If banks and insurance firms want to stay competitive, then they certainly need to embrace digital transformation and offer the digital services that millennials (and increasingly other demographics as well) are looking for. Moreover, if they want to grow and thrive in today’s marketplace, they need to consider how they will offer innovative new services which will surprise and delight today’s customer.
Currently, many banks and insurance providers are out of step with what Gen Y wants from them. Take offering services through physical locations. The idea for most millennials of going into a branch to research or purchase financial services is archaic –– millennials will most likely purchase and interact with a financial institution and insurers solely online.
With nearly half of millennials counting on tech startups to overhaul the way financial services work, open innovation and working with innovative InsureTech startups provide organizations with a path not only to digital transformation that will allow them to reconnect with millennials, as we explain below, but also a path to more advanced innovation that can disrupt the market and build a long-term strategy for success.
What is digital transformation?
For banks and insurance agents, digital transformation involves fully integrating digital technology into all areas of their business –– whether that be internal processes or customer-facing systems.
This is often challenging for these types of businesses due to the legacy systems they have in place, which are not easy to rip and replace with new digital technology. The costs of replacing all these systems, the downtime while the switch is made, as well as the need to train existing staff to ensure they provide the same level of service can be prohibitive.
Insurance is also a heavily regulated industry, which comes with its own set of challenges in terms of how operations are conducted, as well as where customer data is stored, and how it is accessed.
This is why insurance companies are at an increased risk of cyber attacks, with almost half of insurance CEOs citing cybersecurity as their most pressing risk, and an even greater risk than other areas such as regulatory risk. One insurance company based in New Jersey had to pay $1.1 million to settle charges that it failed to properly protect the privacy of nearly 690,000 policyholders whose personal information was contained on two laptops stolen from their headquarters.
While digital transformation can increase the likelihood of a cyber attack if not implemented properly, continuing to rely on legacy systems that don’t have the proper security measures, also increases risk. That’s why insurance companies need to invest in cyber tech to ensure they can fully protect customers who choose their services.
Embracing open innovation and digital transformation
To overcome the above issues, mitigate the cybersecurity risk, and offer customers the services they now expect, insurance organizations need to begin their journey towards digital transformation today. Open innovation can provide a path to not only digital transformation but to disruptive, innovative technologies that can set the standard for financial services companies instead of just chasing the status quo.
One way to accelerate this journey is to partner with an InsurTech startup that already offers innovative digital services, including machine learning, artificial intelligence, blockchain, telematics, and even social impact and development.
Collaborating with these industry disruptors not only can help traditional insurance companies and banks in their journey towards digital transformation, but also help them remain competitive, and push forward their industry.