[Inside] Why did we join the Open Insurance Initiative?
At astorya.vc we are investing in technologies that will enable the next insurance generation, and have long been interested in API. That’s why we are excited to announce we joined the Open Insurance Initiative to move a step forward in developing API standards, promoting API technologies among the insurance industry and ultimately developing new insurance services.
What is an API
API stands for Application Programming Interface. They could be seen as blocks interacting together to form a complete computing program that executes tasks. Basically they receive information as input, compute them and deliver information as output.
A well known exemple you are using every day (though you’ve probably never noticed) is Uber payment process: at the end of your ride, Uber app sends the amount you owe it to Stripe — that has developed a payement API — that processes the payment by withdrawing the amount from your bank account and sends a payment status to Uber that is notified you’ve paid. Btw, this makes payment transparent!
In financial services, banks are the most advanced on that topic due to the PSD2 regulation. API are the tech layer banks leverage to fit with this regulation that requires them to get power back to their customer regarding their data: any third party application is then supposed to be able to access customers data banks are storing (upon customer request). Though most projects are still in early days (see this overview of banks initiatives to launch API) this is a huge opportunity to create new services and revamp the banking User Experience. NeoBanks have long been leveraging API to offer many banking services (loans, money transfers, savings, …) through external partners. API are the enabler of such banking ecosystems / platforms.
See how N26 has build a broad ecosystem of financial services connecting its core-NeoBank to external providers thanks to API.
API in insurance
There are no such regulation (yet?) in the insurance industry but we are convinced API will have a dramatic impact on insurance, starting with the distribution part of the value chain. We strongly believe platforms will be the new brokers in a near future. They have indeed three main strengths they could leverage to sell insurance products:
- huge & segmented customer bases
- in depth knowledge of their customers (thanks to data)
- regular touch points with their customers
In health insurance for instance, FitBit is an interesting use case and might be relevant as they have millions of customers wearing their fitness / digital health bands, they have huge amounts of health data (e.g. 150B hours of heart monitoring data) and regular touch points with their customers through rewards and engagement via their mobile app. They could then be a good entry point to distribute health insurance products. And actually they are already moving in that direction by offering adjacent services (employee benefits and prevention).
In car insurance it’s even more obvious with BlaBlaCar already selling car insurance products. Being a platform connecting 15 millions of drivers and passengers in France (and 65m+ Wordlwide) for mid/long range trips, BlaBlaCar is now registered as a French insurance broker (under the #15003890 at ORIAS). And they are selling AXA’s insurance products.
To ease this kind of insurance / platform partnerships, API is the tech requirement. We’ve spotted InsurTech startups offering API products to enable either insurers to distribute their products via platforms (e.g. Kasko, Getsafe) or the other way around, enabling platforms to distribute insurance products to their customers (e.g. Qover). Several startups have even a more targeted approach to embed insurance products in adjacent areas:
- Banked, BanksAPI, Kotomatik: leveraging banking data to deliver scoring, this could be used to better target customers and deliver relevant products
- Navitia: leveraging mobility data, they could deliver more accurate insurance products to customers
- Nimbla: leveraging credit scoring, they are delivering insurance policies on a invoice-by-invoice basis
- Lemonade: enabling any player sell its home insurance policy
Several insurance companies are already working on their own API. One of the most advanced in the French market is La Parisienne that has developed a huge portal of API that are available on shelves for platform or InsurTech startup that would like to sell any of these products.
The Open Insurance Initiative
What is exciting with the Open Insurance Initiative is that it’s not related to any regulation requirement. This is a tech initiative to anticipate the future of insurance by leveraging the most advanced technologies available on the market (focusing here on API). And most of all this is an initiative to gather many players — incumbents and adjacent players — to work on a market standard that could ease connexions between existing and upcoming players. That’s utterly consistent with what we expect from the insurance market: building insurance platforms and ecosystems by gathering complementary players alongside the value chain.
We are very happy to be the first VC investor to join the initiative alongside with insurers and InsurTech startups. Of course it strengthens our position as a tech investor focused on building the future of insurance by connecting insurers and adjacent players. This is our conviction: insurers will stay in the game but their job will dramatically change. That’s where technology, including API, will be required. Being part of such an initiative to work on new / open standards will help us stay ahead of that trend and keep advocating the market that API are the next big thing in insurance by building real use cases with all the Open Insurance Initiative community.
>> Learn more about the Open Insurance Initiative (here)
>> Learn more about astorya.vc (here)
Co-founded by Florian Graillot and Jan Kastory, astorya.vc invests in tech startups to build the next insurance generation.
Leveraging its own sourcing technology astorya.vc identifies promising startups, structures their growth through its extended network of mentors, and develops new business opportunities with its insurance investors.
Raised from insurance players, astorya.vc is the first early-stage investor in Europe, focused only on the insurance industry.
Learn more on http://www.astorya.vc