Santam pays R1.6 billion for business interruption claims

Santam has paid out R1.6 billion for business interruption claims in 2020 and said on Wednesday that it is making good progress in handling contingent business interruption (CBI) claims and has made payments to approximately 60% of policyholders who submitted claims.

According to Santam, it has:

• paid R600 million to policy holders since January 2021
• subsequently paid additional payments to a number of these 2,500 clients, of which most are small and medium enterprises in the hospitality, retail and leisure sectors
• paid R1 billion in interim relief to 2,500 policy holders in August 2020
• been notified by 3,252 policyholders (2% of Santam’s commercial and corporate clients) of their intention to formulate and submit a claim
• received formulated claims from 1,851 policyholders to date, representing 57% of the number of clients who indicated they would claim
• made final or interim payments to 1,094 of the 1,851 clients who submitted claims
• started to assess the remaining 757 claims
• contracted more than 40 additional expert business interruption loss adjusters to strengthen its internal capacity and enable faster processing of claims.

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While all claims with the required documents have been attended to, Santam is concerned that 43% (1,401) of the clients who initially registered their intention to submit a CBI claim have still not done so. The final deadline for affected policyholders to provide documentation in support of their claims is 31 August 2021.

Santam has simplified the process and put a fast-track claims process in place for businesses insured for less than R10 million per year and the indemnity period is not more than nine months. In February, Santam secured an agreement with the National Institute of Communicable Diseases (NICD) to use its geo-location data for this purpose, saving clients considerable time and effort.

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Financial performance

According to Santam, it provided R3 billion for CBI claims in its 2020 financial results. The company’s income attributable to ordinary shareholders decreased by 75% to R542 million for the year ending 31 December 2020, while it was R2 199 million in 2019.

Headline earnings dropped by 47% and no interim or final dividend was declared, with the economic capital coverage ratio of the group at 161%. The net underwriting margin achieved by Santam Conventional Insurance in 2020 was 2.5%, well below the target range of 4% to 8% and the 5 year average margin of 6.4%.

Santam settled claims amounting to R21 billion in 2020 compared to R19 billion in 2019 – the highest in its history. Therefore Santam disagrees with conclusions that the insurance industry unduly benefited from the pandemic.

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Reducing the impact of Covid-19

Santam says that it stepped up to help at the outset of the pandemic in March 2020 to assist clients, intermediaries, staff and other stakeholders through an array of initiatives that amounted to R400 million that included:

• refunding premiums to personal and commercial clients
• assisting individual clients and SMMES in financial difficulty with premium relief
• assistance to SMME suppliers with less that R10 million annual in turnover
• contributing to the Solidary Fund
• contributing to other Covid-19 specific CSI initiatives
• employee assistance programmes to support commission-earning employees impacted by low sales
• significantly reducing renewal increases for clients.

At a practical level, the Santam Group launched new products, such as SmartPark and MiWheels at Home, that offer discounted premiums on the basis of lower distances travelled.