Insurance is a tool for risk management. Purchasing insurance means you acquire protection against any unpredicted economic loss. If any unfortunate event happens to you, the insurance company reimburses you or someone of your selection.
Rules and Regulations to Start an Insurance Company in South Africa
In South Africa, starting an insurance agency can be challenging, but with the right preparation and guidance, it can be a valuable investment. Here are a few important steps you must follow to establish an insurance company in South Africa.
- First, make a business plan.
- Next, select an authorized financial service provider.
- Third, register with the Financial Services Board (FSB).
The Insurance Act, the Short-Term Insurance Association (STIA), and the Long-Term Insurance Association (LTIA) regulate and handle all significant insurance and reinsurance business contracts.
There are two types of insurance approved by the South African government. This includes indemnity insurance and non-indemnity insurance.
Indemnity insurance covers legal flaws that cannot be solved properly or whose solutions are extremely expensive and can be time-consuming. So, to protect yourself from paying high legal fees to resolve the matter, you should obtain indemnity insurance.
Non-indemnity insurance is another type of insurance in which the insurer and insured sign an agreement. According to this agreement, the insurance company will pay a sum of money if some unfortunate event happens to you.
How much investment is needed to start an Insurance Company in South Africa?
You must have a minimum of ZAR5 million to start short-term insurance and ZAR10 million for long-term insurance.
What is short-term insurance in South Africa?
Short-term insurance offers protection for a limited time. Short-term insurance provides you with partial protection against loss or damage to your private property when a specific event occurs, such as a car accident, car theft, hijacking, or damage to household objects or property. To start a short-term insurance selling agency, a minimum of ZAR5 million of investment is required.
What is long-term insurance in South Africa?
A long-term insurance policy protects the span of your life and your capacity to generate income. Policies like funeral insurance, life insurance, disability insurance, and income protection are examples of long-term insurance in South Africa. You will require a minimum of ZAR10 million to start a long-term insurance sales agent.
How do I become a member of the South African Insurance Association (SAIA)?
To join the South African Insurance Association (SAIA), you must fulfill the following conditions:
- Your agency must be registered with the Financial Services Board (FSB).
- You must have a license to sell short-term insurance.
- You and your insurance company must be members of OSTI (Ombudsman for Short-Term Insurance).
Is it profitable to start an Insurance Company in South Africa?
According to the statistics, the South African financial sector comprises almost 18% of the insurance industry, which makes it the fastest-growing business in South Africa. So, one can say that establishing an insurance agency in South Africa is a profitable business.