Plan to protect poor against insurance abuse

The complexity of insurance products exposes the poor to abuse and manipulation, the national Treasury said yesterday.

The complexity of insurance products exposes the poor to abuse and manipulation, the national Treasury said yesterday.

Releasing its discussion document on proposed regulations for the insurance industry, the national treasury said it was necessary to balance the need to grow the insurance market and consumer protection.

"Given the inherent complexity of insurance and the vulnerability of the target market, there are ... risks of potential abuse and mis-selling.

"A balance therefore needs to be struck between market development and consumer protection," said the treasury.

The proposed regulations would go a long way towards facilitating the provision of insurance products while at the same time ensuring low-income earners were treated fairly.

"Accordingly, the goal of the paper is to develop a coherent and clear regulatory framework that will encourage and facilitate the provision and distribution of good value, low-cost products that are appropriate to the needs of low-income consumers by a variety of market players," it said.

Further, the proposed regulations required insurance companies to acquire a special licence that would allow them to sell insurance products targeted at low-income earners.

"This licence will be available to existing registered long-term insurers, short-term insurers, friendly societies as well as public companies and co-operatives which comply with the registration requirements," the treasury said.

Interested parties can send comment on the document to Katherine.Gibson@treasury.gov.za - Sapa

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