A Regulatory Review of Formal and Informal Funeral Insurance Markets in South Africa a Market Review and Regulatory Proposal
A regulatory review of formal and informal funeral insurance markets in South Africa A market review and regulatory proposal prepared for Finmark Trust April 2005 26/04/2005: VERSION 4.5 Author: Hennie Bester Doubell Chamberlain Ryan Short Richard Walker Genesis Analytics (Pty) Ltd 2nd Floor, No 3 Melrose Square, Melrose Arch, Johannesburg South Africa, 2196. Post to: Suite 3, Private Bag X1, Melrose Arch, Johannesburg, South Africa, 2076. Tel: +27 11 214 4080, Fax: +27 11 214 4099 www.genesis-analytics.com FOREWORD The need to provide for funerals is one of the key drivers of financial behaviour for many South Africans and has led to a relatively sophisticated and widely accessed informal financial sector. It is estimated that over 6 million people currently belong to burial societies where an estimated R6 billion is invested every year- in addition to the wide usage of stokvels (or savings clubs). These informal groups play an extremely important role in mitigating the risks of poor households and, interestingly, are often complemented or supported by formal providers - as can be seen in the Financial Diaries project1. However it was evident from the scoping study FinMark Trust completed on making insurance markets work for the poor2, that the existing legislative and regulatory environment was especially inhibitive to the potential graduation of the so-called „informal mutual assistance (common bond) organisations‟ ability to become insurers in their own right. At the same time, however, there is a heated debate about the extent of abuse in both the informal and formal funeral insurance market. In light of the above, the following report sheds light on the operations of this key market (from formal to informal), assesses the extent of the abuse and current regulatory environment and proposes some amendments to the current regulatory regime.
[Show full text]