SA Insurance industry reviews cover for earthquakes

The 5.5 magnitude tremor experienced in Gauteng and other parts of South Africa on 05 August 2014, followed by the 4.6 magnitude earthquake three weeks later on 22 August in Johannesburg, brings to the fore a pertinent question about whether the local insurance industry is prepared to cover damage as a result of earthquakes.

Warwick Scott-Rodger, Head of Brokers at MUA, says that these tremors provide a wake-up call to the insurance industry about the need to review its policy wording, as well as the need to effectively prepare for large scale disasters.  

Seismology experts say South Africa's potential for earthquake damage comes in the form of natural seismic activity, mining-related events from deep underground mining, as well as earthquakes that occur outside our borders but are nevertheless strong enough to create some kind of effect. 

"Insurance and reinsurance companies have been among the first companies to start feeling the effects of natural disasters in the form of increased payouts related to severe weather events like floods, storms and most recently earthquakes," he adds. 

He says that in the past, some insurers included exclusions in policy wording that prevented payouts for claims for damage related to earthquakes related to mining activities. "However, MUA realised that this exclusion was historical in nature and removed it in order to treat customers more fairly, line with the Treating Customers Fairly (TCF) legislation." 

Following the change to the policy wording, made on 8th of August 2014, all MUA clients - new and existing - now benefit from full cover for any damage caused by any earthquake with no exclusions. Furthermore, this benefit will be applied retroactively to cover all losses reported as a result of the 5th of August 2014 earthquake, which MUA has admitted liability for all claims reported to the company during this period. 

"While the risks facing South Africa are certainly not as significant as a number of other regions, the insurance industry is aware of earthquake risk and has factored it into premiums," concludes Scott-Rodger.