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Hoteliers plead for Covid-19 business interruption insurance payouts

As insurance companies face billions of rands in pandemic cover claims.
Cathedral Peak Hotel in KwaZulu-Natal's northern Drakensberg. The 81-year-old hotel faces closure if an insurance policy covering it against infectious diseases, such as Covid-19, is not paid out. Image: Supplied

Battle lines have been drawn in a David and Goliath clash between distressed tourism and hospitality businesses and insurance giants over the non-payment of Covid-19 business interruption insurance claims.

But, on Wednesday, the owners of two hard-hit accommodation establishments brought home the “on the ground” impact of the issue during a webinar hosted by Insurance Claims Africa (ICA) together with the Tourism Business Council of South Africa (TBCSA).

Read:

TBCSA wants Mboweni to intervene on Covid-19 insurance claims

Business interrupted, but insurers don’t want to pay

They made an emotional appeal to short-term insurance companies such as Santam, Guardrisk, Hollard, Bryte and Old Mutual to pay out. They warned that if a resolution or settlement is not reached, their businesses and possibly hundreds of others will close permanently and lead to massive job losses.

“We’re asking the insurers to please step up and do the right thing,” said William van der Riet, owner of the landmark Cathedral Peak Hotel in KwaZulu-Natal’s northern Drakensberg.

The hotel, which was established by his father 81 years ago, currently employs some 200 people. But he said it is now in a “dire financial position” in the wake of the impact of the Covid-19 pandemic, which has seen the hotel not being operational for just over three months.

“We took to social media at the end of last week to tell our story … We’ve been given the run-around for the last three months, with our insurers looking at every way [possible] not to pay. We have been paying them for all these years, and now, they’ve just slammed the door in our face,” he added.

Read: OUTsurance pays out Covid-19 business interruption claims

“Why shouldn’t insurers also feel the pain … In times like these, this is where they should be standing up. If we treated our clients in this manner, we would not have a business,” said Van der Riet.

His hotel is covered by HIC (which is part of the Guardrisk and Momentum stables) and the property has extended business interruption insurance cover, which included infectious and contagious diseases.

He said that the hotel’s monthly overheads are between R800 000 to R1 million. Following the Covid-19 outbreak and restrictions, the business is facing a growing debt pile of more than R7 million.

Van der Riet said Cathedral Peak Hotel may only “survive for the next few weeks” considering its precarious pandemic-induced financial position. “But it goes beyond the bottom line … Many jobs and livelihoods are at risk, not just at the hotel, but within the broader community.”

An emotional Meg Fargher, co-owner of Budmarsh Country Lodge in the Magaliesberg, shared similar sentiments to Van der Riet during the webinar. At times she fought off tears as she told of her frustrations in getting her insurance claim settled by Santam.

The 5-star boutique hotel was established in 2000 and today employs around 30 staff. However, Fargher said the property had a broader economic impact on the local community, supporting several small businesses.

“While Santam has reneged [on paying out business interruption insurance], we have instances of tiny companies, such as our laundry service, coming to us and saying ‘pay us when you can’… These smaller suppliers have come to the party and are reaching out in a time of crisis,” she said.

“This is in stark contrast to how the big insurance companies are behaving … Santam has a lot to answer for,” she lamented, adding that she opted to take out the policy with Santam due to it being South Africa’s largest short-term insurance group.

Fargher said that this has been “the most devastating time” for the business. The situation “killed some of the joy” she had when she started off in tourism.

“Eskom is now even threatening to cut off electricity to the property. We have overheads every month and no income. We will have to close down if we don’t get the [insurance] claim paid out,” she said.

Meanwhile, Ryan Woolley, CEO of ICA, said that together with these two establishments, his group is now representing more than 500 mainly tourism and hospitality industry businesses in the battle with insurance groups.

Read: Big SA insurers face R4bn in claims from 500 virus-hit firms

He said that the total value of the claims amount to between R3.5 billion and R4 billion, however, ICA is seeking some sort of settlement. This excludes hundreds of similar Covid-19 business interruption insurance disputes being handled by other firms and attorneys in the country, which will most likely take the claims to several billion rand.

Ryan Woolley, CEO of Insurance Claims Africa. Image: Supplied

“We think insurers should at least payout somewhere between 40% to 50% of this… If they payout quickly, the affected policyholders are even willing to accept term payments over several months,” said Woolley.

He told Moneyweb that around 200 of ICA’s 500 clients in the industry dispute are policyholders of JSE-listed Santam.

Read:

Santam clarifies Covid-19 position on business interruption cover

When the virus crisis is over, the legal battles begin

While Woolley has previously said that ICA is not considering a class action suit, he told journalists on Wednesday that the group is now re-evaluating this position.

Santam is already facing a legal battle in Cape Town with a boutique hotelier and restaurant group related to non-payment of pandemic-linked claims. However, the case is only expected to be in the courts in September.

