SA insurers urged to use technology to properly assess climatic risks

While South Africa does not suffer from the same devastation as that currently being wrought by super storm Sandy, the recent freak weather conditions seen locally have highlighted the importance for insurers of understanding the specific risks that certain geographical locations face with the floods and hail estimated to have caused damage of up to R1-billion.

Royden Volans, Commercial Director at Lightstone, specialists in spatial and data driven insights, says it is critical for consumers and insurance companies to understand the propensity for the occurrence of various risks such as lightning and hail in order to properly assess and mitigate against them. “It is widely known that some areas such as Gauteng are more prone to hail and lightning whilst the Western Cape suffers from extremely high winds. However, it is possible to drill down far deeper than that into the specifics of a location – even down to a particular property.”

A presentation in October by the South African Insurance Association (SAIA) highlighted the catastrophe risks faced by local insurance companies, noting that insurers need to start utilising available data in order to properly assess risks on an individual basis.

Volans says insurance companies can access individual reports on properties detailing a variety of information such as seismic activity and the location of the closest mine, the soil type and the presence of dolomite, as well as the gradient slope of the land.

“Furthermore, they can also access the average weather conditions that occur at that property. For example, the data is available to assess the likelihood of flooding, the frequency of hail occurring each year and the lightning flash density of that area relative to the national average.”

Volans says this kind of information is invaluable for insurance companies as it enables them to properly assess the risk of each property that they take on. “The premium charged by an insurer could include specific risks facing that property so understanding the likelihood of lightning striking the structure or the frequency of hail occurring in the area is critical.”

He says a number of insurers have detailed the volume of hail related claims in the last few weeks, particularly for damage to vehicles. Santam also announced it was flying 25 foreign experts into South Africa who are trained in a special technique to repair hail damage.

“By properly understanding what risks a property owner may face, the insurer or broker can not only alert them to this but can also advise them on what steps to take to minimise the possible impact such as having lightning conductors installed – as is a requirement for thatched houses – or even ensuring they install a canopy or covering above their driveway to protect their vehicles against hail damage.”

He notes that consumers who opt to take proactive steps to mitigate their risks should alert their insurance company before doing so as they may also be able to negotiate on their premium.

Volans also notes that while it is important to assess the natural risks that can occur, the Xpose report offered by Lightstone, also highlights a number of other pertinent risks such as the number of residential and non-residential burglaries per 1 000 households, the crime growth rate, overall crime per 1 000 households as well as a Crime Risk Index.

“The insurance industry is moving into a phase whereby risks are being assessed and premiums calculated on an individual basis such as tracking software to monitor a driver’s behaviour or determining certain properties uninsurable if they are in high-flood prone areas.”

“The ability to be able to instantly access a report that provides a comprehensive list of the risks that a property faces – from natural catastrophes right through to the frequency of crime – is an invaluable tool that can assist insurers in calculating an accurate premium and the consumer by showcasing the risks before they buy a particular property,” concludes Volans.