South Africa: Poor May Get Insurance Under New Proposals - AllAfrica.com

Regis NyamakangaJohannesburg

PROPOSALS to reform micro-insurance regulation could do it easier for coverage companies to function low-income households, Doubell Neville Chamberlain of FinMark Trust and manager of the Centre for Financial Regulation and Inclusion said last week.

But while the projected law trades with regulating issues and resort in the micro-insurance market, Blue Financial Services' divisional manager for international insurance, Greg Niemand, said the bill of exchange law should not lose sight of nest egg and investing merchandises that relieve poorness and extenuate against possible losses.

"This double attack should include the chance for low income wage earners to salvage or pool a part of their disposable income in order make a reserve," he said.

"Secondly, all exposure to put on the line is capped at R50 000 -- this is not practical, as the cost of a funeral cannot compare to the cost of losing your property.

"There should be separate restriction for different products, such as as funeral at R25000, life screen at R100000, place harm up to R100000 and nest egg at R100 per month.

"This volition not compromise the poor, make complexness or impact the ordinance of the industry," Niemand said.

The exchequer had proposed the ordinances to hit a balance between increasing entree to coverage to lower-income people, and protecting them against unscrupulous merchandise providers.

Micro-insurance is not new to SA, with funeral merchandises being a good example.

Chamberlain said: "This have been a accelerator for innovation, even though this is a new and hard marketplace to serve, requiring different mentalities and models.

"Regulatory costs and uncertainnesses are threatening already edge markets.

"The recommendations remainder on a definition of micro-insurance that seeks to guarantee less underwriting and market-conduct risks. Key features of the definition include a term of no longer than 12 calendar months and benefits not exceeding R50000," he said.

"If these statuses are met, the projected micro-insurance definition may widen across traditional long-term and short-term insurance categories."

Following a risk-based approach, the projected lower-risk micro-insurance definition lets for decreased regulation. Insurers offering only low-risk micro-insurance products will profit from decreased working capital and conformity requirements, based on the less coverage hazard built-in to the micro-insurance product, he said.

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"The projected new micro- coverage license will be available to a wider set of institutions, and not limited to public companies.

"SA have a burgeoning co- secret agent and common environment, and international experience proposes that these physical things may play a critical function in extending coverage to the poor," Neville Chamberlain said.

According to Niemand, micro-insurance is underused worldwide because of a deficiency of consumer education, which takes to low demand. More work should be done to develop this market, he said.