What to expect from short-term insurers after the KZN floods

What to expect from short-term insurers after the KZN floods is at the back of consumers’ minds whether they were personally affected by it or not.

Many middle-class consumers were fortunate enough to have short-term insurance on their homes, as well as their home contents and their cars, which means that they will be able to claim from their insurers for most of the damage they suffered.

Absa Insurance announced on Monday that it has decided to waive excess fees for flood-related claims to provide relief for customers who have been affected by the floods.

“Given that we have a crisis, it will be not prudent as people deal with flooding losses and then also worry about excess,” says Faisal Mkhize, managing executive for relationship banking at Absa Retail and Business Bank.

He said the waived fees will likely amount to millions of rands.

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Other short-term insurers

Vivienne Pearson, CEO of the South African Insurance Association (SAIA), says SAIA is not aware of other insurance companies following the same approach as Absa and the bank’s initiative may be seen as one way to assist their own policyholders.

“From a SAIA point of view, it is important to note that many of our members have indicated that they stand ready to assist their policyholders and individual insurers will each do so in their own individual ways.” 

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Premium increases?

Premium increases for short-term insurance usually follow after a major disaster such as the KZN floods and consumers wonder if these increases will only be for clients at the coast or dangerous areas.

Pearson says although there has been talk of premium increases, consumers must remember that all insurers review their policyholder premiums from time to time, normally annually as per the policy contract.

“However, this depends on how individual insurers rate the risk of insuring properties in the affected areas. It is far too early in the process and extremely unlikely that a SAIA insurer has begun considering premium increases.

“The approach right now is to gather claims, help clients formulate the specifics, get the damage assessed and pay the claims as soon as possible. Any consideration of premiums would be done on the basis of an overall assessment of flood-related losses and the extent to which reinsurance covered the insurance companies,” she says.

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Will short-term insurers still insure buildings on the coast?

Will insurers continue to provide buildings cover for houses built next to the coast? Pearson says no insurer has indicated to SAIA that such a step is under consideration. “It is exceptionally rare that insurers would consider a blanket decision not to offer a certain kind of coverage solely on the basis of geographical location.”

She explains that coverage and premiums are based on a range of factors and assessments built up over many years and not on a single event.

“SAIA and its members will continue to collaborate with all stakeholders, including government, to find ways to reduce risks, including climate related risks, so that insurance can remain affordable and therefore sustainable.”

Pearson says no claims figures for the industry are available so far as it will take flood victims at least another several days to formulate their claims and lodge these with their insurer. Each insurer will have its own running total and the final figures may be shared with SAIA.

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Short-term insurers did well after the Knysna fires

“The Knysna fires a few years ago was a comparable disaster. In the end, the claims ran into several billions of rands. Insurers performed exceptionally in gathering claims, helping with losses and paying out promptly. Insurers were also adequately re-insured.”

Therefore, Pearson says, SAIA is confident that its members have the skills, experience and full capacity required to deal with flood damage claims.

“We believe the non-life insurance sector’s long track record in handling claims related to disasters can provide a level of comfort to those who have suffered losses that they are in good hands.”