Microinsurance:
A new concept in South Africa - Zaheenah C. A. Khan
Introduction
In South Africa, many people still perceive microinsurance as a new concept. Some refer to the concept of microinsurance as a new financial service within microfinance. The concept of microfinance has been a topic of keeping interest before microinsurance. An important milestone in the growth of awareness for microfinance was the granting of the Nobel Peace Prize to Muhammad Yunus in 2006 for granting small loans to low- income people. The concept of Microinsurance entered the market much later than microloans and became a prominent topic of discussion recently in South Africa.
What is Microinsurance? Microinsurance is defined in different sources as follows:
• A mechanism to protect poor people against risk (accident, illness, death in the family, natural disasters, etc.)in exchange for insurance premium payments tailored to their needs, income and level of risk (Microinsurance Innovation Facility, 2008). • The protection of low-income people against specific perils in exchange for regular premium payments proportionate to
Insurance
Relevant to the risks of both low-income market and above
Regular premium payments
Agents and brokers are primarily responsible for sales
Market is largely familiar with insurance
Priced based on age/specific risk Savings, tax relief help people to manage risk
106 Management Today | January 2012
the likelihood and cost of the risk involved (Churchill, 2007).
• A risk transfer device characterised by low premiums and low coverage limits, and designed for low-income people not served by typical social insurance schemes (Micro Insurance Academy, India, 2007). • Insurance that is accessed by the low- income population, provided by a variety of different entities, but run in accordance with generally accepted insurance practices. Importantly this means that the risk insured under a microinsurance policy is managed based on insurance principles and funded by premiums (International Association of Insurance Supervisors, 2007).
In brief, all these different definitions have in common the element of the provision of insurance services to the low-income households. However, a better way to understand the concept of microinsurance is to differentiate it, as follows:
Table 1: (below) Differences between Insurance and Microinsurance (Adapted from International Labour Organisation Social finance Program 2004)
Microinsurance Relevant to the risks of the low-income market
Premiums should be designed to accommodate customers’ irregular cash flows
Distribution channel may manage the entire customer relationship, perhaps including premium collection and claims payment
Market is largely unfamiliar with insurance
Community or group pricing Different attitude: help people to manage risks
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114