Insurance as a Service (IaaS): Would Open APIs replace E-Commerce strategies in Insurance? The case of Lemonade API


Lemonade_Open_API

In the last years the insurance industry is facing major challenges and digital transformations where startups are playing theirs roles on facilitating such a process.

Lemonade, one of the most famous Insurtech, with the launch of Lemonade API it has just made another step beyond its ambition to rethink the entire insurance industry.

What Lemonade wants to achieve with its Lemonade API is re-designing insurances into an Insurance as a Service (IaaS) business model.

In practice, an API (Application Programming Interface) is an interface where any other business, mobile APP or website, can access to get a specific service. In the case of Lemonade API, the service provided is an insurance.

Lemonade Widget

With Lemonade Widget, any website can thus provide to users the service of issuing a home insurance. For example, from a Real Estate Comparison website, once the user has chosen its house to buy or to rent, then it can buy a coverage directly by clicking the button Add_Insurance.

Similarly, imagine to buy a new brand TV, notebook or furniture for your home from an E-Commerce website. Maybe you want also to insure them from damages or theft. With such an API that can be done just when purchasing.

Widget

Lemonade Rest API

And what about adding insurance services to mobile APPs users? That can be done with Lemonade Rest API. After adding the interface to the code, the insurance service it will be available within the mobile APP.

For example, a user who is accessing to its Smart Security Mobile APP to check if everything is ok at its home, maybe it wants its stuff covered to feel more secure.

Similarly, there are many APPs helping people to manage personal finances and expenses. An insurance that cover with a fair price a valuable item just purchased could be the case, especially if it has been asked a loan.

Rest_API

Also Big Tech Giant Oracle is on the way of Open APIs

Open APIs is not only about insurance. Oracle one month ago has launched its API Banking solution aimed to support financial institution to deliver digital customer experiences, secure payments and an effective identity management against frauds.

Interesting to noticed that, as far as the API Baking service is charged according to the volume of the transactions, who can benefit of such a service are not only big financial institutions but also emerging fintech startup.

Insurance as it is: a service

Technology apart, Lemonade Open API is going to put insurance at the end of the value chain.

Life Insurance apart, the P&C segment is pulled by the numbers and the worth of the items owned. Whenever a consumer buy a house, TV or a new car, a need for a coverage exists. Putting an API just at the moment of purchasing is simply providing a more linear customer journey experience: why customers should buy an insurance by themselves after purchasing? Or why customers should rely on the insurance provided by lenders or car dealers?

Many big insurance companies have already established an E-Commerce channel within a digital strategy aimed to be more close to customers. But is really E-Commerce in insurance the right path towards a customer centricity?

Open APIs would thus enable open business ecosystems.

I’m very curious to see how Open APIs will transform (or not) insurance and financial industries in the next years.

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New IT Innovation Development (N.IT.I.D.): a new business model generator at a glance


NITID Process

Once understood the second side of technology: technology as a catalyst to change business models

(see also: Firm Infrastructure Vs Catalyst to Change Business Models (part 2): New IT Innovation Development (NITID))

  • How to develop new business models that anticipate customers’ needs and market’s trends?
  • How to make IT innovation fully sustainable also by using all the data (inside & outside the company)?
  • How to manage technology disruptions?

Here a “N.IT.I.D.” tool to address such an issue of nowadays businesses of whatever industry.

5 steps:

1. Brainstorming (lateral thinking):

Ok, a new technology or improvement has come out… which might be impacts on the business and society? How can be used for market effectiveness?…in other words, what to do? Starting by thinking to a solution is the best way for achieving a failure.  In a good brainstorming stage all the business impacts related to customers’ needs and stakeholders should be written down without any kind of criticisms. A good brainstorming stage rely on people with different mindsets, lateral thinking and should generate as much options as possible. In one world: chaos

(see also: Chaos vs. Determinism: why not both? From evolutionary theory to BIG Data challenge)

2. Simplify (vertical thinking):

A list of ideas that might have no sense (apparently!!!) has been written down. It’s time to make order upon the chaoby giving to each idea a title. An image that simplify the idea in one #hashtag. Then, remove all the ideas that are redundant because the have the same image, title or #hashtag.

Then, rank all ideas (e.g.: team members votes) and eliminate the ones less relevant. For example, keep only 30 ideas out of 200\500 initially generated.

3. Organize (vertical thinking):

With a simplified list:

  1. first level groups: unify the remaining ideas into rational association (criteria) affinity groups
  2. rank the groups. (e.g.: each member of teamwork assigns 1,3 or 6 point for each group of ideas)
  3. second level groups: group again the unified ideas into a rational association affinity group (another criteria)
  4. for each second level group, summarize a general topic (avoid a list of ideas) or a common theme.
  5. identify relations among groups (correlations, dependencies).

