The government has proposed reforms to the micro-insurance regulatory environment, which aims to aid insurers in providing a service to low-income consumers. Micro-insurance refers to “any insurance product targeted at, or accessible to, low-income households” (Doubell Chamberlain). This type of insurance is not new to South Africa however, it is a concept in great need of re-evaluation and improvement.

A discussion paper related to this reform, The Future of Micro-Insurance Regulation in South Africa, was released by the National Treasury and is open for public comment until the 31 July. The discussion paper aims to find a balance between increasing the access that lower-income people have to insurance whilst protecting these consumers as they have not been notably exposed to insurance on prior occasions.

According to Paul Beadle, the managing director of just-money.co.za, more education programmes need to be implemented in order for knowledge to be gained with regards to the products that are already available in the insurance industry, this would further aid the already acknowledged need for people in lower-income groups to take out insurance. Developing a range of insurance products specifically for a certain group would not be suitable as insurance policies are “based on risk” and the costs therefore differ from person to person.

A problem has arisen in that insurance companies find it difficult to collect premiums from people that do not have a bank account, which seems to be prevalent in the low-income groups. Mzanzi accounts cannot be debited, which can be problematic as a guarantee on whether the premiums will be paid on a monthly basis cannot be established.

The director of Auto & General Insurance, Angelo Haggiyannes, suggests that two alterations need to be made in order for insurers and the low-income consumers to establish a relationship that will succeed. Firstly, an alteration in terms of the way low-income consumers view insurance needs to occur, from insurance being seen as something that is mystical and a service that only the affluent can afford to a service that is a necessity leading to a reduced sense of vulnerability. Low-income consumers need to be aware of the current products available in the market and acknowledge the responsibilities that they would be taking on by buying insurance. Secondly, insurance companies need to alter the way they view low-income consumers, from seeing them as comprising the bottom of the trade hierarchy to being a lucrative segment of the market.

The discussion paper mainly focuses on lowering regulatory costs as well as improving enforcement and recourse in the micro-insurance market, whilst further suggesting the introduction of new legislation which includes the possibility of a Micro-Insurance Act. This act could allow insurers to provide a suitable and inexpensive service to low-income consumers. The key factors inherent in the proposed micro-insurance definition include an insurance product lasting no longer than 12 months and benefits that do not exceed R50 000. If the conditions of the proposal are met, the micro-insurance definition may be extended to incorporate the traditional long-term and short-term insurance categories.