Increased civil disobedience prompts review of insurance covers
Over the past two years, South Africa has seen an increase in labour strikes with residents of impoverished communities taking to the streets to voice their dissatisfaction over the poor level of service delivery to their areas. Added to this, is the increasing spate of wage strikes by mine workers.
While the right to strike and to stage a protest is protected by the South African constitution, the concerning aspect of the growing number of strikes and protests is that they are becoming increasingly violent in nature. This has the potential to cause extensive damage to businesses and policyholders who are at risk of incurring significant losses. To avoid gaps in cover, customers should extend their insurance coverage to include cover for strikes, riots and civil commotion.
Quantifying the increasing trend
Between January 2013 and 9 Feb 2014, South Africa recorded no less than 430 service delivery protests, an average of 33 per month, or one per day according to the Institute for Security Studies. Gauteng leads by a massive margin in terms of violent protests, followed by KwaZulu-Natal and Limpopo.
A report by Aon South Africa shows that at least 10 people have died during such protects, and both government and private property have been seriously damaged, with protesters setting fire to government buildings, private properties, homes of government officials and vehicles caught in the fray.
According to Graeme Fuller, Quality & Technical Specialist at Aon South Africa, standard insurance policies available through private sector insurers do not provide cover for damage to assets as a result of these types of events as they are precluded from underwriting these risks.
"Cover is available in South Africa through Sasria, which was originally founded to provide cover for politically motivated riots. It covers damage caused by riot (both political and non-political), public disorder which includes labour disturbances, civil unrest, strikes and lockouts. It is the only organisation in South Africa authorised to provide insurance cover for losses caused as a result of these types of events," explains Fuller.
Keeping Sasria busy
While Sasria covers strike action, it must be noted that there are exclusions in Sasria's cover. These include war, insurrection, rebellion, revolution and military or usurped power.
According to Sasria's 2013 annual report, its claims frequency increased by 91%, which was primarily driven by labour strikes. Claims severity increased by 135% when compared with 2012 and this trend continues.
Sasria's importance seems clear as the uncertainties in the socio-economic environment mean that special risks, as defined in Sasria's terms of reference, have become a permanent part of the risk management landscape. This is being driven by challenges of industrial action, workplace disruption, social unrest and service delivery protests, which is a frightening reality in the current South African socio-political landscape.
Michaela Phillips, Portfolio Executive at Emerald Risk Transfer, reports that another point that should be noted is that the original intention of Sasria, by including the net profits under the primary coupon, was to cover the larger commercial risks where the combined material damage and business interruption sums insured fell within the R500 million primary limit. It was not aimed at the large corporate's or mining houses, and this is a common misunderstanding amongst brokers.
In event of a loss, the coupon would pay the material damage claim first, the inclusion of net profits or standing charges does not increase the limit of the coverage the client has. The primary coupon limit remains at R500 million, irrespective of the cover being bought. Where values are in excess of R500 million, combined between material damages and business interruption, the insured should consider top up products to ensure full coverage in respect of profits in event of a potential claim, and the primary layer having been eroded by material damage losses.
Sasria has experienced an influx of claims since 2010. Taking into account what has been reported in the media, we are of the view that this trend will remain going forward", says Thokozile Ntshiqa, Executive Manager: Stakeholder Management Division.
Claims Manager Themba Sibiya indicates that the frequency of claims since 2010 has increased dramatically.
"2013 was the company's most significant year in terms of pay outs where it had to pay out R200 million for the Farm workers' strike and about R50 million for the Truck drivers' strike," says Sibiya.
The most significant areas impacted by strikes since 2006 are Gauteng, followed by the Western Cape and KwaZulu-Natal in third place.
South Africa at the moment
While the South African socio-political landscape is not a cause for immediate panic, it is an area of concern given the frequency of service delivery protests.
As we move forward towards the elections in May, there will be an air of uncertainty surrounding South Africa's socio-political scene. There will be a lot of campaigning as the elections draw closer with fresh assurances given by the ANC regarding their capacity to resolve any service delivery issues. But how will these assurances be received? This uncertainty may be fuelled by the disillusionment with assurances which were not delivered in the past, and the rhetoric of opposition parties who are quick to point out the failures of the ruling party.
Editor's Thoughts:
There are a number of options in the industry which can be purchased as a top up to the standard Sasria cover. It may be a significant balancing act to find the right product which suits the specific needs of policyholders, but is important to have the right cover in order to avoid your client suffering a loss from which they may never be able to recover. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
Comments
Where does this tendency leaves the normal home owner _ we are already paying for private security due to the total failure of an ineffective police force, whereby the government collecting big money regarding VAT on such security purchases. Government has no incentive to improve policing – they are saving millions in the process. Similarly – if the public now need to purchase additional cover from SASRIA it is exactly the same conundrum. The less they do – the more they score.
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