4. Evaluate Solutions (lateral & vertical thinking):

Now it’s time to think about a solution: how to develop a solution that meets the needs and opportunities that has been previously brainstormed, simplified and organized?

Many solutions should be brainstormed again and evaluated according to a list of “key performances” that are needed for implementing the new functionalities (needs).

That’s more likely the most challenging stage since both lateral and vertical thinking are required for generating new solutions and for evaluating them according to the key performances required from customers.

5. Select Solution (vertical thinking):

A list of selected solutions and possible business models that are possible thanks to IT innovations and technology improvements are now available with an evaluation that is linked with key performances. How to select the only one that is sustainable and worth to develop?

That is the final Selection stage where each solution is compared and assessed against accordingly what is already provided by competitors.

An example of how N.IT.I.D. process might be helpful in order to find opportunities and threats (disruptions) from IT and technology innovations?

Recalling the issues of Negative SEO:

(see also: Tripadvisor: a case study to think why bigdata variety matters)

…how to improve a service like the one of TripAdvisor closer to customers’ needs?

…stay tuned ;)!

Feelink – Feel & Think approach for doing life!

Firm Infrastructure Vs Catalyst to Change Business Models (part 2): New IT Innovation Development (NITID)


Value chain

Acknowledged the role of IT and technology as a catalyst to change business model (see the previous post “Firm Infrastructure Vs Catalyst to Change Business Models:  the Double Side of IT“), how to implement new IT innovations in practice?

Each innovation implies a changing process and each changing process implies commitment and investments…so, which IT innovations to choose in order to avoid a waste of resources? Are the IT innovations under development in line with the customer needs (actual or potential)? Which are the key competences needed for developing a new IT innovation?

Whatever the industry of the company is about, since the focus is customers’ needs, why not thinking how to adapt the NPD (New Product Development) process to IT innovation? The NPD is a structured creativity process focused on introducing new kind of products\services that effectively produces innovations.

In particular, the NPD process combines lateral (generations of ideas) and vertical thinking (selections of ideas) together and it is divided into four stages: ideas brainstorming, ideas classifications, ideas evaluation and ideas selection.

NPD stage 1: ideas brainstorming (lateral thinking)

In this stage all the team members engaged simply write down new ideas without any kind of filter or criticism (lateral thinking). Taking as an example the case of TripAdvisor (see “Tripadvisor: a case study to think why bigdata variety matters“) where a validation process of the reviews is in place by recording on a database the receipts of the end-user at the restaurant: which might be the new innovations available by using the data of the receipts?

NPD stage 2: ideas classification (vertical thinking) – KJ Method

Now, since usually a brainstorming session generate chaos, how to figure out which IT innovations to implement?

Like navigating in the middle of a storm, just stay focus on the ongoing  issues, do not think to a final solution and keep clam. So a first step is to organized ideas in a structure way in order to figure out a big picture. An approach for classifying the brainstormed ideas is the KJ method, where all the initiatives are split into groups by using a criteria. For example, criteria for classifying IT innovations could be: which are the departments\functions involved by the IT innovation? Or\And, which are the stakeholders (customer, suppliers, third parties,…) involved?

Then, for each group of ideas, assign a tag that identifies it. For example, suppliers IT innovation, marketing & sales IT innovations, and so on.

NPD stage 3: ideas evaluation (vertical thinking) – QFD Matrix

Once ideas are grouped and tagged, the next step is to identify the key performances that are needed in order to implement new IT initiatives. Typically, regarding IT stuff, they are about DataBase (storage, number of transactions,…), architectures, maintenance costs, usability, interoperability,…

By putting IT initiatives into rows and the key IT characteristics into columns, the finial result is a matrix called QFD (Quality Function Development). Briefly, the QFD matrix connects the IT initiative with the needed performances. For these reasons, the QFD matrix applied to IT innovations might be useful also for procurement: which are the key competences? Make or Buy? If buy, which IT vendor to choose?

NPD stage 4: ideas selection (vertical thinking) – Pugh Matrix

Just for a recap. We have organized the ideas, we have identified the key characteristics for each IT initiative… and so? Which IT initiative to implement? The answer is provided by the so called Pugh Matrix where, for the development of a new product or service, evaluates ideas and solutions according to a gap analysis. In particular, how much the new idea will be valuable for the customer? Will the new idea provide a competitive advantage against competitors?

A similar evaluation should be adopted also for IT innovation. Why? Just think about the risks correlated when IT becomes so complex to be maintained and thus a nightmare for customers, employees and suppliers as well.

Too much enthusiasm on IT initiatives has a side effect to much IT complexity. How to innovate without adding superfluous IT complexity? What about using NITID (New IT Initiative Development), a revised NPD method widely use for product innovations?

Feelink – Feel & Think approach for doing life!