Low-Cost Insurance Products Get the Nod

Wednesday, December 21, 2005

Products short-term insurers will offer include so-called “shack insurance”, covering structures and contents for about R15 a month, and cellphone insurance from about R10 a month.

Life companies will offer insurance products that will be more flexible on payments, so that policies do not automatically lapse if payments are missed.

THE insurance and collective investments industry will be able to proceed with low-cost Mzansi-style products in the new year, following the approval of national access standards last week.

The standards were approved by the Financial Sector Charter Council at its final meeting for the year, the council said yesterday.

The standards are aimed at measuring the affordability and accessibility of new products offered by the financial sector under its financial sector charter commitments.

Companies operating in the sector had been waiting for the standards to be approved before finalising their products, which will offer customers in the LSM1-5 market cheap insurance and investment products.

Products short-term insurers will offer include so-called “shack insurance”, covering structures and contents for about R15 a month, and cellphone insurance from about R10 a month.

Life companies will offer insurance products that will be more flexible on payments, so that policies do not automatically lapse if payments are missed.

Santam and Mutual & Federal, SA’s two largest short-term insurers, plan to launch their new products in the first half of next year, the groups said recently.

Although there had been suggestions that the banks’ Mzansi product would not meet the new standards, Enoch Godongwana, principal officer of the charter council, said banks and other companies would be measured individually on their Mzansi products, using a new scoring mechanism from next year.

He said banks would have to introduce debit order facilities to Mzansi bank accounts in order to comply with the new standards and these facilities would make it easier for insurers to collect payments from customers.

Godongwana said the charter council had applied to gazette the charter, as required by the trade and industry department’s codes of good practice.

He said parts of the financial sector charter would have to be aligned with the codes.

Source: Business Day (Johannesburg), Stephen Gunnion (link opens in a new window)