Access to financial services in the long term insurance industry
Eksteen, Ruwaida S. H.
AFRIKAANSE OPSOMMING: Die langtermynversekeringsindustrie het voorheen slegs finansiële produkte en
dienste ontwerp, wat gefokus was op die middel tot hoër inkomstegroepe. Die armes
was dus uitgesluit, primêr as gevolg van die laer inkomstegroepe wat nie
lewensversekeringsprodukte kon bekostig nie. Inteendeel, arm huishoudings is, en
was, meer kwesbaar vanweë die feit dat hulle geredelik blootgestel word aan meer
diverse risiko’s – mensgemaakte, sowel as natuurlike risiko’s - terwyl hulle juis
diegene is wat minder middele het om dit bestuur.
Hierdie toedrag van sake het egter drasties verander gedurende die afgelope paar jaar.
Die onderskeie partye, insluitend verteenwoordigers van die
langtermynversekeringsindustrie, het konsensus bereik ten opsigte van die
ontwikkeling van die Finansiële Sektor Handves wat in ooreenstemming is met die
nasionale swart ekonomiese bemagtigingstrategie. Die oogmerk van die Finansiële
Sektor Handves was nie net om mense in die laer inkomstegroepe te bemagtig nie.
Dit het ook ten doel om finansiële insluiting te verseker, en mettertyd, die aktiewe
deelname van die armes in die hoofstroom van die Suid-Afrikaanse ekonomie.
’n Stel toegangstandaarde was gevolglik ontwikkel en geïmplementeer, wat die
langtermynversekerings-produkaanbiedinge aan LSM 1-5 reguleer (met ander woorde
vir die doeleindes van hierdie verslag, huishoudings wat minder as R3 000 per maand
verdien). Die doel van die standaarde wat ontleed word in hierdie verslag, is om te
verseker dat die langtermynversekeringsindustrie geskikte produkte ontwerp wat die
minimum standaarde soos beskryf in die Finansiële Sektor Handves, nakom. In
beginsel word die toepaslikheid en geskiktheid van die toegangstandaarde in hierdie
verslag geëvalueer, met die oogmerk om te bepaal wat die standaarde inhou vir beide
die verbruiker asook die lewensversekeraar van ’n verslaggewingsperspektief.
Die eerste deel van die toegangstandaarde wat goedgekeur is deur die Finansiële
Sektor Handves in 2007, het slegs begrafnisdekking ingesluit, terwyl die tweede deel
gefokus het op nie-begafnisprodukte en sedert 2008 geïmplementeer is.
Laasgenoemde het die volgende dekking ingesluit: lewensversekering, dekking vir
fisiese ongeskiktheid, kredietlewensversekering en gewone lewensversekering. Die
toegangstandaarde wat van toepassing is op verbandlenings is egter nog nie
gefinaliseer nie en is gevolglik nie ingesluit in hierdie verslag nie. ’n Fundamentele vraag ten opsigte van die daarstelling van toegangsprodukte vir die laer inkomstegroepe, is wat die rol is van die publiek vergeleke met die privaatsektor
en dié van die regering. Terwyl die regering optree as die wetgewer, moet dit ook
daarteen waak om nie te veel van ’n rigiede proses vir die privaatsektor daar te stel
nie. Die wetgewer moet die relevante reëls en regulasies stipuleer en sekerheid
verskaf ten opsigte van die inhoud daarvan. Terselfdetyd moet die wetgewer ook die
privaatsektor asook `n klimaat van innovasie ondersteun, sowel as die daarstelling
van ’n stabiele regulerende atmosfeer.
