Earlier this year, former President Jacob Zuma signed the new Insurance Bill (now referred to as the Insurance Act) into law. The aims of the bill include increasing low-income earners’ accessibility to insurance products and fostering transformation in the sector.
First tabled in January 2016, and approved by Parliament in December last year, the Act aims to bring smaller players into the fold through regulatory guidance.
“Not only will the new law make it easier for low-income consumers to access insurance products that cater to their needs, it also gives small businesses the opportunity to enter the insurance industry,” says Vera Nagtegaal, Executive Head of Hippo.co.za.
Explaining the transformation, Nagtegaal says that the Act seeks to link licensing with the sector’s overall transformation targets as set out in the financial sector code. “This will empower the Prudential Authority to push for development targets, financial inclusion and transformation objectives.”
The framework’s transformation component is linked to the Broad-Based Black Economic Empowerment Act and financial sector code, which have made transformation in the insurance industry a priority.
The inclusion of smaller businesses is a great way to foster innovation, she adds. “It means insurers can think out of the box and look to accessible insurance product solutions that have worked in many African countries.”
As an example, MMI and MTN have partnered up to launch a micro-insurance joint venture called aYo.. With aYo, people will be able to apply for and buy insurance from their mobile phones using their airtime balance.
Nagtegaal says that making insurance products accessible to a wider consumer base means more people can protect their assets and themselves. “Outlets such as Jet and Pep have started selling life cover products at point-of-sale – making it easier for consumers to access insurance products. Much like the growth of mobile money wallets in South Africa, and what’s being done by aYo, we can expect easy-to-use products that are made available through cell phones. With the new bill, the range of products can be extended to cater for a wider variety of consumer needs.”
To ensure consumers are protected, insurers will have to invest in consumer education, she adds. “It’s important for insurers to inform the public about changes in the financial services sector, such as the introduction of a Twin Peaks system, aimed at reinforcing consumer protection.”
The new law introduces a legal framework for microinsurance, and amends and replaces certain parts of the Long-Term Insurance Act of 1998, and the Short-Term Insurance Act of 1998. It has three broad objectives:
- Broaden consumer access to adequate insurance products
- Strengthen the insurance frameworks to maintain financial soundness in the industry
- Align with international standards
Nagtegaal says that platforms, such as Hippo.co.za, have been driving consumer education, leading the charge in demystifying insurance and helping people compare products. “The Act is a welcomed development in this regard. This will ensure lower-income consumers are not excluded from certain insurance products simply because they can’t afford it.”