Xolani Nxanga, managing executive for microinsurance at Guardrisk

Insurance, historically viewed as the safety net of the already privileged, has traditionally excluded the very individuals and households most in need of financial protection against unexpected loss. The advent of microinsurance changes this. These simple, low-cost insurance products are specifically designed to provide affordable protection for all income segments.

Guardrisk microinsurance cell captives accommodate both life and non-life individual risks. This includes life covers, such as simplified life, credit life and funeral insurance, as well as motor, property, legal expenses, dents and scratches, and accident and health insurance products. Policies are able to be sold efficiently and cost effectively, through traditional channels as well as mobile platforms, retail chains, banks and affinity groups.

A major barrier to entry to the insurance sector has always been the minimum capital requirement of R15 million, alongside the significant costs of running and managing an insurance company, and adhering to the increasingly onerous compliance framework. In the cell captive world, a minimum of R1 million capital is required.

A microinsurance cell captive reduces the regulatory minimum capital requirement even further to R250 000. There is no need to have separate life and non-life microinsurance cell captive facilities, as a cell captive microinsurance licence is composite, allowing both life and non-life products to be written out of the same cell. The ability to outsource functions like administration activities, makes the Guardrisk microinsurance cell captive structure attractive both from a cost and speed to market stand point, while reducing complexity.

“We assist microinsurance cell owners with risk spreading through access to reinsurance markets, insurance expertise – including compliance and governance in a highly regulated environment, and most importantly, skills are transferred to the cell owners and their employees.” says Xolani Nxanga, managing executive for microinsurance at Guardrisk. Like traditional cell captives, microinsurance cell captives offer cell owners the opportunity to earn returns on the equity investment, in the form of dividends.

Nxanga points out that microinsurance cell captives are ideal for companies with access to large client bases. A microinsurance cell captive is ideally suited to insurance products that provide cover of up to R450 000 for non-life insurance and R137 000 for life insurance, subject to inflationary adjustments. The ability to provide both life and non-life product in a single cell means that the cell owner only has to capitalise one cell resulting in reduced set up and ongoing costs.

“Prior to the advent of microinsurance cell captives we had cell captive clients – especially in the retail sector – that operated both life and non-life cell captive facilities in order to sell various products to their clients. Often these were relatively high volume and low value products in terms of cover provided. With a microinsurance cell captive they have been able to consolidate their cell captive facilities and offer products to their customers more cost effectively,” says Nxanga.

Guardrisk is committed to bringing solutions to the market which address specific client needs cost effectively. We have seen our cell owners tailor-make products that cover both life and non-life risks in order to satisfy a specific segment under the Guardrisk branded products.”

Working with Guardrisk, an established brand, gives our cell owners an added advantage in a market where trust plays an important role.