Insurance products standards to reach low- income consumers in South Africa: Help or hindrance? A review of the experience of Mzansi and Zimele insurance product standards ii VERSION 8 14/10/2011 Authors: Doubell Chamberlain Sandisiwe Ncube Grieve Chelwa Herman Smit Tel: +27 21 918 4390 Fax: +27 21 918 4391 E-mail: [email protected] Physical address: USB Bellville Park Campus Carl Cronje Drive, Bellville, 7530, South Africa Postal address: PO Box 610, Bellville, 7535, South Africa www.cenfri.org iii Table of Contents List of tables .......................................................................................................................... v List of figures ......................................................................................................................... v List of boxes .......................................................................................................................... v Preface ................................................................................................................................. vi Executive summary ............................................................................................................. vii 1. Introduction .................................................................................................................. 1 2. Financial Sector Charter context .................................................................................... 3 2.1. History of the Financial Sector Charter (FSC) .......................................................... 3 2.2. Monitoring and evaluation of Charter progress ...................................................... 4 2.3. Access to financial services pillar ............................................................................ 5 2.4. Insurance industry response to the FSC .................................................................. 7 3. Mzansi product standards ............................................................................................. 8 3.1. Development of short-term industry product standard .......................................... 9 3.1.1. The beginnings of the ‘Mzansi’ product .......................................................... 9 3.1.2. From conception to definition ........................................................................ 9 3.1.3. The Mzansi product ...................................................................................... 12 3.1.4. The move to Mzansi product standards ........................................................ 16 3.2. Impact of the Mzansi standards ........................................................................... 18 3.2.1. Mzansi, near-Mzansi and Access products .................................................... 19 3.2.2. Mzansi branding and marketing ................................................................... 26 4. Zimele product standards ............................................................................................ 28 4.1. Development of standards ................................................................................... 28 4.2. Targets, measurement and scoring ...................................................................... 34 4.3. The Standards ...................................................................................................... 38 4.4. Impact of the Zimele product standards ............................................................... 41 4.4.1. Adoption of standards .................................................................................. 41 4.4.2. Zimele products ........................................................................................... 43 4.4.3. Near-Zimele funeral products ....................................................................... 49 4.4.4. Zimele branding and marketing .................................................................... 52 5. Fundisa Product ........................................................................................................... 54 5.1. Development of Fundisa ...................................................................................... 54 5.2. Implementation ................................................................................................... 55 5.3. Features of the Product ....................................................................................... 56 5.4. Impact ................................................................................................................. 58 5.5. Emerging themes from Fundisa ............................................................................ 58 6. South African Retail Savings Bond ................................................................................ 60 6.1. Product design ..................................................................................................... 60 6.2. Product distribution ............................................................................................. 60 6.3. Factors contributing to success ............................................................................ 61 7. Microinsurance policy statement ................................................................................. 63 7.1. Microinsurance Policy Statement product requirements ...................................... 63 7.2. Market conduct regulation ................................................................................... 64 iv 7.2.1. The policy statement and the Charter standards .......................................... 64 8. Cross-cutting themes and conclusions ......................................................................... 66 9. Where the standards successful? ................................................................................. 70 10. Issues to consider going forward .............................................................................. 73 11. List of references ..................................................................................................... 77 Appendix A: The Mzansi product standards ......................................................................... 79 Appendix B: Zimele simplified wording template ................................................................. 80 Appendix C: Example of Zimele form D report ..................................................................... 84 Appendix D: Example of near-compliant funeral products ................................................... 85 Appendix E: Meeting list ...................................................................................................... 87 List of tables Table 1 Generic Access Standards ........................................................................................ 11 Table 2: Mzansi short-term insurance product timeline ....................................................... 13 Table 3: Mzansi insurance product premiums and sums assured in South African Rand ....... 14 Table 4: Summary of Mzansi policy document ..................................................................... 15 Table 5 Overview of Mzansi short-term insurance product standards .................................. 18 Table 6 Full-Mzansi product features ................................................................................... 22 Table 7 Near-Mzansi and Access product features ............................................................... 24 Table 8: Range of existing pricing as at May 2006 and proposed pricing for Zimele standards for R10,000 cover ................................................................................................................ 32 Table 9: Timeline of the development and launch of Zimele standards ................................ 39 Table 10: Approved Zimele standards .................................................................................. 40 Table 11: Companies listed as selling Zimele compliant products by ASISA .......................... 41 Table 12: Excerpt of December 2010 Form D report ............................................................ 44 Table 13: Features of selected Zimele-compliant products .................................................. 47 Table 14: Basic features of Zimele compliant products and near equivalent products .......... 50 Table 15: Features of the Fundisa savings product ............................................................... 57 Table 16 South African retail savings bond product summary .............................................. 60 Table 17 Application, registration and payment for RSA Retail Savings Bond ....................... 61 Table 18: Basic Features of Assupol’s Zimele and Non-Zimele funeral products ................... 85 Table 19: Basic Features of Metropolitan’s Zimele and Non-Zimele funeral products........... 86 List of figures Figure 1 Mzansi Insurance Brand ......................................................................................... 26 Figure 2: Zimele logo which accompanies all compliant products ........................................ 34 List of boxes Box 1: The role of the SAIA Access Committee ....................................................................... 8 Box 2: UK CAT standards ..................................................................................................... 30 Box 3: Formula used to calculate individual company targets .............................................. 35 Box 4 Mzansi Standards ......................................................................................................