Short-term insurance industry a shining example worldwide for financial literacy initiatives

The short-term insurance industry contributes millions of Rands each year to increase financial literacy among South Africans.

“As far as we can establish, we are the only industry in the world to pool our money to improve consumer financial literacy,” says Vivienne Pearson, general manager of the South African Insurance Association (SAIA).

While financial services companies are compelled to educate consumers, through the Financial Services Charter (FSC), most do it as individual companies. Short-term insurers, however, contribute through SAIA.

“Financial literacy around the world is a major problem, even in highly developed countries,” says Michael McCann, regional sales manager, Mutual & Federal, a member of the Old Mutual Group. McCann chairs the SAIA Consumer Education and Micro Insurance Committees.

“In South Africa, if consumers understand financial instruments like bank accounts, retirement annuities and insurance policies, they then have the capacity to take the shocks out of their lives. They are empowered to make informed decisions.”

The short-term industry is doing ground-breaking work in the area of consumer financial education and has made great strides which have garnered international recognition.

“We know we can achieve maximum impact by pooling money, and as a consequence, our financial literacy programmes are reaching millions of people,” says Pearson. “We need to empower a new market for the long-term potential gain of selling more products into this market, in a responsible way and to the benefit of that market.”

Since 2004, SAIA members have spent between R5million and R9million per annum on financial literacy projects. Between two and five major projects run each year. They focus on educating people in LSM 1 to 5 categories about everything from budgeting, money management and how to stay out of debt, to rights and responsibilities, channels for complaints, and how insurance works.

Three core SAIA projects have been ongoing since 2004. These are the teacher development workshops, community workshops and multimedia commuter awareness project.

The SAIA /Financial Services Board (FSB) Teacher Development Workshops project reaches teachers and learners, as well as communities. Delivered in partnership with the Department of Education (DoE), it reaches all government schools in South Africa, teaching financial literacy to learners in grades ten to twelve. SAIA provides educational material and runs workshops for teachers to ensure they know how to use the material in their classrooms. The resources are aligned to mathematical literacy, a compulsory subject for all who do not do pure mathematics.

The SAIA Community Workshops are run by accredited training providers, and train approximately 20 community members and retrenched people at a time, providing them with basic financial literacy and generic insurance training. Thousands have been educated since 2004. These workshops are conducted throughout the country, including remote rural areas, in the official languages.

The third key ongoing project, the SAIA/Financial Services Board (FSB) Commuter Awareness Project, uses radio and other media to reach large numbers of people to raise financial literacy. Delivered through ComutaNet, it focuses on reaching commuters over all nine provinces through a variety of different delivery mechanisms, such as Rank TV, Star Radio, Commuter FM, Star Music, roving stage trailers and kiosks/gazebos.

Another major SAIA project was made possible by a grant of approximately £250 000 from the Financial Education Fund (FEF) and conveys financial literacy messages to consumers via an innovative radio soap opera. The series runs on four SABC community stations in four different languages. Financial topics are covered by a cast of entertaining core characters and after each broadcast there is a talk show, hosted by an industry expert.

SAIA uses this project, which includes a strong research element, to show how effective the media is in conveying consumer education.

“The response has been fantastic,” says Pearson. “Our research, which targets listeners of the four radio stations as well as one control station, shows that prior to our intervention, 60% of listeners trusted radio above any other source, except for family and friends, for financial literacy information. Our latest survey showed that this figure had risen to 78%.

“The series is thus making a huge contribution to general financial literacy levels.”

SAIA and its members have received international recognition for their achievements in the consumer education field.

“We were singled out as an example of international best practice in financial literacy, and as the only example of an industry working together to achieve its goals, by the Geneva-based International Labour Organisation (ILO),” says Pearson.

The ILO funded a research project to review the SAIA consumer education strategy, as well as the projects that took place between 2005 and 2010. Researchers looked specifically at how these could be improved, and whether there were tips, lessons, or ideas for others around the world. The ILO was impressed with the SAIA approach, strategy and projects and wrote a case study as an example of international best practice.

“I would like to thank our member companies for their contributions and express gratitude to the SAIA Consumer Education Committee, including its longstanding Chair, Michael McCann of Mutual & Federal, and its committed members.

“Mutual & Federal has always been a willing and leading partner and adds value at all levels. Theirs is not only a monetary contribution – they’re actively involved in visiting workshops, participating in committees and appraising material.”

SAIA has mandated that all its members* have to pool (in terms of the Charter requirements and the SAIA strategy) at least half of the required 0.2% of their after-tax profits to be used for the SAIA consumer education projects. In this way, the SAIA members contributed a total of R8,5 million in 2010.

“Our contribution to financial literacy is not merely a marketing exercise,” says Pearson. “It really is making a huge difference.”

*Barring those who are exempted in terms of the access pillar of the FSC