Natural disasters are on the rise; insurance is not longer a ‘nice to have’

What appears to have been a tornado swept through Montana, in northern Pretoria, earlier this week causing widespread damage to cars, buildings, the contents of these buildings, external geysers, and more.

Trees were uprooted, roofs were blown away, areas and roads were flooded, and many residents had to be evacuated.

This extreme weather event is yet to be categorised as either a tornado or a ‘landsprout’ by SA Weather Service and, while South Africa isn’t historically known as a tornado ‘hotspot’, it would be the second such weather incident within the space of a year. Wynand van Vuuren, client experience partner at King Price Insurance, says that the country’s most common natural disasters – floods, droughts, fires, and large storms – are on the rise, and lighting strikes, hail damage, wind storms, and sea level rises are also happening more often. And, consumers who do not insure their cars, buildings and home contents are becoming ever-more vulnerable.

“The cost of fixing the damage caused by natural disasters is increasing every year and South Africans who do not have adequate insurance are having to pay these costs out of their own pockets.”

Having to fix damage caused by a natural disaster can be a devastating blow to your finances. Only around 30-40% of cars on South African roads are insured. When it comes to their buildings and home contents, most South Africans focus on cover for robbery and break-ins, but they don’t pay enough attention to protecting their homes and possessions against the effects of natural disasters. And, if they do, many are under-insured – and often only realise this when it’s time to claim.

Under-insurance is what happens when your buildings and home contents are covered for an amount that’s less than their replacement value at today’s prices. In such cases, valid claims are paid out proportionately. For example, if the value of your building is R400,000 and you only insure it for R200,000, then you’ll likely only be compensated for 50% of your loss.

In 2024, natural disasters across the world caused losses estimated at $320 billion. Of this, only around half was insured. Munich Re, one of the largest reinsurers in the world (and also one of King Price’s reinsurers) polled homeowners as to whether they’ve considered expanding their insurance in response to increasing weather disaster risks: 57% indicated that they want to do so but cost is a factor.

“One of the main reasons that people give for not insuring their property is financial. I always ask these clients what they would do if they lost their house. Can they afford not to insure their buildings?” says Van Vuuren.

Many consumers also doubt the ability of insurers to pay massive claims caused by natural catastrophes, which can run into hundreds of millions of Rands per event.

“When it comes to paying claims, there’s no need for concern. In South Africa, the industry regulator requires all insurers to maintain adequate surplus funds for potential claims. If you lose your house, you’ve dotted the Is and crossed the Ts on your insurance policy, and your claim is valid, you’ll be paid out.”