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Insurance Bill brings Microinsurance one step closer

12 December 2017African Unity Life (AUL)
AUL CEO, Sonja Visser

AUL CEO, Sonja Visser

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 as it brings access to microinsurance one step closer.

In a statement released following the meeting, Parliament says this particular piece of legislation is 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 reinsurance 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 this bill answers the call by 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. 

“Microinsurance 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 CEO, 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 given the strong drive for consumer protection in South Africa at the moment, a microinsurance license 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. While 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. As it stands, there are currently several unregistered providers who offer financial services in an unregulated fashion. If the regulatory process runs smoothly, she believes providers should be able to apply for a microinsurance license from the first quarter of 2018.

“AUL has a full life insurance license 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 particularly. On a broader scale, our client base includes employer groups, funeral insurance group schemes, administrators and intermediaries.” 

“We are excited about microinsurance and the financial access it will enable to consumers,” Visser shares. “It is not a privilege but a right, no matter income or age, to have financial wellness and microinsurance will facilitate that.”

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Millennials make up 30% of the South African job market; these are your clients and future clients. Do you engage with them?

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