Education will expand the insurance market
Last week the South African Insurance Associations (SAIA) reported back on its Consumer Education Initiatives for 2009. In the 2008/2009 year the following SAIA companies contributed 0.2% of profit to the education drive: Guardrisk Insurance, Santam, Emerald Insurance, Guardrisk Life Insurance, Hollard Insurance, Allianz, African Reinsurance, AIG SA, AIG Life, Mutual & Federal, HDI Gerling Insurance, SASRIA, Zurich Insurance, Dial Direct, Auto & General and Lloyds.
These companies contributed a total of R5.695m for the 2008 financial year. Additional contributions were received from the Financial Services Board (R1.6m) and the Association for Savings and Investments South Africa (R2.214m). Funds were voluntarily pooled and allocated in line with the new SAIA Consumer Education Strategy. “The SAIA believes that the value of collaboration with regards to consumer education cannot be over-emphasized as it increases the impact of the education as well as the reach,” said SAIA Manager: Image and Reputation, Viviene Pearson.
Allowing individuals to make informed decisions
There are two major stumbling blocks to financial services consumption in South Africa. The first is unemployment. You cannot expect unemployed individuals to service monthly policy premiums regardless of the rand amount of these premiums. SAIA is tackling the second problem – education – by expanding basic financial services and generic insurance education to as many South Africans as possible.
According to Ronnie Napier, chairperson of the SAIA board, “the image and reputation of the short-term insurance industry can be negatively influenced by a lack of insurance knowledge, which is why SAIA aims to educate consumers of short-term insurance as part of its Image and Reputation Strategy.” He stressed that financial literacy is important in assisting individuals “to make informed decisions about their finances.”
The short-term insurance industry undertook a number of education initiatives in 2008/2009. South Africans in the Living Standard Measure LSM 1 to 5 benefited from basic financial literacy and generic insurance education per requirements in the Financial Sector Charter.
Realising the dream
How did SAIA spend the funds? The association briefly described three of its 2008/2009 projects. These were:
1) A community workshop project aimed at specific communities within LSM 1 to 5. Financial education was facilitated and delivered by Inzala. A total of 12 022 people participated in the workshops nationally. This was a project in cooperation with the Community and Labour constituency in the Charter arena, jointly sponsored by the SAIA and the Association for Savings and Investment South Africa.
2) A commuter financial literacy awareness programme was implemented by ComutaNet and was aimed at reaching commuters using taxis, trains and busses. The FSB partnered with the SAIA on this project.
3) An important intervention at school level was implemented in partnership with the FSB. Bright Media was re-commissioned to extend the successful Grade 10 and 11 projects (which developed an innovative multimedia teacher education programme for financial literacy) into Grade 12. The Bright Media concept utilizes a combination of both printed and multimedia resources mediated directly in the vital face-to-face teacher training element and the education is aligned to the new Mathematical Literacy subject.
Still plenty to do
There is massive scope for insurers to improve insurance coverage in South Africa. Napier – quoting from an SABC Radio All Media Product Survey (AMPS) – shared the following statistics on the country’s 30 million African Language Stations listeners. Of these, 3.2m had funeral cover, 1.3m had life cover, 484 000 had retirement annuities, 404 000 had medical cover and 186 000 had a motor or personal lines policy in place...
“SABC Radio’s core market falls mostly within LSM 1 to 7,” said Napier. This is the target segment for lower income short-term insurance products. Consumers in this category steer away from short-term cover for two reasons. First, because insurance is viewed as a grudge purchase, and second, because consumers tend to steer clear of products they don’t understand. “Our efforts in providing basic financial literacy and generic insurance education to the lower income market are extremely valuable in assisting our member companies to create a footprint for their products in this largely untapped market,” said Napier.
“We would like to thank our partners in this initiative, the FSB, the Association for Savings and Investment South Africa and the service providers for their involvement in assisting SAIA to make sure that these projects continue to be implemented so successfully,” said Napier.
Editor’s thoughts: Education is the key to uncovering potential in South Africa’s under-serviced communities. There are questions around the suitability of certain ‘low cost’ insurance products and distribution remains tricky. Are you servicing consumers in LSM 1 to 5? What challenges do you face in servicing this market? Add your comments below, or send them to [email protected]
