Insurer of strike perils braces for flood of claims
The right to strike is enshrined in South Africa’s constitution. Strike action is typically used as a measure of last resort when wage negotiations between the employer and organised labour stall. In some cases it is used as a blunt weapon to press home o
Strikes are also associated with damage to business assets and widespread business interruption. As the mining sector strikes drag on, the media has also had its hands full reporting on a nationwide truck drivers’ strike. Over the past few weeks not a day has gone by without news footage of burnt out trucks as striking drivers “encourage” their non-striking colleagues to down tools in sympathy. The question top of mind for private sector businesses is: Who covers this damage. It is common knowledge that short-term commercial insurance should kick in for damage to assets and business interruption. It is also important to remember that Sasria SOC Limited (Sasria) exists as the insurer for such perils locally.
A monopoly on riot, strike and terrorism perils
“Sasria is a short-term insurance company for special risks that arise from strikes, terrorism, riots, labour disturbances and civil commotion,” says Thokozile Ntshiqa, Executive Manager: Stakeholder Management at the organisation. “We are the only institution that provides this type of cover in South Africa and enjoy a legislated monopoly over these perils”. It is advisable for consumers to ensure that they have this cover when purchasing insurance. The cover she refers to is “sold” to insurance consumers via Sasria agents – insurers that act on its behalf. The agent – or insurance company – carries out policy administration on Sasria’s behalf.
In the event an insured suffers strike damage the claim is submitted via the insurer to Sasria. “The clients’ first contact is with their insurance company or brokers, which in turn submits the claim to us,” says Ntshiqa. Assuming the claim is correctly submitted – the paperwork is in order – Sasria takes steps to determine its validity and can finalise the claim within 48 hours. A loss adjuster is appointed to complete an investigation for all claims exceeding R50000. In the event there is insufficient information to make a decision the loss adjuster will interview the client and other third parties to obtain it. “As with any insurance claim, the client has the onus to prove that the loss is as a result of a Sasria covered peril,” she says. Sasria applies the principle of balance of probabilities when analysing claim liability and places the client first at all times.
Telling strike damage from common criminal activity
One of the difficulties Sasria faces is how to distinguish between damaged caused by strike-related versus ordinary criminal activity. A good starting point is the clearly defined legal definition of a strike. “In layperson’s terms we can think of a strike as a work stoppage followed by employees engaging in some form of protest action,” says Ntshiqa. “And we respond to all strikes!” She adds that ordinary criminal activity is not covered under the strike heading. “Anything happening in stealth, in quietness, where there is no strike action, is regarded as normal damage and will be covered by the insured’s corporate, commercial or personal lines policy,” she says.
The bottom line is that there must be a causal link between the damage and the strike action for Sasria to respond. If looting occurs during a strike – for example if a group of striking truck drivers march through town and a few drivers detach from the main group to damage and loot a shop – then Sasria cover kicks in. And it offers comprehensive protection that goes beyond damage to assets only to include cover for goods in transit, motor vehicles, contents and even business interruption.
A recent innovation (since 1 September 2012) is the introduction of net profit cover under the business interruption category. “Clients have an option to buy net profit cover,” says Ntshiqa. “In the event their net profit is affected during a strike, due to material damage to premises, the policy will respond”.
Frightening increase in strike-related claims
It is too early to calculate the insurance claims that will stem from the latest round of strike action and labour unrest throughout South Africa. Ntshiqa says that Sasria will probably have a better grasp of the situation two months from now today.
To date Sasria has received claims to the estimate of R8m. Media coverage suggests that the damage will be widespread and extensive. And Sasria’s claims trends confirm that strike-related damage claims have been on the rise over the past three or four years. This trend coincides with a marked “shift” in the type of claims received. “Non-political riot claims due to student unrest and commuters setting trains or buses alight have taken the backseat to strike action in recent years,” she says. “Both the frequency and severity of claims are definitely higher”. In the past a “stoning” claim would come in at round R20000 – nowadays Sasria typically receives R200000-pus total loss claims for such events.
Strikes already contribute as much as 70% to total claims paid by the perils insurer. And with both the quantum of loss and frequency of claims events on the rise, Sasria will have to keep a close eye on the situation. The insurer does not anticipate a premium increase as a result of the current strike action, but will continue to monitor claims closely. If increases are required an analysis will first be conducted to determine the class of business that is impacted rather than making blanket premium adjustments.
Editor’s thoughts: It is up to the insured and his / her broker to prove the causal link between strike action and damages suffered. But given the extent of destruction in the wake of the on-going truck drivers’ strike (for example) it can sometimes be difficult to provide the required evidence. Have you experienced difficulties in claiming against Sasria for strike-related damages? Please add your comment or send it to [email protected]
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