Unlocking Financial Literacy with Anthropology: A Beacon of Hope Emerges in South Africa’s Insurance Sector

The insurance sector in South Africa is both large and intricate, and marked by formidable competition. Fuelled by high penetration and density of insurance products, this sector has grown to a substantial 18 per cent share within the broader South African financial landscape. Situated within the insurance sector lies the funeral industry, which generates approximately R10 billion annually, half of which is derived exclusively from funeral insurance premiums.

While the funeral as well as funeral insurance premiums industries are growing, the same cannot be said about its consumer market. It has often been reported that over half of the adult population in South Africa do not understand basic financial concepts such as interest rates, inflation, and savings; and that financial literacy is particularly acute in rural areas and among low-income groups where access to financial education remains quite low because of limited access to financial education.

Financial literacy is understood as ‘a combination of financial awareness, knowledge, skills, attitude, and behaviours necessary to make sound financial decisions and ultimately achieve individual financial well-being’ and for some time now there has been a framework used to determine the desired competencies consumers should have in a structured manner.

On an occasion that transpired in 2019, Demographica, a prominent B2B agency active within the Financial Services Sector seized an opportunity to collaborate with a major insurance conglomerate which was engaged in the development of a new insurance product. Together, this alliance conducted a Consumer Education Financial Awareness campaign in the North West region which explored the role that funeral and life cover plays in consumers’ lives, and the need for educating the consumer market on the various aspects of risk and planning.

In the midst of the campaign, the anthropology research team unearthed some deep insights. These revelations unveiled a common misconception many people, including insurers, have on how consumers in low income groups understand and consequently approach personal financial management. When we unpack these key insights, we note that while consumers did not appear at first to fully understand the function of a funeral policy and even sometimes used financial terms interchangeably, they knew all the benefits included in their policy and in their own words, were aware of the many different ways to manage their finances. But here is the interesting bit: Consumers that we researched in the community also demonstrated a keen interest in the Consumer Education Financial Awareness campaign and were very open to learning how to improve their financial awareness to improve their and their families’ financial futures.

In conclusion, the findings from our anthropological research within South Africa’s insurance sector shed valuable light on the multifaceted nature of financial literacy, which should be considered as a basis for measuring the current state of financial literacy. It is in no way exhaustive or representative of what is happening on the ground everywhere, but if we are to understand financial literacy in its entirety it is essential to acknowledge the existing gap in understanding among consumers.

Written by Chiedza Gwanzura, Business Anthropology Manager at Demographica and co-founder of the Labyrinth Behaviour Collective.