Insurance industry spends millions on empowering consumers

Insurance industry spends millions on empowering consumers through financial literacy consumer education programmes

The insurance industry, both long and short-term, is spending millions of rands on empowering consumers through financial literacy programmes in terms of the consumer education requirements of the Financial Sector Charter as well as additional initiatives.

The Life Offices' Association (LOA), representing the life insurance industry, and the South African Insurance Association (SAIA), representing the short-term insurance industry, outlined their past, current and future consumer education initiatives at a joint stakeholder conference held in Johannesburg earlier today.

Lerato Mametse, deputy executive of the LOA, says the life insurance industry holds the view that effective consumer education is vital for consumers in all market sectors, but particularly so in the emerging market where people are often less financially literate.

She says in 2000 the LOA therefore embarked on a multi-faceted education campaign to empower consumers with information about financial matters and the products of the industry.

Mametse says highlights of the LOAs consumer education programme include Mongi Mali, the first financial education programme for government employees launched in 2001 in partnership with short-term insurers and the banks.

In 2003 the LOA's consumer education programme focused on educating consumers on funeral insurance to help curb the abuses taking place in this market. Three years later, the LOA launched an extensive consumer education campaign in all 11 languages aimed at explaining to consumers the Financial Sector BEE Charter and its impact on the long-term insurance industry.

"We are also particularly proud of collaborative efforts such as the consumer education programme on HIV/AIDS and Insurance, which we ran in 2004 as a joint project with the AIDS Law Project," says Mametse. 

And by the end of March this year, some 5542 government employees in all corners of the country had attended financial literacy workshops sponsored by the Life Offices Association  (LOA) to a cost of close on R1.3-million.

Adam Samie, chairman of SAIA, says consumer education is an important obligation for everyone in the financial services sector, especially in terms of the Financial Sector Charter.

"The South African Insurance Association is very serious about this.  From the implementation date of the Financial Sector Charter in 2004 the short-term insurance industry has set out to meet the Charter consumer education requirements, not only because it is required but because we believe that financial literacy education is crucial in the process of upliftment of people who had not previously been included in the financial services sector."

In terms of the Financial Sector Charter, every company in the financial services sector has to spend 0.2% of its post tax profits on educating consumers in the LSM 1-5 income category.

Viviene Pearson, SAIA Stakeholder Relationship Manager, says in 2006 three consumer education projects had been implemented, namely a teacher training project, a community workshop project, and a financial literacy awareness project for commuters. In total, the SAIA spent R 7.3-million on these three projects with a contribution of more than R1.2 million from its partner in two of the projects, the Financial Services Board (FSB). 

"The SAIA and the FSB signed a memorandum of understanding in terms of addressing financial literacy through joint consumer education programmes in April 2005.  Since then we have collectively spent in the region of R23-million on joint programmes," says Pearson.

A new partnership with the community and labour grouping in the Financial Charter process, the Financial Sector Charter Coalition (FSCC), also came into being in 2006, said Pearson.  It is in terms of this partnership that Inzala has been conducting community workshops throughout South Africa.  At the end of May 2007 a total of 16 500 people had been trained in these workshops in all nine provinces, and in all 11 official languages.

The SAIA also introduced the three projects that will be implemented in 2007.  In essence, these three projects are continuations of previous years' projects, including the teacher training project, the community workshops project, and the commuter financial literacy awareness project.  The SAIA will be spending R7.8-million on the three projects.

"The LOA is an important new funding partner in the joint Financial Sector Charter Initiative currently in pre-implementation phase, said Pearson.  The LOA contribution to the teacher training project and the community workshops project is R1.33-million, she says.

The FSB will be contributing another R1.6-million to the teacher training and commuter projects to be implemented in 2007

Pearson says partnering in terms of consumer education makes a lot of sense. "In this way we eliminate duplication and ensure that we address this important matter holistically and in a organised manner."

Mametse adds that the LOA is proud to be partnering with the Financial Services Board (FSB) and SAIA on consumer education programmes. "There are a lot of consumer education campaigns out there doing good work, but it is also good to cooperate with industry players where we can, in order to reach an even wider audience."