ICA had originally considered joining the battle; however, it now plans to take on Santam and HIC in its own legal case in Gauteng courts. This is in order to try to secure a settlement sooner.

Listen: Moneyweb editor Ryk van Niekerk’s interview with TBCSA CEO, Tshifhiwa Tshivhengwa.

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I heard on 702 Outsurance has being paid.

Insurance is the only industry that signs a contract with every intention of not paying. ….ever it seems if they can get away with it.

I wish all shareholders would vote with their feet – sell your insurance shares – starting with this lot above.

If insurers are prepared to pay out 50% of the claim then please institute a counter claim to them to return 50% of all insurance premiums paid to date.

Insurance is a scourge and rip-off industry.

Would love to see terms and conditions on Outsurance payouts????

Did exactly that!

Got rid of Old Mutual baggage. They very inefficient and costly.
An OLD company with old thinking… exit if you can.

On 28 June it was reported that, to date, Outsurance paid a mere R37m out in Covid related BI claims. That is but 0.44% of their 2019 gross written premium. Keep in mind they have an almost R4b marketing, acquisitions and admin budget

At Incompass Insurance Consultants, a niche hospitality brokerage, Covid BI claim settlements represent 53.3% of gross written premium. And this figure will still more than double in the weeks ahead.

Santam’s advertising slogan is: “Insurance good and proper.”

Seems it’s more a case of “Poor and dodgy.”

Very keen to take your premiums. Far less keen to honour their side of the contract.

Mr Woolley – just why is it that the insurance houses should not honour their obligations to the tune of 100%? If they feel a need to seek some sort of leeway then it is incumbent on them to make a genuine approach to their clients with cap in hand. Refusing to pay and putting the future of their clients businesses at stake (i.e. money muscling them) to worm their way out of what they owe does not warrant the perspective that you bring as CEO of ICA and you are putting your credibility at risk.

If I had a case to bring against the insurers in regard to COVID business interruption I certainly would not want you guys involved.

Do the insurance company executives and Board members not realize the brand damage they are incurring. This is truely reckless. Millions of policy holders will look to move and/or cancel premiums. Consider turning this into a PR success story and reduce your marketing budget. A quick strategic coup for Outsourance.

And where will they move? To Outsurance? If you are considering that, do yourself a favour and find an ex Outsurance assessor and speak to them about their way of doing insurance.

I have watched what the insurance companies have done to South African’s for 24 years now. It’s not a good thing. Their investments as well

That’s why I don’t go near insurance companies for investments.

The average joe doesn’t understand the fee structures and how fees can be obscurely worked in at various points of calculation.

Having worked at one some years ago, I did that calculation and the extent to which investors are being screwed over is staggering.

That 10x guy has a very strong business case.

I had a claim for a crack in a floor of a house rejected. The assessor did the report using Google Earth and my photos from a location 400km from the house.

Amazing!!!

In abnormal circumstances such as we all find ourselves in, business, and in this case, the insurance industry, needs to stand up and show what they’re made of. The current business environment demands a different morality. One that shows solidarity and sympathy / empathy with their fellow countrymen and business partners – their clients, without whom they would have no business.
The banks are also not displaying any “new morality” – extending loan periods so they can make more interest from their long suffering clients isn’t HELP, its blood sucking their clients to death.
We need to see a different morality from these two business arenas – a NEW MORALITY.

Why is the hospitality business so privilege to claim and not other businesses?

If any business has the kind of policy cover under dispute here they are equally entitled to claim. There are not many businesses that I know of that have actually taken out this sort of cover. Maybe it’s just fairly common in the Hospitality / Tourism Sector and hence the reason why these articles have been focusing on these kinds of businesses?

Because tourism is still closed. Other businesses can claim, why not if they paid for the insurance.

I think that is my point…can other businesses then claim and what is the procedure??

Because those who have policies with these insurers whose policies state they are covered

unfortunately in sa u need insurance with all the crime and stupid drivers on the road.

That is like saying you need a tracking device but when you are hijacked and taken hostage and only released, if ever released, only when the device is removed, you realise that it is a useless purchase. Just like insurance that doesn’t payout.

Mr Wooley being willing to accept partial settlement of his clients’ claims is telling. If his client’s policies provide cover for their losses, why would he be willing to accept payouts of 50/60%? If you are confident in your stance, insist on 100% being paid or fight them if they dont. This seems more like a “marketing” ploy to try and convince the insurers to pay something for losses that he knows is not covered. Let’s pressure them via the media to get something paid out and we pocket a handy sum in the process?

In some instances the brokers who sell these insurance products are dishonest rushing to get a sale and commision.

In support of our valued tourism industry, we should vote with our wallets, and take our business to the companies that pay up. I left Outsurance for SANTAM but it looks like I will have to reverse that decision.

End of comments.

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