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Local insurers offer premium relief

11 May 2020 Gareth Stokes

South Africa’s short-term insurers and UMAs are doing their part to alleviate the financial impact of the lengthy nationwide lockdown implemented to flatten the coronavirus infection curve. Leading brands such as Elite Risk Acceptances, Discovery Insure, Old Mutual Insure, and Santam have all announced initiatives aimed at assisting their commercial and personal lines clients. They have also committed millions of rand to help small and medium businesses (SMEs) in their supply chains, as well as donating to social initiatives such as the Solidarity Fund. In the following paragraphs we consider some of the relief offered by insurers to their personal lines motor policyholders, before reflecting on the impact of these measures on short-term insurance brokers.

Wreaking havoc on personal finances

“We recognise the long term impact a disruption of this nature can have on personal finances and business operations,” said Garth Napier, managing director of Old Mutual Insure. Ramping up efforts to support customers manage the financial fallout of COVID19, Old Mutual Insure has set aside R60 million towards 15% motor premium discounts in April 2020 and 10% in May 2020 for qualifying personal lines customers. Qualifying commercial and agriculture customers will receive a 10% motor premium discount for both months. 

Santam said it had committed more than R400 million to COVID19 relief efforts to date. The insurer initially set aside R135 million to help commercial and personal lines clients; R20 million to assist SME suppliers; R10 million for the Solidarity Fund; and R10 million for other corporate social initiatives. On 21 April it added R155 million to cover the cost of refunding 20% on all motor vehicle premiums paid by its commercial and personal lines clients during April 2020. Lizé Lambrechts, Santam CEO, said the insurer was “absolutely committed to playing [its] part to help alleviate some of the devastating impacts of the virus”. 

Lockdown is reducing motor risks

Reducing motor premiums is an easy win for short-term insurers due to the significant reduction in risk exposure during lockdown. Christelle Colman, managing director at Elite Risk Acceptances said that a significant reduction in motor claims during lockdown made it possible for the specialist insurer to grant a 25% discount to all of Elite’s comprehensive motor premiums for April and May 2020 combined. The good news for the UMA’s short-term insurance brokers was that their fees and commissions would still be calculated based on the undiscounted (original) premium. 

Colman, who is frequently quoted in digital and print media, offered a few pointers for clients that need help in reducing their monthly short-term insurance premiums. These included temporary reductions in cover (by changing cover on an unused vehicle from comprehensive to third party fire and theft, for example) and increases to certain policy excesses in line with reduced risk. Other tips include undertaking regular maintenance on homes and vehicles; updating the sums insured on policies; and to shop around. But her best advice was to steer policyholders towards the broker distribution channel. “Your short-term insurance broker knows the industry and is experienced in interrogating specific circumstances and risks – they are also experts in matching the right cover to your budget,” advised Colman. 

Napier said that premium relief was a sensible strategy to assist struggling policyholders. He was interviewed by CNBC Africa on 29 April to inform viewers about the various economic relief initiatives implemented by short-term insurers consequent to COVID19. “We have seen a big drop in our motor claims, and that is part of the reason for giving premium relief to customers,” he said. “Customers are not using their cars as much and they are mostly parked in locked garages”. 

Telematics pioneer enjoys data edge

Discovery Insure is in the enviable position of having real-time data on many of its personal lines motor policies thanks to telematics technology and the Vitality Drive programme. The insurer already analyses reams of driver behaviour data to reward individual insureds for risk appropriate behaviour. COVID19 relief has been offered via May premium reductions based on actual kilometres travelled in April. Drivers on the Vitality Drive programme would qualify for a 25% premium reduction on vehicles that covered fewer than 500km. A 15% premium discount would apply to all other motor insureds.

The nationwide lockdown has forced financial services businesses to reconsider how they accommodate staff and deliver on their commitments to key stakeholders. “We expect around 90% of our staff will continue working from home [during Level 4],” said Napier, adding that the crisis was highlighting the longer term viability of remote working. The lockdown will not only change how firms conduct their business; but forever rewrite the rules of engagement between insurers, insurance brokers and policyholders. 

“Customers will have a slightly different view on the role insurance plays in their lives, and the importance thereof – certainly, commercial clients will take a long look at how their covers have performed through the crisis,” said Napier. He sees personal lines motor business, a huge component of the short-term insurance industry’s premium, contracting in coming years as individuals opt to work from home, using Uber and ride-sharing services to get around. But the real challenge facing insurers and their intermediated distribution forces is how to realign their business practices with the post-COVID19 world. Much of their will come from policyholders.

Cover for a post-COVID world

“Your clients will want to pay only for cover that is absolutely necessary,” concluded Colman. “Short-term brokers will have to play their part in reducing client’s covers to the essentials required for survival in an extremely challenging post-lockdown economy”. 

Writer’s thoughts:
South Africa’s large short-term insurers are painfully aware of the financial impact of the nationwide COVID19 lockdown on both personal lines and commercial policyholders. They have committed millions of rand to ease policyholders’ burdens via payment arrangements, premium deferments, premium reductions and other initiatives. Are you happy with the assistance offered by your main insurance partners to your clients (their policyholders) to date? And do you feel that they have done enough to address your concerns around the impact of reduced premiums on short-term insurance broker commissions and fees? Please comment below, interact with us on Twitter at @fanews_online or email me us your thoughts [email protected].

Auto & General have also offered the following statement

R320 million Relief Fund

Our holding company responded to the President’s call to unite in the fight against the Covid-19 pandemic with a pledge of R320 million. The focus areas for the financial contribution are multi-faceted in order to meet the very real and diverse needs over this time. 

  • R50 million has been donated to the National Solidarity Fund.
  • R200 million is being used to primarily support feeding schemes in our neighbouring communities.
  • A relief fund of R70 million was also put in place to assist small businesses, including those within our supply chain and over 2 100 SMEs have been identified to receive assistance.

We also assisted #OperationCovid19 with a donation of R1 million for vital food items and provided additional funding to our Food Security Programme in Diepsloot.

R35 million in premium relief

We have made up to R35 million in premium relief available to our customers. Here are some of the other ways we’re helping them:

* If you’re retrenched and you have Cash Back Plus, your premium waiver could provide assistance with paying your premiums for up to 6 months.
* Pausing all policy increases until July 2020.
* Using your Cash Back Plus to pay your premium (if you’re due for payout in 6 months or less).
* Reducing your premium by removing certain insured items during lockdown.
* No charge for car hire during lockdown, if you are currently using a hired car.
* Premium flexibility, we will do our utmost to assist, depending on your unique circumstances.



Added by SEELAN NAIDOO, 12 May 2020
I find it appalling that not ALL Insurer's have relief efforts in place for their customers... specifically on motor insurances. This is despite the reduced risk and limited claims. They know who they are?
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Added by Warwick Head, 11 May 2020
Insurers have offered a discount of 20-25 % however the savings as a result of limited claims must be far greater and it would be nice for insurers to confirm stats from last year to this year on what their claims ratios are . The limited amount of risk does not equate to the discounts offered!
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Added by Mark Cooper, 11 May 2020
All well and good, but group schemes run by some of these didn't get the premium relief memo.. :(

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