Behalwe die ontwikkeling van geskikte, bekostigbare en minder komplekse produkte,
berus die verantwoordelikheid op die privaatsektor om vertroue te skep in die
langtermynversekerings-industrie asook om die noodsaaklikheid van risiko-dekking te
propageer. Versekeraars het verder nodig om die laer inkomstegroepe as ’n winsgewende segment te beskou, terwyl die armes versekering as ’n noodsaaklike vereiste moet beskou. Hoe meer vertroue geskep word deur die versekeringsindustrie,
hoe minder sal mense in die laer inkomstegroepe hul geld belê in die informele sektor
wat gekenmerk word deur die afwesigheid van regulering, minder sekuriteit en hoër
Dit is verder noodsaaklik vir die sukses van die verskaffing van toegang tot finansiële
produkte, om in gedagte te hou watter impak dit op die verbuiker sal hê. Met
betrekking tot die produkte wat ontwikkel en bemark word deur die
lewensversekeringsindustrie: spreek dit werklik die behoeftes van die laer
inkomstegroepe aan en dra dit positief by tot transformasie? Die privaatsektor is as
gevolg daarvan grotendeels afhanklik van marknavorsing en analises oor
verbuikerstendense gemeet oor tyd. Die impak wat finansiële produkaanbiedinge het
op die laer inkomstegroepe, kan gevolglik nie onafhanklik beskou word nie want die
behoeftes, verwagtinge en profiel van die onderste deel van die piramide sal met
verloop van tyd verander.
Mededinging dra as sulks ook positief by tot die daarstelling van toegang tot
finansiële produkte en dienste. Dit dwing die privaatsektor (die lewensversekeringsmaatskappye)
om vorendag te kom met innoverende wyses om effektiewe toegangsprodukte en dienste te kan lewer aan die armes. Die bring mee dat die
verbruiker waarde vir geld kry wanneer finansiële produkte en dienste aangekoop word van lewensversekeraars.
Met verwysing na die toepaslikheid van die langtermynversekeringsindustrie se
toegangstandaarde en of dit die behoeftes van die armes bevredig: die
lewensversekeringsindustrie het inderdaad baie bereik gedurende die afgelope paar
jaar, deurdat konstruktiewe geleenthede geskep is vir die laer inkomstemark. Gegewe
die minimum-vereistes soos uiteengesit in die Finansiële Sektor Handves, kan die
armes nou ook langtermynversekeringsprodukte bekom wat uitdagings soos fisiese
beskikbaarheid, toegang tot transaksies, bekostigbaarheid, diskriminasie en
Dit is daarom noodsaaklik vir die doeleindes van effektiewe finansiële insluiting, om
vir verbruikersopleiding ook voorsiening te kan maak. Finansiële geletterdheid sal in
beginsel die laer inkomstegroepe in staat stel om hulself te kan bemagtig en
terselfdertyd die teikengroep in staat stel om meer ingeligte besluite te kan neem ten
opsigte van hul finansies. Laasgenoemde kan egter nie in isolasie geskied nie.
Finansiële geletterheid en dus verbruikersopleiding, is minstens net so belangrik.
Dit is juis daarom dat, bo en behalwe die regering wat die rol as wetgewer vertolk
deur die toepassing van die reg, al die betrokke partye veronderstel is om ’n
gemeenskaplike oogmerk te hê. Met ander woorde, dit verwys direk na transformasie
en die doelwit om mense in die laer inkomstegroepe te bemagtig – nie net om
finansiële insluiting te bewerkstelling nie, maar van meer belang, om te verseker dat
die armes oor die vermoë beskik om meer ingeligte besluite te kan neem oor hul
finansies. Hierdie aspek sal veral bydra tot effektiewe toegang tot finansële dienste in
die ware sin van die woord - as die armes ’toegelaat’ word om meer aktief deel te kan
vorm van die hoofstroom van die land se ekonomie. ENGLISH ABSTRACT: Previously, the long-term insurance industry only developed financial products and
services that were mainly targeted at the middle to high income groups. The poor
have thus been excluded, primarily due to them not being able to afford financial
products and services offered by life insurers. However, poor households are, and
have been, more vulnerable because they are often exposed to more diverse risks,
both ‘man- made’ and natural, whilst having fewer instruments to manage them.
This state of affairs has drastically changed during the past couple of years. The
respective stakeholders, including representatives from the long-term insurance
industry, reached consensus with regards to the development of the Financial Sector
Charter which is aligned to the national black economic empowerment strategy. The
objective of the Financial Sector Charter is not only to empower people in the lower
income groups. It also aims to ensure financial inclusion and, eventually, the active
participation of the poor in the mainstream of the South African economy.
