By Michael J. McCord; published by the Microfinance Centre for Central and Eastern Europe and the New Independent States, the Microinsurance Centre and the International Fund for Agricultural Development (IFAD); 2012; 124 pages; available at: http://www.ifad.org/ruralfinance/wrmf/manual.pdf
In this manual, Mr. McCord proposes a “systematic new-product development process” for the microinsurance market. The approach is intended help microinsurance providers maximize the potential for their new products to be successful through means such as measuring market demand and developing effective and mutually-beneficial partnerships with other organizations and firms.
The author defines “success” as “meeting the needs of the three major parties in the microinsurance relationship: low-income policyholders, the insurer, and delivery channels.” For policyholders, this means that new products should be affordable, accessible and responsive to policyholders’ needs, reducing their net household or business risk. For insurers, this means “reasonably profitable products and the expansion of the insurer’s risk pool and market.” For delivery channels, this means the addition of “an additional, indirect revenue stream resulting from more financially stable clients/members,” an additional direct income stream through commissions and competitive advantages resulting from products which more accurately reflect clients’ needs and therefore enjoy higher demand.
According to the manual, the success of the microinsurance industry is contingent upon the market creating “real value in the products offered” by doing the following: (1) protecting policyholders from real risks to which they would otherwise be exposed; (2) offering premium payment schedules that reflect policyholders’ cash flows; (3) advertising in such a way as to be easily understood by potential policyholders, reducing the barrier to consumer entry; (4) implementing claims procedures that are reasonable and understandable; (5) offering products that are fiscally sustainable.
Pitfalls that may impact microinsurance providers that fail to follow an efficient, streamlined product development process include: (1) failure to preemptively evaluate product performance and identify and fix problems before product release; (2) ineffective marketing methods; (3) products that do not respond to clients’ needs and thus are not in demand; (4) failure to build partnerships with providers offering similar or complementary services, leading to diminished organizational reputation and market share.
The manual identifies seven steps in implementing successful microinsurance product development: institutional assessment, market research, prototype design and testing, product design, pilot testing, roll-out and continuous review. Each of these steps are addressed in detail with examples of successful implementations by microinsurance providers, diagnostic questions to help providers identify areas of potential improvement and suggested steps for improving product development practices.
By Makai McClintock, Research Associate
About Microfinance Centre for Central and Eastern Europe and the New Independent States
Based in Poland, the Microfinance Centre for Central and Eastern Europe and the New Independent States is a network of approximately 105 microfinance institutions (MFIs) in 33 countries that aims to promote a socially oriented and sustainable microfinance sector. Its services include knowledge management, policy advocacy, research and development, and assistance with technical services for the microfinance community.
About Microinsurance Centre
Established in 2000 and based in the US, the Microinsurance Centre is a for-profit initiative of MicroSave, an India-based technical assistance and training provider serving the microfinance industry. The Microinsurance Centre’s activities include research, product development and training.
About MicroSave
Established in Uganda with United Nations funding in 1998, MicroSave is a for-profit technical assistance, training and resource center that relocated its headquarters to Lucknow, India, in 2006. In 2008, MicroSave was transformed into a consulting company, which has since completed projects in India and eleven African countries. The Microinsurance Centre was founded in the US in 2000 as an initiative of MicroSave.
About International Fund for Agricultural Development (IFAD)
The International Fund for Agricultural Development (IFAD), an agency of the United Nations, was established in 1977 as an outcome of the 1974 World Food Conference. IFAD is dedicated to eradicating rural poverty in developing countries by focusing on country-specific solutions. Since its establishment, IFAD has invested approximately $12 billion in approximately 860 projects and programs that have reached an estimated 370 million rural poor people.
