant value, including operational efficiency, productivity increases and cost savings. A MarketFacts article published in June 2023 underscored the criticality of data for successful AI implementations.
The successful long-term adoption of AI depends on several factors that create AI readiness, including the industry’s ongoing investment in the modernization of legacy platforms and the ability to integrate siloed and disparate systems within a carrier’s ecosystem. The use of standardized application programming interfaces (APIs) across the entire industry — from carriers to vendors to third-party service providers — has been dramatically increasing in popularity. Simply put, modern API infrastructure helps everyone access data and workflows faster and cheaper.
With modern API layers, carriers can integrate internal systems and seamlessly connect to external parties without extensive and expensive coding. APIs are the linchpins for carriers to be able to utilize data stored across multiple systems — both legacy and new. Absent these data, carriers will limit their ability to capitalize on AI capabilities. To fully capitalize on investments in AI, carriers need to first focus on developing a layered, manageable and cost-effective API strategy to ensure a frictionless experience for both AI and non-AI use cases.
Building on the core tenets of APIs, the industry is exploring the use of universal APIs, which encompass a singular API layer that can concurrently connect to disparate systems and consume data from them. Universal APIs have already been successful in lending, banking and payment processing. For instance, Stripe Inc. offers a universal API for the payment processing industry and has simplified the work for merchants, credit card companies and consumers alike. Plaid Inc., with its universal API, enables banks, consumers, distributors and financial apps to interact by requesting data or moving funds. Venmo, the popular payment app, uses Plaid’s API, enabling users to send money to each other between different banks. For banks to each build a different “Venmo” internally would be slow, full of friction and prohibitively expensive.
The commonality is that stakeholders in these industries have benefited tremendously by adopting standardized and platform-neutral connectivity APIs that they didn’t have to rewrite and rebuild themselves. This allows companies to focus on their core business and leverage this lucidly connected ecosystem to develop new products and gain operational efficiencies. Insurers currently lack a comparable solution and can learn from these other industries.
In payment processing, it’s unthinkable for a merchant or consumer to need three distinct systems and procedures to process three different credit cards — Visa, Mastercard and American Express. All three leverage Stripe for all payments without redundancy. In life insurance, however, you often need to manage multiple processes and use many disparate systems to access different insurance products — even within the same carrier — because different products often are powered by different core systems.
These problems are not due to the lack of other technical innovations. On the contrary, many carriers have adopted new core systems and moved partially or fully into the cloud, along with other modernization efforts. However, the absence of a universal API has stymied carriers’ ability to reap maximum benefits from other modernization efforts they’ve already invested in. Without industry-standard connectivity, it is expensive and difficult to connect various systems and data across different product lines for several parties.
This means everyone must rebuild the same thing separately many times, individually to different specifications, whenever they seek to grow or launch a product, incurring compounding costs. This problem is exemplified when a carrier needs to connect with multiple distributors and vice versa. The industry ends up with a complex web of mostly nonreusable and sometimes manual connections between systems that are expensive to maintain and full of friction.
All parties should have one common place for data, rules and workflows. This is vital because maintaining many things in different places becomes expensive and time-consuming. When everything can be configured and executed in one place, it becomes a universal API layer, which enables seamless interaction between different parties and systems in one common place.
With a universal API layer, companies can connect data and workflows from any selection of systems and have a universal output exposed externally to distributors, reinsurers, data platforms or AI models, which require interaction, and manage all this in one place without redundancies. The absence of a universal API layer is bad for everyone because it means that:
Each organization must rebuild the same thing separately, many times, to different specifications, whenever it seeks to grow or launch a product. Everyone incurs the cost of fragmentation and retraining.
Amongst other benefits, a universal API enables carriers to:
The industry sits at the perfect timing and crossroads of an explosion of AI applications and an abundance of data both within and across enterprises. Consolidation in distribution means increasing demand from distributors for freedom on where to do business and access data. APIs mark a transformative moment for our industry as we create better infrastructure for everyone’s benefit. We might look back a few years from now and wonder how we conducted business before a universal API.