Small Insurers Offer Flexible, Affordable Life Cover to Low-Income Market
October 11, 2018
Many people in South Africa earn a small income. So they have given up on insurance that prepares them for the unknown future. But now small insurers have come to the rescue.
If they research in insurance, the local insurance companies they are familiar with have high prices. Therefore their services and products are essentially for the higher income market.
Consumers dislike the complicated policy descriptions. These are just some of the reasons why so many millions of South Africans don’t have insurance.
Also some of the bigger insurance companies are exclusive with their coverage. They have an extensive screening process. And by the time you’ve given them your age, your salary and where you live, they’re no longer interested.
Small Insurers step into the Low Income Market
Now, however, smaller insurers are making it possible for low-income earners to have life cover and affordably too. There are insurance companies who cater to the needs of low income earners and they understand their financial situation.
These smaller insurance players such as Assupol and Hollard are starting to offer value-added products that were once reserved for the middle to high income earners. the traditional players had only offered to middle-and high-income earners.
Life insurance is becoming more affordable to low income earners because where funeral cover has profit margins of about 5%, underwritten life cover halves this at about 2%. Now smaller insurers are combining funeral- and life cover.
Traditional insurers such as Metropolitan and Sanlam have also started providing underwritten life protection for low-income earners. CEO at Sanlam says that the industry is having to find ways to drive down the costs of offering financial services.
National Treasury informed parliament on the new Insurance Bill which makes provision for affordable insurance to low-income South Africans. To open up to higher risk people, insurance companies are going to have to re-evaluate their operating models. They need to understand that low-income consumers have a different set of need that high income consumers.
By ensuring simplicity in product offerings, these small insurers will be able to penetrate the low-income market. The low income market also needs education about the value of insurance.
In 2018, the insurance industry has had to become very innovative, offering products which are more user-friendly. Small but well established financial services companies can now offer policyholders the flexibility to customise their life cover based on their needs and their pocket.
Education on Affordable Insurance Products Important
CEO at Hollard, Saks Ntombela believes that while it is essential to make life insurance affordable to low income consumers, plenty of consumer education will be required. He added that funeral cover was one product that the low income market understood very well and that Hollard were using it to extend life cover by combining the two.
The new products are going to ensure that those who earn a low salary don’t have to feel left out. A time of protection has been ushered in for those earning a small salary, putting away the perception that there is no money to be made with low income earners.
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All info was correct at time of publishing