The Future of Micro-insurance Regulation in South Africa

This discussion paper proposes that a regulatory space for the provision of microinsurance products be carved out within the broader regulation of insurance provision in South Africa. It is rooted in concern over consumer abuse in the low-income insurance market and the need to tap opportunities for financial inclusion.

The paper aims to develop a regulatory framework that will facilitate the provision of valuable, low-cost products that match the needs of low-income consumers. It proposes a dedicated microinsurance license that will be available to existing registered long-term and short-term insurers, public companies and cooperatives that comply with registration requirements.

The paper also considers other options that need to be included in an overall regulatory framework for microinsurance, for example underwriting or the cell captive mechanism. It examines regulatory frameworks in other countries like India and the Philippines. It draws the following conclusions:

• Setting targets rather than quotas to incentivize provision of microinsurance products;
• Creating a distinct microinsurance category to which intermediation regulation can be tailored;
• Exercising caution in excluding particular legal entities;
• Creating a prudential microinsurance regime.