A set of access standards that governs life insurance products and services offered to
LSM 1-5 (i.e. for the purposes of this report, households earning less than R3 000 per
month), were developed and implemented accordingly. The objective of the access
standards, analysed in this report, is to ensure that the long term insurance industry
develops appropriate products that meet the minimum standards defined in the
Charter. In principle, this report evaluates the feasibility of the access standards with
the aim of ascertaining what the standards imply for both the consumer as well as the
life insurer from a reporting perspective.
The first set of access standards, approved by the Financial Sector Charter in 2007,
included funeral products only, whereas the second phase, which focused on nonfuneral
products, came into effect in 2008. The latter is applicable to the following
financial products: life cover, physical impairment cover and credit life cover. The
access products standards relevant to mortgage protection are not yet finalised and
have therefore been excluded from this report.
A fundamental question in terms of providing access to the low income groups is the role of the public versus private sector delivery as well as that of government. Whilst
government acts as the lawmaker, it also needs to be sensitive towards not creating
too much ‘red tape’ for the private sector to comply with. The regulator should
therefore stipulate and clarify the relevant rules and regulations, but at the same time
support the private sector and encourage a climate of innovation as well as creating a
stable regulatory environment.
Apart from developing appropriate, affordable and less complex insurance products,
the private sector’s responsibility is to create trust in the insurance industry as well as
to promote the need for risk insurance. Insurers thus need to see low income earners
as a profitable segment, whereas poor people need to see insurance as a necessity.
The more trust is created by the insurance sector, fewer people in the low income
groups will invest their money in the informal sector which entails no regulation, less
security and higher risks.
It is furthermore pivotal for the success of access to financial services to take into
account how this will impact on the consumer. With respect to the products
developed and marketed by the life insurance industry: does it really meet the needs
of the poor and does it contribute positively to transformation? The private sector is
therefore heavily dependent on research and analyses of consumer trends measured
over time. As a result, the impact that financial product offerings have on the low
income earners cannot be dealt with on its own, because as time passes so will the
needs, expectations and profile of the bottom of the pyramid change.
On its own, competition tends to also contribute positively towards access to financial
services. It forces the private sector (i.e. life insurance companies) to come up with
innovative ways of providing effective access, products and services to the poor. This
ensures that the end user gets value for money, when procuring financial products and
/or services from life insurers.
In respect of the viability of the long-term insurance industry’s access standards and
whether or not it speaks to the needs of the poor: the life industry has indeed achieved
a lot over the past couple of years, by creating constructive opportunities for the lower
end of the market. Given the minimum requirements as per the Financial Sector Charter, poor people can now also obtain long-term insurance products that address challenges with regards to physical accessibility, transactional access, affordability, non-discrimination and the level of complexity.
However, more important for the low income group to participate effectively in the
mainstream of the South African economy, is the fact that the need for financial
literacy is even bigger. It is one thing to have the right of entry (i.e. access) to the
financial services sector in terms of life insurance product offerings, but it is different
if that same target audience does not have the ‘know-how’ to use and implement the
It is hence an imperative for the purposes of effective financial inclusion to also make
provision for consumer education. In principle, financial literacy will enable the
lower income groups to become more empowered and at the same time, ensure that
the target audience is equipped to make more informed decisions about the finances.
Given the latter, it can however not happen in isolation. Financial literacy and thus
consumer education, is equally important - if not more.
It is therefore critical that, apart from government fulfilling its role as regulator by
upholding the rule of law, all the stakeholders should have a universal goal. In other
words, this directly addresses transformation and the objective of empowering people
in the lower income groups – i.e. not only to ensure financial inclusion, but more
importantly to enable poor people to make more informed decisions about their
finances. And only this will contribute to effective transformation in the true sense of
the word - if poor people are ‘allowed’ to become more actively involved in the
mainstream of the South African economy. Description:
Thesis (MDF (Business Management))--University of Stellenbosch, 2009.
Masters Degrees (University of Stellenbosch Business School)