The long-awaited Insurance Bill was among a number of pieces of legislation passed by the National Council of Provinces, at its final plenary sitting for 2017, last week \u2013 good news for lower income South Africans as it brings access to microinsurance one step closer.<\/p>\n
In a statement released following the meeting, parliament said this particular piece of legislation is intended to encourage a \u201cfair, safe and stable insurance market\u2026 by establishing a legal framework that enhances financial soundness through higher prudential standards, group supervision and stronger reinsurance arrangements\u201d.<\/p>\n
It will increase access to insurance; and improve governance, risk management and internal controls for insurers within the South African context.<\/p>\n
Long-term insurance provider, African Unity Life (AUL) said that 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.<\/p>\n
This includes citizens in the lower income bands whose only exposure to insurance to-date has been through funeral policies.<\/p>\n
\u201cMicroinsurance 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,\u201d said AUL CEO, Sonja Visser.<\/p>\n
\u201cThis means they will be safeguarded against financial risks, loss of income, illness, inability to work or the loss or destruction of assets.\u201d<\/p>\n
Visser said given the strong drive for consumer protection in South Africa at the moment, a microinsurance license is necessary.<\/p>\n
\u201cLicensing of micro-insurers will bring many benefits, including that policies contain specific terms to protect consumers \u2013 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.<\/p>\n
\u201cAdditionally, 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.\u201d<\/p>\n
Importantly, Visser said, the legislation will bring more providers of financial services into the regulatory net.<\/p>\n
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.<\/p>\n
\u201cAUL has a full life insurance license so we are able to offer full life products across all markets,\u201d said Visser.<\/p>\n
\u201cThe 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.\u201d<\/p>\n
\u201cWe are excited about microinsurance and the financial access it will enable to consumers,\u201d Visser said. \u201cIt is not a privilege but a right, no matter income or age, to have financial wellness and microinsurance will facilitate that.\u201d<\/p>\n