New regulations coupled with insurtech offerings will pave the way for significant growth
Traditionally, access to micro-insurance in South Africa for lower income households has been restricted to life insurance products only, in the form of funeral insurance. However, barriers to uptake and opportunities for financial inclusion were less than optimal, given that the regulatory cost of compliance in proportion to the target market was disproportionate.
With the commencement of the Insurance Act, 2017, on 1 July 2018 a new micro-insurance license category has been established. Now micro-insurers are allowed to be profit-making, not-for-profit or co-operatives, opening up the market to existing community finance groups who wish to extend their operations. In addition, proportionate scaling of regulations has the effect of reducing prudential requirements imposed on micro-insurers, commensurate to their product offering, reducing costs which previously may have been a barrier to entry and uptake by the lower income household target market.
In addition, the development of insurtech offerings designed to be delivered through mobile phones – which are widely owned by consumers in all income brackets – will make it easier for micro-insurers to reach their target groups. The result will be rapid growth in micro-insurance in the coming year, and the evolution of a completely new type of insurer in South Africa.
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