New Micro Insurance Legislation on the Horizon

Aug 1 - The government is hoping to encourage savings among South Africa's poor population and regularise the micro-insurance industry by introducing new legislation, it was announced this week.

The Treasury said that new micro-insurance legislation could be implemented by 2014 in bid to see cover extended to the nation's poor.  The legislation also aims to get rid of what the government sees as unscrupulous companies already active in this market.

In a document released by the Treasury this week, it said: "The impetus for a dedicated micro insurance regulatory framework dates back to concerns about the risk of consumer abuse in the informal funeral insurance market raised at a parliamentary portfolio committee on finance meeting in August 2003."

The document went on to say: "An improvement in the attitude of South Africans and take up of insurance through a registered insurer - from 19.5% in 2008 to 25.6% in 2010 - may mask a concerning feature within the South African market: that the importance of insurance for personal risk reduction is understood, but not necessarily translated into behaviour."

Numbers show that 74% of South Africans say that they recognise the importance of personal insurance, however 34% have no plans to address threats to their lives and jobs.

Low National Savings Rate

Another objective of the new legislation would be to address South Africa's low national savings rate.  Experts traditionally blame these rates on the government's lack of incentives to encourage the population to save, although it is generally recognised that severely low income levels among Blacks doesn't leave much room for savings.

South Africa's major insurers such as Old Mutual and Santam did not comment on the Treasury's announcement, although they are expected to do so in the coming weeks.