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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An Example of Strategic Positions towards Disruptive StartUPs: Digital Insurance


Technology disruptions and digital transformations are nowadays become a strategic topic in the business world and StartUPs are playing a key role as a generators of new business models.

Clouds, Mobile APPS, IoT and Analytics, together can create new business opportunities easier than few years before since they enable the creation of digital ecosystems among different industries.

As a matter of facts, most of big companies nowadays invest on Start UPs and embrace disruptions with dedicated investment fund (Seed, VC) and  Acceleration programs.

Launchpad Acceleration (Google)  and Microsoft Ventures are just an example.

So, how do big companies deal with Start UPs? Do big companies consider StartUPs as a threat or as an opportunity in order to embrace disruptions?

For each company, by evaluating its:

  • Market Leadership in the industry
  • and the Disruption Attitude towards innovations and investments in StartUPs

in the Figure below, an example applied for the Insurance Industry where are shown four strategic positions toward digital disruptions: Disruptive Leadership, Conservative Leadership, Disruption Hunter and Conservative Niche.

Disruptive_Strategic_Positions_Insurance

Disruptive Leadership

(Market Leadership: HIGH & Disruptive Attitude: HIGH)

Companies that have a proactive attitude towards disruption because they leverage theirs market leadership and resources to develop accelerator programs for Start UPs as well as dedicated Seed or VC investment founds

AXA one of the biggest insurance companies worldwide, with AXA Strategic Ventures  is the most active.

Its portfolio is well developed and wide with more than a few potential successful digital insurance Start UPs such as Policygenius and LimeLightHealth as well as with Biobeats in order to explore new businesses opportunities and ecosystems in healthcare enabled by wearables.

Other big players are filling theirs disruption leadership GAP  by investing more resources and encouraging more initiatives.

In 2015, Generali acquired MyDrive, an interesting auto telematics StartUP, and launched the first edition of Generali Innovation Challenge in order to scout “out of the box” solutions.

Meanwhile Allianz SE is strengthening  its investments by facilitating new strategic business development opportunities with Allianz Digital Corporate Ventures and Allianz Digital Accelerator.

Smaller players like Munich RE and Marsh are insted pretty active on scouting and investing early stage digital insurance Start UPs (see CB Insights Seed & A Series top Seed and A Series investors in insurance).

Conservative Leadership

(Market Leadership: HIGH & Disruptive Attitude: LOW)

Despite its leadership, Conservative Leadership companies have a reactive attitude toward disruptions ans compete in the insurance market by mainly employing its resources on “traditional” investments:

  • Agents’ Networks & Brokers
  • Dividends and Investors relations
  • M&A of developed Start UPs
  • Internal Product Development (close innovation)

Big insurance players such as Zurich, Prudential and Berkshire Hathaway Inc. do not have any signficant accelerator or investment found dedicated for StartUPs and they just M&A whenever a small companies reach a significant stage of development in terms of customer base and traction.

 For example, as United Healthcare did with Optum and others additional Mobile APP services such as Real Appeal.

So, with a Conservative Leaderships approach the market risk of disruptions its just mitigated rather than exploited.

Disruption Hunter

(Market Leadership: LOW & Disruptive Attitude: HIGH)

Despite they are not leading the market many insurance companies might invest (or speculate) on disruptive Start UPs.

Due to the limited amount of resources compared to market leaders, Disruption Hunters neither can institute accelerator programs as Disruptive Leaders do nor acquiring already developed Start UPs.

However, there is still the opportunity to scout early stage StartUPs that required a limited amount of investment at Seed or A Series levels.

Since the risk of failures at early stages is significantly high, it is also necessary to have a wide portfolio as Hub International, Confie and Arthur J. Gallegher have done in 2015.

According to CB Insights, respectively top three acquires of digital insurance StartUPs during last year.

Conservative Niche

(Market Leadership: LOW & Disruptive Attitude: LOW)

Mainly many and many SMBs or independent insurers agents & brokers that are conformable with theirs networks of loyal customers.

So, a framework for identifying the strategic position towards StartUPs’ disruptions have been just applied for the insurance market and it can be extended to other industries (Automotive, Telecommunication, Banking,…).

Concerning insurance, many companies have strengthened theirs effort and interest regarding StartUPs, maybe also because already other big players from other industries like Google have attempted to threat the insurance market (see Compare Auto Insurance recently closed).

What if insurers become comfortable with disruptive digital ecosystems? Would they threat other sectors as well?

Feel free to add any comment, thank you!

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