FANews
FANews
RELATED CATEGORIES

Beyond the Knysna catastrophe a new vision

06 August 2018Sharon Paterson, Infiniti Insurance
Infiniti Insurance Limited CEO Sharon Paterson – “We can contribute to the well-being of all.”

Infiniti Insurance Limited CEO Sharon Paterson – “We can contribute to the well-being of all.”

June signalled a year since the Great Knysna Fire when a runaway tornado of flames tore through the Sedgefield-Knysna-Plettenberg Bay area. As one of the most disastrous fires in the country in a century it took lives, razed commercial plantations and caused damage to properties and infrastructure. A thousand firefighters from all over the country descended on the hamlet and its surrounds to bring the blaze under control.

Infiniti Insurance Company had a number of clients affected by fire which in some instances randomly burnt down buildings in the town and surrounds. CEO Sharon Paterson says that even for those with adequate cover, the rehabilitation process has been long and difficult.

“The disaster has left a legacy of difficulties in some quarters and despair in others. Twelve months down the line one of our clients – an elderly couple, are now just moving into their rebuilt house. For them it has been a year lost out of their lives. Farmers cannot plant crops as all the nutrients in the soil have been destroyed and it will take decades for plantations to be resuscitated,” she points out. “These difficulties were acerbated for those who were not insured or under insured especially where the loss of property and possessions cannot be recuperated. “

Paterson says little can be done to prevent disaster such as the one that ravaged Knysna and calls for an innovative role for insurance industry. “A report commissioned by the World Institute of Development Economics Research (Stefan Dercon, Tessa Bold and Cesar Calvo) shows that households in developing countries are exposed to high risks from illness and theft to catastrophic occurrences, with important consequences on their welfare.”

The study has argued for fostering insurance provision as part of a comprehensive system. ‘The current focus on ex-post measures in the form of some safety net is not cost-effective or sufficient to reach the poor. In terms of the basic institutional setup for insurance provision, the partner-agent model appears to be the most suitable, so that an established insurer (the partner, from the private sector, possibly in partnership with the public sector) links up with an institution with local financial connections, such as a microfinance institution (MFI).’

Climate change is presented as a major factor leading to catastrophes but here there appears to be a dichotomy of interests on the part of some of the largest insurance and reinsurance companies around the world who continue to play a major role in this change. Fifteen of the largest European and 40 of US insurance and reinsurance firms have invested over $130bn and $459bn respectively in fossil fuel companies according to Chris Seekings writing in The Actuary.

“Investing these sums in a Public-Private partnership (PPP) that helps secure the assets of the poor in the long term would address a massive social deficiency in populations while creating wealth through the protection of assets, in part, for reinvestment in further insurance,” says Paterson.

“In South Africa where budgets are fractions of those in Europe and the US, insurance and reinsurance firms could still play a substantial role in driving this approach in a region where the disparity between rich and poor is one of the highest in the world. The government’s objectives to introduce a National Health system and to provide housing among other basic needs provide an ideal opportunity to introduce a PPP with a view to driving a culture of protecting newly acquired assets among the large section of our population.

“The approach would embed risk and asset management fundamentals and support the massive investment in entrepreneurial and SME growth in focus today with the build-up and retention of personal assets in a broad section of the South African population. In addition, the growing black middle class, especially those with newly acquired wealth and assets is in need of consumer education, part of which is insurance,” she points out.

Dumisani Twala, exco member of FSIN writes in Insight that as people accumulate assets – such as property – they immediately attract the need to protect them.

Paterson says the insurance industry has an opportunity of contributing to the well-being of society in a more proactive manner while growing the market through addressing the issues of reducing the risks associated with the loss of assets while ensuring citizens are in a position to make the right choices when it comes to protecting the wealth they have generated.

Quick Polls

QUESTION

The FSCA has said that the intrusive nature of regulation actually benefits insurers and intermediaries. Is this the reality on the ground?

ANSWER

Yes, intrusive regulation has helped us see how we can work towards better customer service
No, intrusive regulation comes at a cost and a major headache