Role of APIs in Insurance Transformation
I want to discuss how the insurance industry uses our ecosystem or APIs to get things done.
I’m heading the Digital Transformation Office of Daman Insurance Health Insurance, the largest health insurer in the Middle East. And our role is to put digital at the heart of the UAE healthcare ecosystem. We are required to connect 4000 Plus hospitals, doctors, and providers with more than two and a half million members, ensuring that we have all the right connectivity to our ecosystems and the government.
So, our world is one big API.
This article will discuss a few things on why it is so important to enable this connectivity and how you can do it. It will also discuss why it is so difficult for organizations to do so and how you can work around it to get it done.
The new strategy imperative
When looking into the insurance world, we also need to look into embedded insurance. People do not want to buy insurance. Insurance is a product that people, in most cases, are forced to buy and have to pay a lot of money for it. In most cases, they hope they will never have to use this product because if you have to use an insurance product, you’ve had an incident that is not necessarily a positive experience. So it’s a difficult product to sell and work with. In the future, we are looking at selling insurance as an embedded part. So whenever you buy products on Amazon, Netflix, or Google, you may be offered insurance. And this is where we as insurers need to be able to connect to other parties to offer our products as embedded insurance products. So, suppose we are to create an insurance organization capable of following environmental fluctuations, we must rethink how we work with our systems, organization, and culture.
Long terms projects
A project needs a scope to be defined and described. It needs to be developed, tested, and accepted for going live. This can take from 6 to 18 months, which is a large span. By the time the product is ready for release, the world has changed, and the product needs to be changed.
To mitigate this risk, we have to understand why this happens. A combination of many factors makes it difficult to move as fast as we want. If we understand these factors, it is easy to work around them. There are four main areas that we need to focus on.
Four main areas for fast deliveries
- Technical debt– Technical debt happens when we cut corners deliberately. If we have to deliver fast, say within three months instead of the estimated six months, we may have to use ad-hoc solutions. This creates technical debt. Next time when you have to make changes, impact analysis and revisions will take more time. So, it all adds up and builds into the time we take to deliver solutions. As time goes by, technical debt increases, slowing the system and development.
- Us vs. Them – Lack of documentation during analysis, and many change requests, can lead to issues during user acceptance testing. It gives an “Us Vs. Them” feeling. Increasing the team size cannot be a solution because that will not deliver the solution faster. It can lead to distrust between requirements, code documentation, development, and UAT teams. There is no single owner.
- Resources – As this continues, we will have lots of change requests, many of which will be business critical. There will be dependencies on key personnel. Effort estimation will then be unrealistic. You have to prioritize the change request to the systems.
- Organizational capabilities – The procurement process may be long if we start hiring people or external help. We have to ensure compliance with processes. In financial services, there may be a change resistance from the top management. The talent gap in the market can also be an issue. The picture is not so dim. There is a way out of this.
Adding speed back to the Organization
APIs are a good solution to add speed back into the organization. Three main areas help us add speed back into the organization.
- Environment of connectivity
- Power of ONE
- Short-term projects
Environment of connectivity
Enable partners to connect seamlessly to your systems. When you’re building this environment of connectivity, you will also be able to reduce the need for in-house capabilities because you can use plug-and-play solutions. We don’t have to reinvent the wheel but can take best-of-breed applications and build our app around them. The business also becomes more responsible and engaged. It will help you get the right product installed in the company.
We do this by enabling a technology architecture called multi-speed, two-speed, three-speed, etc. You can call it whatever you want. The idea is to isolate your transactional core systems.
You will isolate them with a connectivity layer, and on top of this layer, you can build a layer of differentiation where you have your business processes and rules. Suppose you are into digital transformation and are changing or revamping your product or digitalizing your processes. In that case, specialists within the business can work on these business processes and rules directly in low-code or no-code systems and change the processes, thereby improving how the companies work. You can do this because you have defined this layer of connectivity (API) between your process systems and your transactional code. We don’t have to look into changes to the transactional code. On top of your layer of differentiation are the systems of engagement. This is where you have your mobile apps, websites, and partner connectivity.
By separating systems like this, you are building an organization capable of doing many things simultaneously because you won’t depend on people working in the core system. The APIs and the core systems will be your intellectual property and are hardcore for your business. The teams can start focusing on reducing the technical debt, creating this layer of connectivity, and keeping the API layers alive in the best possible way. The business can work on the simpler layers and get things done faster.
One of the keys here is to understand that you don’t necessarily have to change your core systems, but you have to isolate them.
Power of ONE
Don’t think you can transform your whole organization in one go. Start with one team, one unit, and one project. Ensure that that project has a full focus on change. Internally as well, the one project will be less challenging. The Business Unit owners and those who’ve been in the culture for a long time and feel they own the business won’t feel as threatened by this single change project. It is easier to manage and keep the motivation for change because there’s a focus on one project, and when it succeeds, you will celebrate the success.
When we try to do short-term projects, we try to keep everything we’re doing for three months. Even if we have a longer, maybe one- or two-year change project, we will break it down into three-month deliverables because it is easier to deal with and starts rewarding or giving back the benefits. We can celebrate this, and then we can build on this celebration, and this results in a move on to the next project. This is the key to change.
Putting it all together – people and culture
The main aspects of success are people and culture. When we talk about digital transformation, we think of APIs. But, APIs and digitization will not go anywhere without people.
The financial services industry is an old industry and a proud industry. It is a slow-moving industry. It is difficult for them to start changing their habits. They don’t know what’s coming. So they will resist the change.
We are also a heavily regulated industry, so there will be a lot of red tape and old processes. We have Legacy IT systems and an aging talent base. So, to make these changes work, we can do the following –
- Set a truthful, believable vision with a clear end-state. Celebrate all victories.
- Begin with the perfect team. Find the evangelists in the organization and empower them.
- Break down projects into small, sizeable chunks that deliver measurable value.
- Adapt performance management with clear targets and responsibility.
- Apply key performance indicators across business units to secure cross-unit collaboration.
- Enable two-speed IT to secure fast implementation of changes and innovations.
Ensure that the organization has the bandwidth required for success.
Stop projects – reduce running projects to an absolute minimum. You have to do a project reevaluation exercise – What projects add value in the shortest time and then prioritize them.
Reskill people – It takes longer to hire new people. It may be easier to reskill your people who want to work with you.
Add to Board agenda – Elevate all transformation projects to the Board level. So every time there is a board meeting, they ask about the project status, which gives a stronger focus within the organization.
Celebrate success – Celebrate whenever you can. Celebrate when anything good happens, even for the smallest of successes.