Microinsurance refers to insurance that is accessed by the low income population that is provided by a variety of providers and managed in accordance with generally accepted insurance practices. The dominant insurance product in the lower-income insurance market is funeral cover, which is often provided by unlicensed providers.

Treasury said the promotion of better access for South Africans to affordable insurance products that meet their daily risks, better matching of insurance products to the needs of low-income consumers and strengthening consumer protection are the three matters that require policy address.

The aims of the framework is to extend access to a variety of good value formal insurance products that are appropriate to the needs of low-income households, as well as to lower barriers to entry to encourage broader participation in the market and promote competition amongst providers.

It also aims to facilitate more effective supervision and enforcement, supporting the integrity of the insurance market as a whole.

This microinsurance policy document builds on Treasury’s 2008 discussion paper on the “Future of Microinsurance in South Africa.”

The Financial Services Board and Treasury will develop the microinsurance legislation for comment by 2012 and for tabling in Parliament by 2013.