After the fire: how short-term insurers can create good PR

Fiona Zerbst, FAnews Online Editor

It has been four months since the devastating fires at St Francis Bay in the Eastern Cape, in which 76 homes burnt to the ground, but in some sense we are still processing what it all means for the short-term insurance industry. The Insurance Institute of

Marius Meyer of Meyer Loss Adjusting indicated quite correctly that these fires – the biggest domestic fires in the history of the industry – will stand as a case study in years to come. Although the forensic report is still outstanding, it appears that the cause of the fire was most likely electrical.

Natasja Blok, managing director of Thatch Risk Acceptances (TRA), an insurance underwriter that writes on behalf of Compass Insurance Company, made the valid point that because the industry rose to the occasion and settled claims rapidly, the event, tragic as it was, became a good public relations exercise for clients and industry regulators alike.

Blok says it was the first time she had dealt with such a large catastrophe and she and partners Compass, Hannover Re, Lireas Holdings and Sum Holdings had to come up with a strategy so that pay-outs could be made as soon as possible – they increased the limits of what could normally be paid out, for example, and settled an impressive 15 claims within 10 days. TRA was faced with 30 claims in total: 21 homes, eight body-corporate units, and one case of water damage.

The aggregate of loss was R350m, a significant amount of money.

Turning adversity into opportunity

Blok’s intention was to turn adversity into opportunity since the fact remains that clients effectively get their greatest benefit from a company when disasters occur. Reinsurers have confirmed that clients seldom replace thatch, preferring to rebuild their houses with standard tile or slate. Despite the fact that TRA is a niche insurer that covers thatched homes only, Blok decided to allow these clients to continue to insure with TRA.

Because the market may well harden this year, as insurers look to recoup their losses, good industry PR will become increasingly valuable. Operational efficiency, innovation and the use of technology are vital when it comes to retaining clients.

The upside to the St Francis Bay fires was increased risk awareness: if insurers can prove to their clients that safety and risk mitigation are important in an economic downturn, they can win half the battle.

Declining risk management a concern

Peter Todd, CEO of Mutual & Federal, told forum attendees that risk management is vital during a poor economic cycle. He drew attention to the fire that shut down ArcelorMittal’s steel-making plant, in Vanderbiljpark, during February. Inadequate fire safety management and the failure of fire services show that risk management is declining and Todd warned insurers to consider what risks they are exposing themselves to with contingent business interruption cover, especially when there are a number of suppliers relying on the business in question.

Todd predicted that restrictions on contingent business interruption cover could come into play. He also said he foresees more qualitative risk selection on high-exposure risks as well as increased rates based on risk quality and risk accumulation.

Editor’s thoughts:
Chief Executive of the Insurance Institute of South Africa (IISA), David Harpur, said that investigations into municipal fire stations are under way and some companies have indicated they are willing to assist in the management of these fire stations, which makes good sense and could have a positive impact on the industry. This is yet another way in which insurers can take the initiative and build on good PR. What do you think of this proposal? Comment below or email fiona@fanews.co.za.