Weaker Rand impacts insurance and could lead to premium increases
With the South African Rand recently dropping to its lowest level since 2011 having lost about 18% of its value against the US this year alone, the cost of items purchased or imported from overseas has actually risen. In light of this, it is vital for consumers who own and regularly purchase imported goods to consider the implications of the weak value of our local currency on the insured value of their items.
This is according to Christelle Fourie, Chief Executive Officer of MUA Insurance Acceptances, who says that ongoing fluctuations in the strength of the Rand against many major currencies has highlighted the importance of consumers conducting regular valuations on their imported goods. “It is imperative that items purchased overseas are insured for the correct replacement value, otherwise the owner may find that their insurance policy will not pay out the full replacement amount in the event of theft, damage or loss.”
Fourie advises consumers who regularly buy items in other countries to conduct regular valuations on these items to ensure that their insurance policy reflects the correct replacement value of the item. “Art, designer clothing, footwear, bags and luggage are most often affected by changes in the Rand value and this should be considered when re-evaluations are done.”
Due to the fact that the value of the Rand depreciated by almost 20%, these belongings that have been purchased in foreign countries over the past year can cost as much as 20% more to replace now. “This directly impacts the replacement value of items in the event of loss or damage, with the cost of replacing the item often being substantially higher.”
She says that while it may not be practical for clients to re-value their entire contents every time the Rand dips or rises, it is a good idea to conduct an evaluation if there has been a sustained period of Rand strength or weakness. “For high value items in particular, this should be done on a quarterly basis and on a more regular basis when there are major fluctuations in the Rand.”
At MUA, we see many of our clients who have expensive taste purchase imported tiles, carpets, expensive furniture and bathroom accessories, says Fourie. “In the kitchens especially, it is especially important to conduct a proper valuation as an imported Miele kitchen can cost as much as R500 000 to install. The impact of a fluctuation in the exchange rate on half a million rand can amount to a huge difference when it comes to replacing that kitchen.”
Fourie also says that it is important to make sure jewellery is adequately insured for its replacement value, as there are different factors that also need to be taken into account. “In the case of antique jewellery and other rare items it is not always possible to actually replace the item in South Africa, particularly with period jewellery. As such, one should always make sure that they have an accurate and up-to-date valuation certificate that includes the date at which the valuation was undertaken, the Rand to USD rate and the Gold price in USD at the time of valuation.”
The depreciation of the Rand also impacts on the cost of motor vehicle repairs due an increased cost of imported motor vehicle spare parts, says Fourie. “The rising cost of motor vehicle spare parts, paired with the weaker Rand, means the cost to repair damage to a car has skyrocketed compared with a year ago. This increase in motor repair costs could possibly also lead to a further escalation in insurance premiums, placing additional pressure on consumers’ pockets.
“Everyone who own items that are not bought locally, should keep track of currency fluctuations and make sure they contact their broker regularly to update the value of their belongings. It is also advisable to keep all slips as proof of payment and make sure these have been declared at customs, otherwise the claims may also not be entertained,” concludes Fourie.
