A RECENT survey by research company ikapadata shows township residents in Johannesburg, Cape Town and Durban still do not have formal insurance despite government’s encouragement to short-term and long-term insurers to make packages accessible to them.

Jan Schenk, a director at ikapadata, said 66% of the 917 respondents had no formal insurance and only 35% were planning or considering to get insurance in the next 12 months.

"Funeral cover remains by far the most popular from of insurance, with about two-thirds of the insured respondents claiming to have one. In contrast, just about one in five of all respondents has private healthcare," he said.

Mr Schenk said cost was the most important reason people lacked insurance, with half of those who had no insurance saying it was too expensive.

The South African Microinsurance Regulatory Framework, a Treasury policy document on the existing market landscape for low-income households and a proposed comprehensive policy framework, is being tabled in Parliament, with implementation likely to follow in 2014.

Jabu Malele of KPMG insurance blamed a lack of trust between consumers and insurers for the sector’s low penetration of the lower-income market segment.

"It is clear other players in the market have seized the opportunity to service the market due to ineffective regulation and little appetite from traditional insurers, which is the reason there are numerous funeral parlours and burial societies," he said.

"In our view a standalone, simplified microinsurance act will be welcomed in order to demarcate regulation and participation in this segment.

"The framework requires that all participants be regulated and existing insurers can either act as reinsurers for microinsurers or register a new separate microinsurance entity to participate in this sector."

The ikapadata survey found other informal alternatives to insurances were moderately popular, with 30% of respondents saying they were part of an informal saving scheme such as a stokvel.

"In many cases stokvels share their purpose with formal insurance. The amounts stokvel members pay into these saving schemes are comparable to those paid by insurance holders as about half pay more than R200 a month," Mr Schenk said.