Understanding the market and client needs key to enabling product evolution

Thursday, March 10, 2016
The first module of the Microinsurance in Africa Expert Forum series took place last week, with around 50 participants joining facilitator David Ashiagbor, Coordinator of Making Finance Work for Africa (MFW4A) and topic expert Michael J. McCord, Chair of the Microinsurance Network and President of the MicroInsurance Centre in an interactive discussion on product evolution in the African region.
The vast majority of Forum participants specified that product evolution is a deliberate part of their organisation or institution’s microinsurance strategy. McCord highlighted that expansion and diversification of products in Africa in the three-year period between 2011 and 2014 has been driven by new technological solutions and  distribution channels. He went on to stress that an important component of the sector evolution process is that insurers are starting to recognise the significance of understanding the market and their client’s needs.
Participant Saagar Khimasia, of APA Insurance in Kenya, shared that whilst his organisation began with an asset replacement programme for livestock, it slowly evolved and learned that it would better serve its target market with an asset protection policy, thus increasing the value chain and helping out the entire community.
The Landscape of Microinsurance in Africa report, published by the Microinsurance Network and Munich Re Foundation, in cooperation with Making Finance Work for Africa and GIZ on behalf of BMZ and carried out by the MicroInsurance Centre, is due to be released this quarter, and the numbers indicate a constant evolution of the market in the region. Whilst several insurance companies have moved out of the market, more and more insurers have recognised microinsurance as a profitable business and entered the market: 37 new insurance companies are providing microinsurance products since 2011, with 46 products discontinued and 96 new products introduced – a clear sign of the evolution of the market.
McCord singled out a few trends in the evolution of the market for products and for the providers themselves, remarking that new providers are generally more knowledgeable about the market. In terms of products, he highlighted an increase in voluntary products (from 36% in 2011 to 58% in 2014), bundled products (from 30% in 2011 to 45% in 2014) and in product variety (uptick in health and property, for example). The growth in voluntary products shows the market’s willingness to purchase products, rather than have it forced upon them. Meanwhile, the proliferation of bundling, which includes multiple types of coverage within one product, helps bring about variety.
Regulatory incentives were also pinpointed as an enabling factor for product evolution and development. Luc Noubissi of CIMA shed light on this, explaining that within the CIMA region of 14 countries, the first microinsurance regulation was enacted in 2012. This led to incentives, such as insurance contracts, being written in local languages, and the opportunity for insurers to sell mass insurance contracts. With the growing interest in mobile insurance, a new project was created to develop specific regulation for mobile insurance. Noubissi explained that from a consumer protection perspective, specific regulation is key to allowing insurers to develop microinsurance products.
Following on from this, McCord added that regulation is often responsive to technological opportunities, but because there’s a time delay, input from regulators and supervisors is required to enable evolution. 
A discussion was held around the difficulties of fostering product evolution and how these can be overcome. McCord opened by saying that there is a formal process that needs to be followed to develop a new product, starting with understanding client needs (A Forum poll showed that 16 of 23 participants say that fostering product evolution is a part of their company's strategy). Once the real needs are sought out, and a diagnosis of the gaps and risks faced by target clients is done, a clear path towards product evolution can be pushed, leading to additional and more valuable products.
The importance of localising and gaining knowledge of problems from a local perspective, was a point brought up by Michele Grosso from Democrance. The social, cultural and economic context of a particular region is a huge factor to be taken into consideration for the implementation of insurance and other financial services. Only by applying global knowledge to local situations and addressing issues specific to local markets can one bring about successful implementation of microinsurance schemes. 
To view the full presentation displayed during the Forum, click here.
To listen to the recording of the Forum, click here.