Seamless integration that enables uninterrupted data fluidity — and empowers the ecosystem approach so many group benefits insurers want to enable — doesn’t just materialize out of thin air. There has to be something that transfers data securely across systems and technologies to make this happen.
APIs (application program interfaces) and EDIs (electronic data interchanges) both enable data transfer that lets insurers take an ecosystem approach to their business, but the similarities basically end there.
So… which one works better for insurers? Looking at them each closely quickly highlights their major differences, and you’ll soon see that one is decidedly better than the other.
EDIs = The Past. APIs = Now (and Beyond)
First, let’s run through EDIs:
- An EDI is essentially a conduit that facilitates the transfer of data between two organizations (e.g., an auto manufacturer sending parts orders to its many component suppliers).
- The technology dates back to the late 1960s/early 1970s, and hasn’t changed much since then.
- Systems connected by EDIs typically use a uniform file format like EDIFACT, X12, or VDA, and communicate using VAN, AS2, or FTP protocols.
- EDI data exchanges use batch processing, so they take place at set intervals (and can’t be triggered outside this schedule).
- In addition to manufacturing, the industries that use EDIs most often include retailers, logistics, and various segments of healthcare (for example, communications between medical organizations and Medicare).
Now, APIs:
- An API is a set of rules or protocols, written in code, that allows two different software applications or systems to communicate. For example, a customer’s mobile e-commerce app and an e-retailer’s database are two systems an API would connect.
- The earliest APIs date back to the late 1970s, but modern APIs — particularly representational state transfer (REST) APIs and other web APIs — appeared in the early 2000s. Ever since, they’ve been in consistent use, and are now more versatile than ever.
- Unlike EDIs, APIs can be used with many different programming languages and platforms. This is due in no small part to their use of versatile file formats, most notably XML and JSON.
- API data exchange occurs in real time, over common internet protocols (like HTTP and HTTPS).
- Because of APIs’ flexibility, virtually all modern software uses them to communicate with other apps, databases, and backend systems.
EDIs are by no means useless — especially not in logistics or manufacturing, which commonly make standardized large-scale data transfers. The issue is that they’re not useful for other industries, especially not insurance.
EDIs require highly specialized knowledge to set up and manage, and they’re costly to maintain. In contrast, a significant number of today’s developers can put together APIs from scratch (or with the help of easy-to-find, open-source API libraries), and do so quickly. APIs also often come with built-in workflows and automation to simplify development and deployment, which just isn’t possible with EDIs.
Above all, what it comes down to is speed: How fast do you want your data transferred and available? (And how quickly do you want to start making those quick data transfers happen?)
Real-Time Data: The Key to Better User and Customer Experiences (and Why We Love APIs for Group Benefits Insurers)
In insurance, having real-time data available is more valuable than ever before.
- Customers (and end-users, in the case of group benefits) need the freedom to look up policy details and track the progress of claims.
- Brokers require fully up-to-date commission and billing data to oversee their policies of record properly. They also have to keep a close eye on member sign-ups during open enrollment cycles to assist their employer-clients.
- Adjusters, policy administrators, and other business users need the most accurate data possible to resolve claims fairly, assess risks in underwriting, and provide the best possible customer service.
Several years ago, real-time data might’ve been a nice-to-have, rather than a must-have. Today, because of how data processing and transfer methods have evolved, it’s essentially negligent for any insurer to stick with outdated practices or technology in this area.
The Need to Overhaul Entrenched EDI Technology in Favor of APIs
Now, we know how daunting it can be to overhaul an entrenched technology. And EDIs definitely fit the bill for the word “entrenched” based on how long carriers have used them. However, several factors make them incapable of supplying the real-time data insurance users need.
- EDIs represent a major error risk because all the procedures involved (entry, testing, validation) require lots of manual work from staff.
- Unless data from multiple sources has uniform formatting to begin with — which isn’t guaranteed by any means — it needs to be standardized before an EDI transfer.
- As a result, the data transfer for something like a group enrollment (to use just one example) can take weeks or even months.
When insurance platform users are stuck sitting around and waiting for data ingestion to finish before they can move on to the next step, the inevitable delay isn’t going to please customers.
APIs, by contrast, allow real-time data transfer, because all the systems they connect are seamlessly integrated and use up-to-date communication protocols.
This real-time capability also means updates take place in mere minutes, so if something wasn’t accurate at the time of initial transfer, it’ll be corrected quickly.
An API Success Story: Improved Enrollment Metrics via Seamless Data Exchange
In collaboration with EIS, Wellfleet Insurance Company developed an innovative benefits administration platform that uses APIs to harness the power of real-time data transfer.
The APIs automatically connect and streamline multiple data sets into Wellfleet’s core system, enabling fast quoting, real-time claims updates, and efficient billing processes. This reduced the need for old data processing practices, while also ensuring customer and group member information was accurate and up to date, enhancing their customer experience.
Leveraging APIs ultimately boosted Wellfleet’s operational efficiency, minimized errors, and reduced the time required for customers to complete enrollment cycles.
Superior Technology and Integration
Having gotten this far, it’s worth noting that APIs are only as powerful as the technology they’re a part of. Ideally, they should support airtight integration for optimal communication between internal systems, critical business applications, and external third-party solutions.
Wellfleet built its API-driven platform on EIS Suite. Our cloud-native, customer-centric coretech platform serves as a single source of truth for customer data, providing centralized and secure data management.
Unlike modern legacy systems that rely on batch file integration via EDIs, EIS Suite gives insurers access to more than 9,000 open APIs. This guarantees real-time data integration between all applications within an ecosystem, whether internal or external. It also improves the user experience by providing a comprehensive view of benefits and enabling personalized engagement and shopping experiences for employees.
Ready to embrace the API revolution?
By using cloud-native, data-fluid coretech from EIS and the expansive selection of APIs that come with our flagship platform, insurers can address the challenges they face and also make things easier for customers, brokers, partners, and all other relevant users.
EIS Suite can connect an effective technology ecosystem that helps you streamline and accelerate operations. To learn more about how our API-driven solution allows greater automation, helps you save time and money, and minimizes errors across policy administration, data management, claims processing, and billing, get in touch with us today.
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