Global increase in natural disasters to take a toll on South African consumers

Natural disasters, both locally and around the globe, are having a marked affect on both insured and uninsured South Africans. This trend highlights the increasing need for improved consumer education in the insurance industry, in order to protect clients from unnecessary financial loss.

This is according to Adam Samie, Chief Executive Officer at Lion of Africa Insurance, who says that while they may not be an insurance catastrophe, the recent fires and flooding around South Africa are certainly proving to be a social catastrophe.

?The recent flooding in Gauteng and fires in and around the Western Cape has done some serious damage. Unfortunately, the vast majority of those affected live in outlying areas or informal settlements and do not generally have an awareness of, or access to, insurance products. As a result, it is the local communities who are suffering most, particularly those in informal housing.?

Samie says this situation highlights the need for the local insurance industry to do more to educate consumers about the risks of being either uninsured or underinsured, as well as ensuring a broader range of people have access to affordable risk products.

?When it comes to financial education, much of the focus of business and government tends to be on encouraging people to save more. However, in many instances, protecting your assets is as important as growing them and we need to find ways to communicate this to the broader South African market.?

However, he also warns insured consumers that the natural disasters that have occurring around the world are likely to impact on South African insurance policies and certain premiums. ?Only five months into the year, the global insurance industry is facing a payout of US$42 billion. As most re-insurance companies are global companies, this means that any further catastrophes this year could cause the market to harden, making it difficult for many re-insurers to underwrite risks in areas prone to natural disasters, including some areas of South Africa.?

Samie says it is therefore essential for consumers to find out their risk status. ?This means finding out about the flood line in their area and whether or not they are living in a fire-risk zone and ensure that they take simple steps to minimise any potential impact.

?For example, particular items of value in a home should not be kept below that flood line and one should also try to avoid any type of design or innovation that would require excavation on the property that would then take the property even further down the flood line.?

Samie says that while we cannot prevent natural disasters from occurring, it is possible for those living in high risk areas to minimise their impact by taking adequate financial and practical precautions - and insurers should communicate effectively to consumers in order to encourage them to do so.