A practical example of the value of insurance

In June 2017, South Africa suffered its worst natural catastrophe to date when a wildfire consumed the coastal towns of Knysna and George.

Santam, the University of Stellenbosch, and the Council for Scientific and Industrial Research (CSIR) recently released a collaborative research report into the disaster. There are some important key learnings that can be taken from it. 

The report is a good read from a broker’s perspective, particularly when it comes to showing clients a practical example of their exposure to fires. The full version of the report can be read here. 

Exposure to risk

The report points out that many of the dwellings and assets destroyed were located in high-risk areas. The plantations and densely invaded areas were concentrated on the lower mountain slopes and near the coastline, which is where most settlements were also located. This created a combination of valuable infrastructure and high fuel loads which set the scene for a disaster. 

The report added that many dwellings were also located on sloped terrain. Slopes enhance fire spread and intensity. If the slopes also had vegetation types with a high fuel load, this could have contributed to the loss of these houses, either through heat radiated by the fire or through embers blown up against the house, other flammable material near the house, into the gutters, or under the eaves and into the roof space. 

Not based on material

The report shows that the data that was recorded from the fire indicates that homes constructed from many different materials were destroyed. This means that no home is impermeable. 

The report added that around 23% of the dwellings that were destroyed in the Knysna Fire were timber structures. By South African standards, the Garden Route area has a higher than normal prevalence of timber structures which may have influenced the fire spread rate on the outskirts of the town where timber homes were interspersed amongst thick forests. 

However, the report adds that the majority of the structures damaged or destroyed by the fire were not constructed of timber. 

The report points out that the data collected from the fire indicate that the presence of masonry walls and steel sheeting, or even a concrete roof, does not necessarily guarantee the survival of a home. This is because all homes have windows, air vents, chimneys and other weak points through which the contents of homes can be ignited. A window subjected to high temperatures can quickly crack and fall out, leading to the curtains catching fire. 

International research shows that roofs (and associated features such as eaves, gutters, vents and chimneys) are the most susceptible to ember attacks. Therefore, it is important to ensure that roofs are not combustible. 

The report points out that risk reduction is a collective responsibility. If homes on the edge of a suburb or vegetated areas are more resilient, they can form a shield to protect the rows of homes behind them. 

Conversely, once a home catches fire, it may increase the fire exposure of neighbouring homes, meaning that they too could burn down. Hence, communities rather than isolated individuals need to become fire resilient. 

Recommendations for insurance industry

The report points out that there are a lot of key learnings that directly impact insurers. 

Reducing the risk and impact of wildfires: The report points out that the insurance industry can assist in reducing fire risk by building the capacity of municipal fire services and fire protection associations (FPAs) to prevent and respond to wildfires. Further, the insurance industry could also sponsor an annual wildland-urban interface (WUI) seminar in affected areas to encourage the sharing of experiences and the latest approaches and advancements in risk reduction and suppression. 

Reducing fuel loads: the report points out that insurers should support prescribed burning by extending insurance cover for the execution of prescribed burns. Insurers should work with FPAs and fire and rescue services to determine the details of these policies. Further, the insurance industry should also support risk reduction by requiring policyholders to undertake measures to reduce risk, such as reducing flammable materials in the home ignition zone (HIZ) and creating defensible spaces around homes. Outside of the WUI, this could include requiring that policyholders join their local FPA. 

Enable responsive action to address time-sensitive rehabilitation concerns: the report points out that the insurance industry could assist in the rapid mobilisation of resources by creating a Disaster Fund to assist in funding immediately needed interventions in the interim. 

Create insurance products to support households in the missing middle: the insurance industry should explore developing more affordable insurance products to support households in the missing middle, who may otherwise be unable to afford insurance. 

Editor’s Thoughts:
A lot can be learned from the Knysna fires and the insurance industry has a massive role to play. That’s why reports like this are vital to the industry. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.