Western Cape fires a social catastrophe as many victims have no financial cover

The financial impact from recent fires in the Western Cape could easily run into millions of rands in damages according to local authorities. This is made worse by the fact that many of those hardest hit are uninsured and will therefore be unable to recov

This is according to Adam Samie, Chief Executive Officer at Lion of Africa Insurance, who says that while it may not be an insurance catastrophe, the fires are certainly proving to be a social catastrophe.

“The recent fires have done some serious damage around the Western Cape in the Swellendam, Bainskloof, Stanford, Piketberg, Aurora and Ouplaas areas. Unfortunately, the vast majority of those affected live in outlying areas and do not generally have access to insurance products. As a result, it is the local communities who are suffering most, particularly those in informal housing., This shifts the burden of making good their losses to the taxpaying sector through emergency relief provided by local authorities rather than private sector insurance companies.”

Samie says the fires have highlighted the need for the local insurance industry to do more to educate consumers about the risks of being either uninsured or underinsured, as well as finding ways to provide access to a broader range of people to affordable risk products.

“When it comes to financial education, much of the focus by business and government tends to be on encouraging people to save more. However, in many instances, protecting your existing assets is as important as growing new assets.”

Samie says South Africans actually get good value from their insurance when it comes to incidents such as fires. “We live in a relatively benign climate so policies tend to contain little or no weather related restrictions. As a result, most people are able to buy one insurance policy that provides comprehensive cover, including for losses caused by events such as fires.

“In many other countries this is not the case. For example, homeowners in California would have to buy more than one policy, such as taking out separate earthquake cover. In Europe, we also find that insurers often specify the extent of the cover by the distance to the river and the height of the building above a particular flood line.”

However, he says for South Africans based at or near fire-prone areas, it is increasingly likely that they may find their insurers starting to include certain restrictions in their policies, or increasing the premium for those living in areas most likely to be affected.

Samie says that while we cannot prevent natural disasters from occurring, it is possible for those living in high risk areas to minimise their impact by taking adequate financial and practical precautions.