Is the SA insurance sector prepared for multiple natural disasters?

Dawie Loots, CEO of MUA Insurance Acceptances.

So far in 2016 South Africa has been hit by severe storms, flooding, hail, landslides and even earthquakes and tornados. These extreme weather patterns are somewhat peculiar for the country and there have been an increased number of cases of damage caused by these freak weather conditions.

This is according to Dawie Loots, CEO of MUA Insurance Acceptances, who states that the recent events caused insurers to declare a situation of catastrophe, due to the massive amount of related damages. “While the issue of climate change has been downplayed to some extent in South Africa, it is already having a major impact on people and the insurance industry as a whole.”

While the debate about climate change and changing weather conditions is likely to rumble on for a number of years, it is clear that for an increasing number of South Africans it is already becoming a harsh reality, he says. “Due to the fact that South Africa is not a country with a history of extreme natural disasters, we have been somewhat relaxed about disaster risks in the past, let alone the possibility of loss accumulation such as the simultaneous earthquake and a tsunami which happened in Japan in 2011.”

He believes that the recent events in South Africa should serve as wake-up call to the insurance industry to review policy wordings in order to effectively prepare for large scale disasters. “While the risks facing South Africa are certainly not as significant as a number of other regions in the world, the insurance industry is now well-aware of these disaster risks and this will have to be factored it into premiums.”

All these elements could cause the cost of insurance to increase across all personal lines, even on a global scale, on the back of the huge losses sustained recently. “The financial impact of disastrous events are absorbed by insurers and reinsurance companies across the world and will have a major impact on insurance premiums. When the insurance sector is required to pay out substantial claims, the cost of recovering these losses has to be passed back to clients,” Loots explains.

For consumers, who are already facing tough times as the cost of living continues to soar, it is vital to avoid the temptation of cutting back their insurance when premiums are increasing. “Rather speak to a broker or insurance provide to negotiate better deals as it is not advisable to simply cancel an insurance policy. This will leave the consumer seriously out of pocket should they suffer damage or losses to their possession,” concludes Loots.