A helping hand in tough times
The effects of the devastation caused by the recent Western Cape storms and Knysna fires is something that will unfortunately stay with the country for many years to come. As families rebuild, we will no doubt hear stories of heartache and fear as they relive these experiences.
One of the most positive things to experience is how people pulled together after the crisis to assist those who have been affected. While this has been very welcome, the best assistance to families following disasters such as these come from insurers.
FAnews spoke with Santam and Old Mutual Insure to find out how the disasters impacted the industry.
Major impact
The ferocity of the devastation took many people off guard, the same applied to the industry. Speaking at a recent industry function, some of the industry’s most prominent brokers mentioned that this could be the biggest claim in South Africa’s history.
“Certainly the Cape storms and the devastating fires in the Southern and Eastern Cape will have an impact on the industry as most of the short term insurers would have been exposed to claims and as a result have to carry the losses on behalf of policyholders,” says John Melville, Executive Head of Risk Services at Santam.
Hennie Nortje, Executive for Claims Centre of Excellence at Old Mutual Insure, says that compared with the Saint Francis Bay fires, there are at least five to six times more dwellings that have been damaged in Knysna. News reports suggest that the damage caused by the Saint Francis Bay fires was about R500 million. That would mean that the damage caused by the Knysna fires could cost billions of rands.
“For the insurance industry, the damage caused by the disasters is really big and will test the combined resources – financial or otherwise – of the industry,” says Nortje
An issue of quantum
It takes a while for families to regroup and gather their thoughts after living through disasters such as these. So the insurance claims following these disasters will take a while to land on the desks of assessors and underwriters.
Melville points out that at the time of publishing of this newsletter, Santam has received in excess of 1 000 claims following the damaging storm in the Western Cape. The majority of the claims related to wind damage, although the company has received a number of water damage claims as well.
“The most severe damages are to large structures where roofs have been blown-off and where buildings have collapsed. We treat more manageable claims digitally at this stage and we have a team of desk-based assessors who are dealing with these claims. In the greater Southern and Eastern Cape, we are dealing with a number of complete losses of houses,” says Melville.
As a business, Melville points out that Santam is adequately reinsured against such catastrophes and the risk retention the company holds is R100 million.
“The claims that we have seen coming through thus far are well above R100 million and will be adequately covered through our re-insurance programme. We note that the fires and severe storms are very unusual events and our reinsurers are also of the same view. While there may be an impact on premiums, we do not expect a severe knee-jerk reaction from reinsurers and insurers,” says Melville.
“Old Mutual Insure has received hundreds of claims with damage in the hundreds of millions of rands (for the fires only) to date. We have received many multimillion rand claims. On our largest claim, we were able to make a R15 million payment on the claim for a college on the day the claim was reported,” says Nortje.
The value of insurance
Another factor that needs to be considered is that these disasters are happening during one of the toughest economic climates that the country has experienced since 1994. It is during this time that economists say that insurance products take a bit of a back seat and are not seen as a priority.
However, the value of insurance following the storms and fires cannot be understated. “Damage and losses by fire, severe weather or other risks such a theft can prove costly and can prove to be a serious setback for any individual, family or business. Unfortunately, it is only after such debilitating events that policyholders appreciate the role and value insurance plays in our modern society. We would caution consumers to carefully consider the implications of being caught without insurance or with insurance cover that doesn’t deliver on what was promised. We would also encourage people to speak to their broker or insurer to ascertain the full extent of their insurance cover for building and structural insurance for their homes, their household contents and their motor vehicle,” says Melville.
Editor’s Thoughts:
The last thing a person who has lived through a disaster wants to think about is how they are going to rebuild. Helping hands are needed during times of personal tragedy; brokers and insurers are the personal superheroes needed. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
