A South African perspective of microinsurance

Abstract

This article investigates microinsurance (MI) in perspective to the insurance industry and as a role player in the South African economy. This is achieved by researching the factors that are resulting in serious deprivation in the provision of MI. Some of the factors are financial literacy, out of reach of customers, low commission/ fees for brokers, hence the need for stakeholders to address these challenges to enable an up-and-running MI environment in South Africa. Previously, the insurance industry only developed financial products and services that were mainly customised for the middle to high income groups. The low-income households have thus been excluded and yet are the most vulnerable to financial shocks but the least protected. This situation has drastically changed during the last few years. The LOASA and the Insurance companies reached consensus with the Financial Sector Charter of South Africa to launch tailor-made products and services for the low-income people. South Africa is still facing an “Insurance Gap” approximately 61% of the low-income households which are not insured represent a huge opportunity for the industry. Therefore, the introduction of the Zimele products classified as MI products in 2007 was a good launch to target the “niche” of those uninsured market.