JOHANNESBURG: The long-awaited Insurance Bill was among a number of pieces of legislation passed by the National Council of Provinces at its final scheduled plenary sitting for 2017 last week – good news for lower-income South Africans, because it brings access to micro-insurance one step closer.
In a statement released following the meeting, Parliament said this piece of legislation was intended to encourage a “fair, safe and stable insurance market by establishing a legal framework that enhances financial soundness through higher prudential standards, group supervision and stronger re-insurance arrangements”.
It will further increase access to insurance, and improve governance, risk management and internal controls for insurers within the South African context.
Long-term insurance provider African Unity Life (AUL) says the passing of the bill answers the call by National Treasury to address access to affordable insurance and will bring many more South Africans into the financial sector. This includes citizens in the lower-income bands whose only exposure to insurance to date has been through funeral policies.
“Micro-insurance will enable the over 20% of South Africans who currently do not have access to formal financial services protection against financial risk, loss of income and the loss of assets,” says AUL chief executive Sonja Visser. “This means they will be safeguarded against financial risks, loss of income, illness, inability to work, or the loss or destruction of assets.”
Visser says that, given the strong drive for consumer protection in South Africa, a micro-insurance licence is necessary.
“Licensing of micro-insurers will bring many benefits, including that policies contain specific terms to protect consumers, such as maximum waiting periods, no exclusion of pre-existing conditions, notice when changing premiums and grace periods for claims. Products will need to be affordable, simple and add real value, and consumer education will be key.
“Additionally, providers will be able to insure for death, as well as in-life insurance, including legal, hospital cash back, retrenchment and loss of income. Asset protection and short-term insurance for cars and household content will also be covered.”
Importantly, Visser says, the legislation will bring more providers of financial services into the regulatory net. There are currently several unregistered providers that offer financial services in an unregulated fashion.
If the regulatory process runs smoothly, she believes providers should be able to apply for a micro-insurance licence from the first quarter of 2018.
“AUL has a full life insurance licence, so we are able to offer full life products across all markets,” says Visser. “The lower-income market is a key focus area for us, and we already engage this consumer group on funeral cover in particular. On a broader scale, our client base includes employer groups, funeral insurance group schemes, administrators and intermediaries.
“We are excited about micro-insurance and the financial access it will enable to consumers,” Visser says. “It is not a privilege but a right, no matter income or age, to have financial wellness, and micro-insurance will facilitate that.”