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Innovation and transformation: What’s the difference anyway?

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We often use innovation and transformation synonymously. Both words evoke thoughts of change and modernization. Both innovation and transformation are important outcomes of the change management life cycle.

We know that innovation is occurring all around us, and in simple terms, it is finding new ways to improve or change something that already exists for the better. Alternately, transformation is the result of moving from one state to another.

So, should we innovate or transform? Do both? What’s the difference?

I think the best way to answer is to explore the differences between innovation and transformation in insurance and breakdown each into definitions and examples. Then you can determine where your company is in the change management life cycle and what will work best for your organization.

What SMA has found as we work with insurers is that innovation and transformation are not only distinct, but they are decidedly different, and their impact on organizations is different too. 


Innovation is defined by SMA as rethinking, reimagining, and reinventing the business of insurance. We have seen the results of innovation in business models, customer relationships, new products and services, and how investments in technology are made. A perfect example of innovation is the focused improvements of customer experience.

Once, customers had to push paper and phones calls back and forth between agents, but innovation has made these types of interactions a distant memory. Today, chat, apps, portals, mobile, and others have started to create an innovated customer experience.

It is different and (arguably) better. Similarly, in the data analytics arena, innovation in the ways we use and apply data has changed the way insurers operate, price policies, handle claims, and compete in the market. Innovation makes something that once seemed impossible possible. It is rethinking the way of doing things, questioning the possibilities, and turning them into action.


Transformation is the evolution or journey from a current level to a different and better state. SMA describes it as modernizing and optimizing. Like innovation, transformations produce an improved state of things, but we can also measure the journey as an outcome of the process.

The journey of transformation is the tangible process, structure, or building block for future success even if a project fails or takes a different shape. Transformation can be seen in core system replacements, during which existing and necessary underwriting, billing, and claims capabilities are shifted and moved into a better state through improved technology and processes. Transformations are evolutionary and occur over a period of time.

SMA has gathered data on insurers about how they self-identify their focus in the change management life cycle. Our recent research reveals that approximately 13 percent of insurers are innovating, while 45 percent identify as transforming. That’s a pretty sizeable difference.

The data suggests that transforming existing systems and processes is a necessary modernization effort in today’s world. SMA predicts that the percentages of both innovating and transforming insurers will continue to grow as internal and external influencers put pressure on both the need to transform and the need to innovate. Most insurers need both!

See also:

3 more do’s and don’ts for insurance innovation (part 2)

What’s next for the life insurance industry?


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