Consumer education remains a top priority

Millions of rand are being spent each year on programmes aimed at educating entry level South African consumers on financial literacy.

The insurance industrys efforts in this regard were highlighted at a Consumer Education Stakeholder Conference held jointly by the Life Offices' Association (LOA) and the South African Insurers Association (SAIA) in Woodmead on 12 June 2007.

As contributor to a number of the education programmes mentioned during the proceedings, the Financial Services Board (FSB) was also in attendance. The conference clearly illustrated the common purpose of the short- and long-term insurance industries, as well as the financial services industry regulator in ensuring that education reaches those consumers who need it most.

The regulator plays its part

Rob Barrow, CEO of the FSB was the first presenter at the conference. He was quick to point out the regulators responsibility with regard consumer education. "The FSB's mandate in terms of our legislation is to facilitate continued education programmes amongst the industries that we speak about."

According to Barrow, the "day of consumerism" has arrived in South Africa. He mentioned that one of the aims of education is to ensure that consumers know their rights and understand their responsibilities. Years of neglect of certain sectors of the local market meant that "there was an enormous need for consumer education," said Barrow. The financial services industry in South Africa was quickly "moving to an environment where [the industry] tries to make sure there is fair treatment of investors, and fair treatment of product suppliers."

Having acknowledged the requirement for the regulator to be involved in the education process, the FSB has partnered with SAIA in various programmes over the past years. The FSB contributed R1.2 million to two of SAIA's 2006 education projects, and has committed another R1.6 million for the current year.

SAIA fully committed to consumer education projects

SAIA Stakeholder Relationship Manager, Viviene Pearson reported that SAIA had spent R7.3 million on three projects in 2006. These included a teacher training project, a community workshop project and a financial literacy awareness project.

The process of consumer education was ongoing and many projects had been undertaken in conjunction with the regulator since 2005. "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," said Pearson.

The Life Offices' Association has also been very active in ensuring that the emerging market receives appropriate information. Lerato Mametse, deputy executive of the LOA said "we are 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.'

Mametse said that the LOA had taken a decision as far back as 2000 to embark on a multi-faceted consumer education campaign to empower consumers. The LOA had been active in launching initiatives to thwart the negative selling tactics used in the marketplace for funeral policies. The body was also active in providing financial literacy skills to government workers. To this end, some 2, 500 government employees had attended financial literacy workshops by April 2007. These workshops were sponsored by the LOA at a cost of nearly R700, 000.
 
Dispelling the "crooks in suits" label

Adam Samie, Chairman of SAIA believed that education was one of the tools that industry players could use to dispel the bad name the financial services industry was often lumbered with. Samie believes the existing "sea of ignorance" amongst consumers provided "a dynamic environment for mass exploitation and daylight robbery." This situation had long been exploited by those in the financial services industry, whether it was their intention or not.

Improvements in education and financial literacy would have serious long term benefits for the financial services industry. "A logical outcome of a well educated and understanding consumer base is a couple of million new customers," said Samie. The cost of educating these consumers could therefore be viewed as a justifiable acquisition cost.  The industry should continually update how it interacts with customers, in terms of allowing for easy access to insurance products, and focus on providing greater value for money, more appropriate products and greater transparency.

In closing, Samie said that SAIA appreciated the current environment, where many industry associations were working together to raise levels of financial literacy among consumers. He believed that concerted efforts going forward would reap huge benefits for the industry in years to come.

Editor's thoughts:
The consumer age has truly arrived and consumers enjoy more protection than ever before. With so much emphasis on consumer education, we would like to know whether you believe financial literacy is an obstacle when selling insurance and retirement products. Are the majority of your clients well versed in basic financial literacy? Send your comments to [email protected]