A win-win for insurer and insured

The newspapers are littered with the human cost of crime. But have you ever stopped to think about the financial implications of living in the ‘wild wild west’ of the emerging world? Forget for a moment the damage done as thousands of skilled professionals seek safer pastures and focus on the actual cost of fraud, trafficking and violent crimes that blight our beautiful land. According to Charles Goredema – an expert at the Institute for Security Studies – ‘big ticket’ crimes ‘cost’ the country more than R110.5bn each year.

In a Sapa article Goredema estimates the ‘profits’ from financial crimes at between R80bn and R90bn each year, followed by drug trafficking and smuggling of goods (R10bn) and predatory crimes like robbery, house breaking and theft ( R500m). Do we have your attention? This information is of importance to the short-term insurance industry because vehicle hi-jacking, vehicle theft and home and commercial robberies account for a huge slice of the short-term claims paid each year. Stamping out crime is a win-win for insurer and insured – it creates the dream insurance scenario where premiums go down while underwriting margins go up.

Insurers pay out billions each year

It doesn’t take rocket science to work out that insurance companies shoulder much of the country’s crime burden. Santam’s claims and loss-adjusting expenses in the 2008 year amounted to R9.422bn (of which R1.415 was recovered from re-insurance contracts). The bulk (67%) of the group’s R14.179bn gross premium for the year falls in the Motor and Property categories – where household and vehicle crime occurs. Another large local insurer, Mutual & Federal, reports R5.220bn claims paid net of re-insurance in the latest year.

Although neither insurer mentions the impact of crime in their latest report they still do their part to combat it. Short-term insurers, through the South African Insurance Association, make regular contributions to Business Against Crime South Africa (BACSA). According to SAIA “The short-term insurance industry is adversely impacted by the unacceptably high levels of vehicle crime and insurance fraud – and we are concerned about the increases in house and business robberies.” They make repeated donations to BACSA, particularly for use in projects to reduce vehicle crimes. These initiatives have helped to reduce certain crimes in this category by 30% since 2002.

Earlier this year BACSA commented on President Kgalema Motlanthe’s opening address to Parliament. They bemoaned the “low probability of a criminal being investigated, arrested, charged, prosecuted and sentenced as evidenced by the 2007/8 national statistics, which showed that only 13.4% of all reported crimes, 12.6% of contact crimes and 7.3% of property crimes resulted in a conviction.” And the latest SAIA/BACSA initiative hopes to improve the situation. They funded the training of 500 detectives from the Gauteng SAPS. Commenting at the graduation ceremony held in Johannesburg recently, SAIA notes: “When we were approached by BACSA in 2007, we readily saw the merits and a wonderful opportunity to support the capacity-building within our SAPS Detective Services.”

More action – less electioneering

If only politicians could take the same ‘hands on’ approach. They’ve been having a field day with the crime topic as they canvas support for the country’s fourth democratic elections. We’re puzzled by the ANC’s policy of getting tough on corruption while including the likes of Winnie Madzikizela-Mandela in the fifth slot on its election list – not to mention the party’s presidential candidate. DA leader Helen Zille has been shouting them down for months now. “The problem with the ANC is that it doesn’t have the political will or leadership to stamp out crime,” she says. Their focus is on protecting the party’s top brass by shutting the Scorpions and throwing the South African Police Services and National Prosecuting Authority into disarray. She promises that the DA “will catch the criminals and then prosecute, convict and punish them” when they win the Western Cape…

That’s great for Cape Town; but what must the rest of us do? The average Joe doesn’t receive R1m per month for a security entourage. Instead we have to rely on an understaffed, poorly resourced and demoralised police force for protection. And government’s failure to take strong action on National Police Commissioner Jackie Selebi and the reluctance to appoint a new police chief in his absence inspire little confidence. Until government gets tough on crime we’re going to have to continue paying the so-called security tax – hiring armed response companies and private security guards to provide the protection we expect from the state!

Editor’s thoughts:
The best way to tackle a massive problem is to break it down into manageable pieces. What South Africa needs is a government focused on combating crime rather than creating smoke screens to hide it! Do you think the current government is doing enough to combat violent crime? Add your comments below, or send them to gareth@fanews.co.za