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Insured against special risks?

06 February 2013 Fiona Zerbst
Fiona Zerbst, FAnews Online Editor

Fiona Zerbst, FAnews Online Editor

Is South Africa set for a year of strikes and protests? If January was anything to go by, the answer may well be yes. Zamdela, a township in Sasolburg, erupted on 21 January as protesters voiced their anger at the proposed inclusion of Parys in their mun

This political dissatisfaction led to shop looting and bus burning and at the time of writing at least two lives had been lost (the death toll may be higher, however).

According to Municipal IQ, the number of service delivery protests rose to a record high of 173 last year, up from 82 in 2011 and much higher than the 27 recorded in 2008. Over 75% of service delivery protests have been violent. As we know, violence is hard to contain and can affect businesses almost anywhere.

An increase in strike and political riot claims

Is semi-permanent ‘strike season’ and rioting the new normal? According to Keith Fick, executive manager of insurance operations at Sasria, it may well be. Over the past year, Sasria reported a decline in non-political riot claims, but an increase in strike and political riot claims, which could offer a clue as to what 2013 may hold: 62% of claims were strike related, 27% political and 11% non-political.

According to Fick, the value of new claims for 2012 amounted to R171m, double the value of claims received in the same period the previous year. The total for 2011 was R97.8m (still, however, a substantial amount). Strike claims made up almost two-thirds of the total last year.

Is Sasria expecting another rough year?

“It’s difficult to say if there will be more riots and strikes, but given last year’s circumstances, I would say we’re expecting them,” Fick says. “The cutting of 14 000 jobs by Amplats may reignite tempers that were calmed following the settlement reached in the last quarter of 2012.”

Sasria bears the brunt of damages caused by riots, strikes and unrest and it is underwritten by government. Last year’s claims were substantial – the truck driver’s strike added to mining woes.

“The mining strikes in February and March 2012 had claims reported where both mining and private property were damaged. These claims were reported with an estimate of R60m before adjustment,” Fick says. “Before the dust had settled, Lonmin took centre stage. There was loss of life and although there wasn’t as much material damage reported in this period, compared to earlier strikes, other mines took their cue from Lonmin and started protests for higher wages. The damages resulting from this were around R30m.”

The truck drivers’ strike had a severe impact on Sasria, according to Fick: “There was an increase in both the number and severity of claims reported – the average number of claims increased by 44% and the estimate by 34% during the last three months of last year.”

Does he feel the new wage agreements entered into will stand the test of time?

“It’s a bit premature to say, given the volatility of the strike peril over the last three years,” he says, adding that the previous year gave a good indication as to how unpredictable the labour sector is. “Although we may want to have a situation where things are under control, we’ll have to undertake forecasting and planning to prepare for the future.”

Western Cape woes

The Western Cape strikes have also proved expensive. The current estimate, in terms of claims, is R50m – and this is on the rise. At the time of writing, a R12m claim had been reported. “When the protests took place, Sasria was inundated with calls from brokers wanting to know how cover could be extended to farmers,” says Fick. “The fact is that the insurers were imposing waiting periods on their clinets during this period, while Sasria accepted these risks on a non-refusable basis.”

Fick has broken down the average cost on items that were damaged or deteriorated due to the strikes: R5 000 000 for crates used for harvesting and storage; R7 000 000 for stock in warehouses; R600 000 for a deterioration of stock; R5 00 000 for crops with hanging fruit; R4 00 000 for farm property, including plant; and R300 000 for business interruption (based on standing charges).

Well capitalised

Does the large increase in claims make the purchase of reinsurance more expensive or is Sasria expecting an impact on reinsurance at renewal? According to Fick, despite the increase in its loss ratio, Sasria remains well capitalised and its business book remains highly profitable, despite the recent spike in claims frequency. “We’re not envisaging any major challenges during our treaty renewal discussions,” he says.

Fick says that premiums to Sasria will increase, but this is based on the relevancy of its product. “We’re not proposing rate increases in the immediate future – our rates should remain unchanged for the 2013/14 period,” he says.

Editor’s thoughts: Post-Marikana, the truck drivers’ strike and the Western Cape strikes, it’s obvious that protests can happen anywhere, at any time, potentially affecting any business. Are you more jittery about violent strikes and protests than you were last year? Comment below or email fiona@fanews.co.za.

Comments

Added by Craig, 11 Feb 2013
Personally I think that violent strkes will stay for the foreseeable future. Precedents have been created that the state, authorities and employers only respond when there is violence involved in protests. In fact, the more violence, the quicker the response will be. Regardless of whether an area is perceived to be passive or immune to strikes, unrest or the like, brokers and insurance companies should be encouraging policyholders to take Sasria insurance. Better safe than sorry, I say.
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