With implementation yet to take place more than five years since the discussion paper was first published, the question arises: are the proposed elements of the regulatory framework still relevant given changes in the market and regulatory environment?
Cenfri, on behalf of FinMark Trust, embarked on research to answer this question and assess the local microinsurance environment some five years after the initial discussion document was published. The purpose was to assess the continued relevance of the proposed microinsurance regulatory framework given market trends as well as delays in implementation.
The initial findings were presented at a workshop in March 2014 and revealed that the trends witnessed in terms of insurance usage, supply-side movements and broader regulatory developments together entrench, rather than undermine, the continued relevance of the microinsurance framework.
Growth in insurance penetration has not kept up with adult population growth, implying a slight decrease in overall usage as a percentage of adults. In the lower-income market this trend has been even more pronounced, with the number of people with insurance being slightly lower in 2013 than it had been in 2008. Neither has formal insurance gained significant ground vis-à-vis informal uptake. Thus the policy imperative to enhance formalisation and uptake in the low-income market remains as strong now as it was in 2008.
The sense from the supply-side is that the microinsurance framework will still add value, even more so given broader regulatory trends which impact on compliance cost and complexity. While a few aspects of the proposed microinsurance regulatory framework may be problematic, the proposed parameters for the most part still meet market realities. However, there is an imperative for microinsurance regulatory change to happen soon, to go hand in hand with an effective enforcement strategy, as well as to create certainty and lead to simplification rather than to add complexity through yet another layer of regulation.
In addition to assessing the continued relevance of the proposed microinsurance regulatory framework, FinMark Trust has so far commissioned two “microinsurance readiness assessments” as part of their on-going support to microinsurance development in South Africa. These assessments apply a detailed template of each of the proposed aspects of the microinsurance regulatory framework against the business parameters and realities of potential new microinsurance licence holders to assess what the impact of obtaining a licence would be on their operations. The assessments are intended to support local providers with their compliance strategy as they gear up for the microinsurance framework, as well as to provide a reality check on the potential impact of the proposed microinsurance framework to the National Treasury and Financial Services Board as they finalise the regulatory framework.