RGA actuary Greg Becker discusses the lessons that can be learnt from the South African protection market.
The South African insurance industry has developed an endorsement standard based upon the Zulu word meaning "to stand on your own two feet."
The initiative encourages the take-up of insurance among low-income earners, and it has been very successful.
But could it work here in the UK?
A set of product standards need to be met for a product to be able to carry the Zimele logo.
The standards have been carefully structured not to impinge on the products sold by the incumbent intermediaries, for example, the sum assured on life cover has been capped at a relatively low sum assured so that ‘more traditional larger sum assured life insurance policies' are precluded from Zimele's scope.
The principles based standards cover many areas including policy wordings, underwriting, ratings, cover details and more. Sales of products that meet the requirements are tracked and since launch in 2007 in excess of five million compliant policies have been sold.
Participating insurers have been buoyed by the success and are looking at ways to extend the initiative. As an example, the extension of the standards to include mortgage insurance products is being considered.
Part of the success also lies with the non-traditional sales channels being used. Some Zimele products are sold through high street stores with recognised brands who sometimes have nothing to do with insurance or financial services.
With the welfare state cutting back on benefits, the RDR likely to reduce the number of IFAs, and a regulator looking positively at simplified products and simplified advice, this could be the type of initiative needed to move the industry forward from Payment Protection Insurance and other mis-selling scandals.
The Zimele initiative shows that an existing insurance industry can agree on a set of standards, and that a regulator can permit different sales processes and practices for products that are simple and which treat customers fairly.
This practice can be rolled out without curtailing product innovation and the free market, and that customers can engage with products that meet their needs.
Greg Becker is product development actuary at reinsurer RGA, and his full article can be found in this month's COVER.
