Insurance pay-outs critical in rebuilding communities
On Sunday, 11 November 2012, a fire tore through St Francis Bay in the Eastern Cape, destroying or severely damaging 76 luxury holiday homes. Initial assessments put the insured losses at between R300 and R500 million, making this one of South Africa’s mo
Tragedies such as that suffered by the small holiday town provide an opportunity for the insurance industry to demonstrate its value. Within hour of the event, insurers were assessing the losses suffered by their policyholders and making interim payments to assist those who had lost their permanent homes, holiday homes and moveable possessions. “The prompt and proactive response following the fire tragedy at St Francis Bay is a dramatic demonstration of the vital role the insurance industry plays,” said David Harpur, Chief Executive of the Insurance Institute of South Africa (IISA).
Costs mounting
Major insurers were quick with feedback on their exposure to the disaster. Alexander Forbes Insurance said it was exposed to approximately R45 million. “We insure about 100 homes in the area and claims have been reported on 14 of them,” said Gari Dombo, MD Alexander Forbes Insurance. “Some were insured for both buildings and contents and others contents only”. He observed that additional costs associated with alternative accommodation or loss of rent could push up the ‘loss’ claims by up to 25 %, depending on how long it takes to rebuild.
Thatch Risk Acceptances (TRA) estimated its claims from the St Francis fires to be in the region of R100 million. “By close of business on Tuesday [13 November] we had 20 individual homes gutted as well as eight units in Sandpiper Body Corporate,” noted Natasja Blok, Managing Director of TRA. “The average St Francis home plus contents is valued at far more than one might anticipate, these are luxury holiday homes”. Sums insured on TRA’s books were between R1 million and R16 million per household. Mutual & Federal estimated its exposure at more than R20 million and admitted that 10 units in the Royal Wharf complex as well as two free-standing homes damaged by the fire were on its books. Santam acknowledged some R21 million claims received by 15 November.
Insurers will ultimately provide the capital to rebuild the large number of gutted homes in St Francis, creating much needed jobs and providing the local construction industry with some long-overdue relief. Local businesses will also benefit as the affected homeowners use their pay-outs to replace personal possessions. “Thanks to the insurance industry the community of St Francis Bay will be restored to its former condition,” said Harpur. The wider community will also benefit from the ‘silver lining’ of new jobs and increased household disposable income, albeit over the short term. Over time insurers will inject roughly half a billion rand into the surrounding community to assist it in rebuilding damaged infrastructure and replacing lost possessions.
Moving beyond catastrophe to corporate social responsibility
South Africa’s insurers are doing their part on other fronts too. The industry has been on a charm offensive in recent years, with many insurers either raising funds for worthy causes or contributing to corporate social responsibility projects. There are numerous examples worth mentioning. Etana Insurance’s 4th annual DaREDevil Run for Male Cancer Awareness was held on 2 November this year. More than three thousand registered runners took part and helped to raise approximately R250000 for Cancer South Africa.
Another positive contribution is Santam Limited’s decision to partner with Grain SA for a second year by sponsoring and participating in the Young Leadership Laboratory, a forum where tomorrow’s agricultural leaders can network, learn more about industry issues and work together to find solutions to various challenges. Other organisations involved in the initiative include the Department of Agriculture and Forestry, businesses involved in agriculture such as banks and insurers, as well as commercial and emerging farmers. “Interactive forums such as the Young Leadership Laboratory give young agricultural leaders the opportunity to engage with each other and relevant leaders to prepare them for their roles as industry, farmer and government representatives,” said Riaan Louw, Head of Agriculture at Santam.
Education gets special attention
Many industry stakeholders are doing their part through education initiatives. One such example is the Mutual & Federal decision to sponsor the Winning Teams program in the 100 worst performing schools in the Capricorn district in Limpopo province. Winning Teams is a proven intervention in public secondary schools allowing Grade 10 to Grade 12 learners to close the core knowledge gap that currently exists in subjects such as Maths and Science. The project ties in with the insurer’s overarching CSI focus on education, crime prevention and youth rehabilitation, as well as agricultural socio-economic development.
“We are passionate about improving the Maths and Science pass rates in our country, as this ultimately benefits the short-term insurance industry by increasing the skills base,” said Vuyo Lee: Executive for Brand, Customer and Transformation at the insurer. “We recently visited one of the schools in Capricorn and were blown away by the overwhelming support from the school teachers and principals and the eagerness and excitement with which the learners tackled the various study tasks”.
Insurers also contribute to fraud prevention projects through the South African Insurance Association (SAIA), which has donated more than R17 million to Business Against Crime South Africa (BACSA) since 2003. Each of these examples illustrates how the insurance industry is shaping the South African economy and society.
Editor’s thoughts: The corporate social responsibility projects mentioned in today’s newsletter are the proverbial ‘tip of the iceberg’. What is your favourite insurance-backed social cause – and where would you like to see insurers involved going forward? Please add your comment or send it to [email protected]
