New micro-insurance legislation would be applied by 2014
The government wants to expand insurance cover to the poor, and rid it of unscrupulous companies so this new regulation will be an attempt to regularize an industry. Yesterday, The Treasury told that new legislation for the micro- insurance sector would be implemented by 2014.
The government said that one of its objectives, which were encouraging savings among the poor, was extending micro- insurance to the poor. SA had a low national savings rate because the lack of incentives from the government to encourage savings.
The majority of South Africans didn’t have any form of insurance against death or disability currently. Then, as they were still studying, Santam and Old Mutual couldn’t comment on the proposals yesterday. The current dominant product in the micro-insurance sector was funeral cover. The document said that in many cases, unlicensed providers were giving it.
It noted that an improvement in the attitude of South Africans and took of insurance through a registered insurer — from 19,5% in 2008 to 25,6% in 2010 — might mask a concerning feature within the South Africa market: that the importance of insurance for personal risk reduction was understood, but not necessarily translated into behavior.
The document was setting out the minimum capital requirements for micro-insurers and laid out the regulatory and prudential framework of bodies such as burial societies, friendly societies and co- operatives. It also limited the maximum period for micro-insurance contracts to one year.
