API, Web Services and Microservices and Their Usage in Digital Transformation

Often, insurance services opt to have in-house solutions or go for third-party products to automate some if not all of their processes. These solutions or products take the form of software applications.

When choosing or developing software for an insurance company, there are three aspects to keep in mind: API, web services, and microservices. These three terms are incredibly important in web applications, and considering how they are used, can be confusing to understand the three concepts.

Application Programming Interface

Application Programming Interface (API) is the core of any online automated connectivity. It is the medium through which multiple applications, devices, and data interact with each other.

In practice, an API defines a set of rules and protocols that allows two or more systems to communicate with each other. Every API needs to have documentation specifying the information that gets transferred between two systems.

For instance, let’s assume you are working with an insurtech company to build software that integrates with Facebook to help you know if users are breaching a policy term. To build such software, you will need to use Facebook Graph API for you to have access to data inside Facebook, including users, comments, posts, and more. With this API, you will have an easier way of accessing the data you need.

Web Services

This refers to the actual software that implements an API like the one described before. This software can respond to requests coming from .www (World Wide Web), hence the name “web” providing responses (“services”) without requiring human intervention.

There are several ways in which two systems can engage in exchanging data via webservices. The most popular ones are using text formats like XML (eXtensible Markup Language) or JSON (JavaScript Object Notation). Web service implementations can also use different transport channels, for sending data over the network, HTTP being widely used.

The HTTP protocol is implemented by most web servers available today and many of these servers can be configured to wrap the HTTP protocol in SSL (Secure Socket Layer) to encrypt the web service communication.


This is one of the popular ways to build a complex software system. It involves breaking down software into smaller components, rather than having one huge software application. The main reason for using microservices is modularity, which can make even sophisticated software easy to understand and/or develop. The success of a microservice implementation is heavily dependent on how truly loosely coupled are the components. In an ideal world, each component could be deployed and scaled independently

Let’s assume that, for instance, your insurance company deals with employee benefits products. Instead of manually looking at your catalog to see who has paid their premiums, one can automate the process to see who needs to be reminded, etc. Suppose the line of business extends because you decided to also include voluntary benefits insurance.

If the previous implementation was designed as a monolithic application, you now have to re-think how the application works and deploy a new one that includes the new functionality. Instead, you could have the software broken down into two or more loosely coupled components (e.g. one for Group insurance and Employee Benefits and one for worksite and individual voluntary products), so that adding the new functionality would not affect the existing one. This would also have the benefit of allowing more granular scaling: you would only need to scale up the component that is in high demand. Let alone the ease of implementing cross-selling opportunities.

The inputs and outputs flowing from each component to another are defined by an API, so now you could swap any component with another implementation, hopefully with better performance, as long as is using the same API.

Which of the Three Is Best For Your Project?

The right structural design for your project depends on your requirements.

If you simply want to delegate some functionality of your own software to another party, you could have your application act as a webservice consumer. For example, an online payment system is a complex system, subject to many regulations and security constraints. An insurance company may not be willing to spend the required effort to implement such systems, but that doesn’t mean such functionality cannot be embedded in your software (like web pages or smartphone apps). The way your software could connect and communicate with a 3rdparty online payment system is through webservices. The online payment system has to have a public API that your system can use.

If you think that your software could become complex in time, maybe you should consider breaking down in smaller, simpler components that you can develop or deploy gradually over time. Microservices will be ideal for that. So, yes, software can use both web services and microservices simultaneously.

In a nutshell, APIs are software-to-software interfaces with a set of verbs instructions on how to access and relay data.

Web services are service between two end-points; they communicate over the internet and are optimized and encoded by formats such as XML or JSON.

Microservices is where software is broken down into loosely coupled distinct components that communicate with each through an API.

All three can be used as part of the framework for future digital transformation.