Global warning for insurers and insured
When you hear in one week that at least 17 people have died from exposure to the cold, Port Elizabeth has had its coldest day in 52 years and Plettenberg Bay is covered in ice so thick it looks like snow, the likes of which have not been seen in living memory, you cannot help thinking this must be a global warning to insurers and insured alike.
Lloyd's of London have recently published their latest research suggesting that climate change will be more rapid than expected. A much greater element of catastrophe and unpredictability seems to be common.
Perhaps it is time for insurers to take a longer term look at their short-term insurance. Perhaps it is time to start building up catastrophe reserves to take account of the potential for greater and more frequent climate induced losses.
At the same time we are getting greater certainty about uncertainty. In South Africa we are also seeing a growing middle class. The acquisition of assets by a far greater number of people should lead to a larger pool of insurance persons. This needs an all-round, government encouraged, climate that goes beyond getting in spending. Insurance needs to made more generally available, simpler to understand and more accessible and affordable. The key to this outcome is not the growing burden of bureaucratic compliance that recent legislation has thrust upon the industry. It must be almost impossible for young enthusiastic independent door-to-door brokers to emerge into the market, having regard to everything they would have to go through to be authorised and compliant under the FAIS Act.
Policyholders generally and people who have built or are building in areas where sea levels or other water levels could threaten their assets must take precautions in advance. The appalling behaviour of motorists in bad weather is just one example of how little individual attention is paid to risk management. How many people who complain about losses caused by electricity cuts make a real effort to reduce their own energy consumption?
It has been shown over and over again that improved risk management is a major contributor to fewer losses. There are many insurance products nowadays which reward policyholders for a good claims record. The greatest reward however is not suffering the inconvenience and financial setback that any loss entails even if you are insured.
It is a global problem that needs interactive solutions. Insurance is traditionally a pooling of risks to spread the burden of losses. It would be better if insurance was seen to be a pooling of efforts to avoid losses and to minimise their impact.
Patrick Bracher, Director at Deneys Reitz
