In general terms, it is a set
of clearly defined methods of communication among various components. A good API makes
it easier to develop a computer program by providing all the building blocks, which are then put together by the programmer.
An API may be for a web-based Y system, operating system, database system, computer hardware, or software library.
An API specification can take many forms, but often includes specifications for routines, data structures, object classes, variables, and remote calls.
—Wikipedia
How do APIs work?
You can think of an API as a contract between two pieces of software, promising that an instruction from one will result in the other performing an action and/or returning specific information. APIs have been available for several years, but more recently, their adoption has been growing rapidly. Any new software product your company installs should be supported by APIs that facilitate its connection to, or communication with, other software.
APIs are used for:
- Software integration (for example, taking data from several back-end systems and delivering it to a web portal), and
Martin Lippiett is Vice President of Business Consulting, Delphi Technology, Inc.
- Connectivity (for example, connecting to a bank for electronic funds transfer or to legal bill-review software).
Here are some basic terms that will help in understanding APIs:
- Interface—An API is an interface, a middle ground in a transaction between two systems whose software interacts.
- Protocol—The set of rules that define how the software components interact with each other. Both parties must understand and uphold the same protocol if the communication is to be successful.
- Format—The technical format that both companies must adhere to in the interchange (for example, XML or JSON).
APIs need to be supported by excellent documentation. The author of the API will generally not be available to the other programmer when that individual wants to use it on a customer’s site. In addition to the protocol and format details, the documentation should communicate to the developer what is available in the API and any configuration options.
APIs, in addition to passing data between systems, include security models that limit who can pull data, and when and how frequently data can be pulled. Security features include measures to prevent unauthorized internal and external access; they also ensure the eligibility of third parties, prevent incidents, and limit damage when incidents
do happen.
A Web portal is a good example of the
use of APIs. Companies can use a portal to improve their competitiveness and, therefore, will have specific needs in terms of what data is provided, what transactions are allowed, and how the whole thing looks.
Consider this scenario: Jack is a programmer at ABC Insurance Company, and he has been asked to develop a new Web portal for them. The company uses XYZ’s software package for policy and claim administration, and some other software for customer relationship management, financials, and risk management. Jack needs to concentrate less on the processes for providing internal product services, and more on enhancing the external customer experience. He should focus on what the insured or agent sees through the graphical user interface (GUI) and what functions are available to them.
When the look and feel and functionality have been determined, Jack can start the development by creating the various Web pages—the GUI—that are needed. Next, he will bring into those pages the information held in the XYZ policy administration system, as well as the various other systems. If there are APIs available, for example, to provide next-billing event information, latest claim status, insured’s name and address, upcoming risk management events, a premium calculation, or any of the other pieces of information that would be needed to populate the portal, then Jack’s job is a whole lot easier. He will not need to understand the internal structure and content of data in all of the “back end” databases; he will simply have to find the right API to deliver what he wants and “assemble” it into his graphical user interface.
APIs can be bidirectional. Not only is back-end data gathered for presentation, permitted updates that are done via the Web portal can, in turn, be passed back to the back- end. For example, the user might update name and address data on the portal and then that information can be sent back to the customer relationship management software to update the database record.
Benefits of working with APIs
API technology provides welcome efficiencies and flexibility in software development. Early adopters have experienced the benefits of increased speed to market, reduced costs, and improved customer experiences.
The advantages of APIs are enormous.
- APIs allow a“best of breed” approach to selecting packaged software. Since APIs are designed to make different software talk to each other, this offers the insurer the opportunity to select products that are best suited to its functional needs with a reasonable assurance that they can be integrated with other software from another vendor without complication—provided that all of the products have been designed to use APIs and provided that those APIs are available to support the desired integration. Take, for example, financial software like payables and ledger systems, which could be used by virtually any type of business such as retail, insurance, hospitality, manufacturing, etc. Vendors of these financial packages are keenly aware that the market success of their product relies on their ability to connect with a whole variety of systems that their customers have installed, and, for this reason, they have placed great emphasis on interoperability using APIs. The choice of a ledger system should be based on the best functional fit, rather than simply selecting the one that is already integrated with the other installed software.
- More rapid program development. As Jack is working on the Web portal as discussed above, he does not have to be an expert on everything, and that will make him more productive. The simplification of his work will reduce errors as well as the time needed to test the system. The “building block” approach means an improvement in speed to market for new applications.
- Integration makes for better systems. If data in one system is needed in another, one option is to pass it through via some electronic means (like an API)—or to re-enter it a second time, which brings up issues of human productivity, control, accuracy, and timeliness. There really is no room for argument about the best way to integrate systems.
- Easier maintenance. If software can be developed more easily and quickly, chances are that it will also be easier and cheaper to maintain. In addition, switching from one software package to another can be easier if the old and the new are supported by similar APIs.
Technology will continue to move forward with the demand for seamless provision of services, and the ability of APIs to modularize and decouple products and services will increase in value. Market demand will force vendors to open their applications using APIs. We also may see efforts to develop standards for the use of APIs in insurance. Within a few years, API platforms will be the only choice for insurers looking to stay competitive and offer the best digital experience to their insureds and agents.