This discussion paper proposes that a regulatory space for the provision of micro-insurance products be carved out within the broader regulation of insurance provision in South Africa. Micro-insurance refers to insurance that is accessed by or accessible to the low-income population, provided by a variety of different providers and managed in accordance with generally accepted insurance practices. It does not operate in isolation, but forms part of the broader insurance market, distinguished by its particular market segment focus (which translates into distinct means of distribution and distinctly structured products). Micro-insurance as defined in this paper is intended to catalyse the market provision of risk management tools for poor households. However, given the inherent complexity of insurance and the vulnerability of the target market, there are also risks of potential abuse and misselling. A balance therefore needs to be struck between market development and consumer protection. Accordingly, the goal of this discussion paper is to develop a coherent and clear regulatory framework that will encourage and facilitate the provision and distribution of good value, low cost products that are appropriate to the needs of low-income consumers by a variety of market players who compete for the market, treat their policyholders fairly and are able to manage the risks of providing insurance. This is in line with the government’s objective to increase access to financial services for the poor and provide a supportive regulatory environment for the implementation of the Financial Sector Charter.
National Treasury Republic of South Africa