Sources and Additional Resources
“Microinsurance Product Development for Microinsurance Providers”; by Michael J. McCord; published by Microfinance Centre for Central and Eastern Europe and the New Independent States, Microinsurance Centre and the International Fund for Agricultural Development (IFAD); 2012; http://www.ifad.org/ruralfinance/wrmf/manual.pdf
MicroCapital.org story: “MICROCAPITAL BRIEF: Microfinance Centre (MFC) for Central and Eastern Europe and the New Independent States’ ‘Financial Education Program’ Reaches 100,000 Low-Income Households in Eastern Europe, Central Asia”; published August 18th, 2011; https://www.microcapital.org/microcapital-brief-microfinance-centre-mfc-for-central-and-eastern-europe-and-the-new-independent-states%E2%80%99-%E2%80%9Cfinancial-education-program%E2%80%9D-reaches-100000-low-income-households/
MicroCapital.org story: “MICROCAPITAL BRIEF: Habitat for Humanity, Microfinance Centre (MFC) for Central and Eastern Europe and the New Independent States Establish ‘Shelter Innovation Center’ to Address Housing Needs in Europe, Central Asia”; published June 10th, 2011; https://www.microcapital.org/microcapital-brief-habitat-for-humanity-microfinance-centre-mfc-for-central-and-eastern-europe-and-the-new-independent-states-establish-%E2%80%9Cshelter-innovation-center%E2%80%9D-to-address-housi/
MicroCapital.org story: “MICROCAPITAL BRIEF:Microinsurance Centre Launches Microinsurance Learning and Knowledge (MILK) Project with $2m Grant from Bill and Melinda Gates Foundation”; published April 29th, 2011; https://www.microcapital.org/microcapital-brief-microinsurance-centre-launches-microinsurance-learning-and-knowledge-milk-project-with-2m-grant-from-bill-and-melinda-gates-foundation/
MicroCapital.org story: “MICROCAPITAL BRIEF: $700m in Grants, Loans from UN’s International Fund for Agricultural Development (IFAD) Support Rural Financial Services, Agency to Focus on Sub-Saharan Africa”; published May 31st, 2012; https://www.microcapital.org/microcapital-brief-usd-700m-in-grants-loans-from-uns-international-fund-for-agricultural-development-ifad-support-rural-financial-services-agency-to-focus-on-sub-saharan-africa/
MicroCapital.org story: “MICROCAPITAL BRIEF: United Nations (UN) International Fund for Agricultural Development (IFAD) Provides $100m to Ethiopia for Rural Microfinance, Bridges to Traditional Banks”; published January 17th, 2012; https://www.microcapital.org/microcapital-brief-united-nations-un-international-fund-for-agricultural-development-ifad-provides-100m-to-ethiopia-for-rural-microfinance-bridges-to-traditional-banks/
MicroCapital Universe Profile: Microfinance Centre for Central and Eastern Europe and the New Independent States
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Microfinance+Centre+for+Central+and+Eastern+Europe+and+the+New+Independent+States
MicroCapital Universe Profile: MicroSave
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=MicroSave
MicroCapital Universe Profile: International Fund for Agricultural Development (IFAD)
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=International+Fund+for+Agricultural+Development+%28IFAD%29
MicroCapital Universe Profile: Microinsurance Centre
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=The+Microinsurance+Centre
Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month? Find out more at https://www.microcapital.org/products-page/
Similar Posts:
- MICROFINANCE PAPER WRAP-UP: “Agritech and Fintech Providers in East and Southern Africa: A Landscape Assessment;” published by IFAD, SAFIN
- MICROCAPITAL BRIEF: Credit Bank, FSD Kenya Engaging SACCOs in Effort to Reduce Remittance Costs for Rural Kenyans
- MICROCAPITAL BRIEF: Stanbic Bank Uganda, IFAD Seek to Reduce Costs of Remittances via FlexiPay E-wallet, Encourage Adoption via SACCOs
- SPECIAL REPORT: Digitizing Microfinance to Meet Customer Needs via an Incremental Approach #EMW2023
- MICROFINANCE PAPER WRAP-UP: “Establishing a Financial Services Ombudsman in Mongolia: Experiences and Lessons from Armenia, Australia and Singapore,” by Massimiliano Gangi et al
