Credit Life Insurance in South Africa: The Customer’s Perspective

This paper analyzes whether low income consumers get a fair deal when they purchase credit life insurance. It offers a demand-side perspective on how consumers experience the purchase of such insurance products. The study focuses specifically on credit life insurance, which is insurance taken out by a consumer to cover a debt they have incurred in the event of death, disability or retrenchment, often at the insistence of the credit provider as a form of collateral security. The main methodology for the study is a mystery shopping exercise focused on a broad range of furniture retail and microfinance outlets. In addition, it uses information from in-depth interviews that were conducted with low income consumers who had entered into a credit agreement or taken out a microloan. The paper covers the following sections in detail:

• Overview of credit life insurance models and their value proposition;
• Regulatory environment for credit life insurance in South Africa;
• Overview of the South African credit life insurance market;
• Findings of the study as emerged from the mystery shopping exercise and consumer interviews;
• Data analysis to highlight trends in claims and expense ratios;
• Emerging issues in the credit life insurance sector.