Risk management key during fire season
December is usually associated with spending time with family, and enjoying the festivities that the season brings. However, in November 2012, the residents of Saint Francis Bay were in shock as a devastating fire made its way through the holiday town destroying homes.
The estimated damage caused by the Saint Francis Bay fire was believed to be in the region of R350 million. It contributed significantly to an end of year period which cost the insurance industry almost R2 billion in claims.
Increased risk awareness
Although South Africa is not normally associated with the mega fires which ravage Australia and California during the dry months, the effects of global warming have seen this risk increase significantly.
Natasja Blok, Managing Director of Thatch Risk Acceptances - the company that underwrote the majority of the Saint Francis Bay fire claims, says that fire is one of the few natural disasters where there is a significant chance of total loss.
"At this time of year, the prospect of vegetation fires becomes a huge problem in the Western Cape, because fynbos regeneration generally requires fire. That is why it is even more important for homeowners near fire-prone areas to have an up to date insurance policy to avoid suffering a major financial loss.”
The study by independent botanical consultant Paul Emms reports that the area at the top of Table Mountain has not burnt for around 80 to 90 years, meaning that certain fynbos species are declining and their regeneration now needs to be regenerated by fire. This report also comes after recent news that the City of Cape Town has intensified its fire fighting capacity ahead of the dry summer season, which has been welcomed by many homeowners.
Blok clarifies, "Besides the danger of summer fires in the dry Western Cape, over the interior of the country the summer rainfall pattern brings the threat of heavy rain and with it lightning strikes. Lightning obviously poses a hazard to people and livestock, and can cause extensive damage to property. It presents a serious potential fire hazard to homeowners in much of the country, particularly those whose houses have thatched roofs.”
The biggest risk is underinsurance
Blok says underinsurance is one of the greatest obstacles homeowners face when claiming after a fire.
"A proper valuation upfront is vital to avoid being underinsured at a claim stage. Many homeowners think it is correct to insure their property for the selling price. However, they should be looking at what the cost would be to rebuild the property in the event of a fire,” says Blok
Blok offers practical tips for residential risk management to guide people in the event of a fire in the home.
It’s not enough to have a fire extinguisher in the home. The key people in the home need to know how to use it. It should also be easily accessible, but not within the reach of small children or pets.
Family members should all know what to do in the event of a fire and this should be discussed and agreed, thinking about such issues as where to gather, escape routes and what items to save. Rule number one, of course, is the saving of human lives over possessions.
"Clients who may be more prone to fire damage, such as those living close to mountains or dry areas or in a thatched roof house, should take adequate precautions now, ahead of the summer fire hazard season. Homeowners can ensure that they are financially covered and unharmed,” concludes Blok.
The most important role player
Although the insurance provider, by virtue of the nature of its business, is the major role player when it comes to cover, the role of the broker has in essence been promoted to the most valuable player in this situation.
There are the rare clients who are fully aware of all of the risks presented in this situation, but the reality is that the majority are not. How many clients are aware that they should not be insuring their property for its selling price? And how many clients are aware that they are underinsured, not only based on the price of their property, but for the contents inside the property?
Editor’s Thoughts:
We
cannot go on ignoring the effects that global warming and climate change are
having on the insurance industry. Clients need to be aware of this and need to
put risk management processes in place in order to not only prevent their own
losses, but to help the insurance industry avoid facing a similar period that
they faced at the end of 2012. Please comment
below, interact with us on Twitter at @fanews_online or email me your thoughts[email protected].
