OUTsurance pays out Covid-19 business interruption claims

Reserves R220m for such claims, with R37m already reimbursed mainly to hard-hit tourism and hospitality businesses.
OUTsurance says it has paid around 135 claims thus far related to business interruption insurance for pandemic cover. Image: Supplied

Unlisted insurance group OUTsurance has thrown down the gauntlet to competitors, by taking a contrarian view around non-payment of business interruption insurance claims related to infectious diseases cover.

Most of its short-term insurance peers, including giants Santam, Hollard and Old Mutual, are refusing to pay out business interruption insurance to hundreds of smaller tourism and hospitality businesses impacted by the economic fallout of the Covid-19 pandemic.

Read: Business interrupted, but insurers don’t want to pay

But, OUTsurance (which is majority owned by Rand Merchant Insurance Holdings) said this week that it’s paying out affected clients that have extended cover for infectious diseases. In fact, the group has set aside a reserve of R220 million for such claims.

“OUTsurance has paid business interruption claims where the policy had an extension for pandemic cover. The first of these payments were made in April for losses occurring in March 2020 due to the pandemic and resultant lockdown,” the group said.

“The treatment of these claims since March is congruent with the views published by the Financial Sector Conduct Authority (FSCA) in an industry communication on 18 June.”

Commenting on the issue, OUTsurance CEO Danie Matthee said that from the onset of the pandemic, the group’s view was that affected clients with business interruption policies that included cover extension for pandemics, would be covered.

Company spokesperson Natasha Kawulesar told Moneyweb OUTsurance has already paid out around R37 million to date in Covid-19-related business interruption claims. This encompasses around 135 such claims being settled.

“We can’t mention the names of clients, but they are largely in the hospitality industry including guest houses, restaurants, hotels and game lodges…. A small percentage is in retail.”

Read:
Dining industry still in ICU
When the virus crisis is over, the legal battles begin

Competitor in hot water

OUTsurance’s move comes as JSE-listed competitor Santam faces a legal battle in Cape Town with a boutique hotelier and restaurant group related to non-payment of claims linked to the pandemic.

Commenting on the matter, Santam said in an emailed response: “It is important that we obtain legal certainty as quickly as possible on the policy interpretation applied by Santam and other insurers. To this end, we have agreed expedited timelines on legal proceedings with a policyholder that has a number of boutique hotels and restaurants which are representative of the bulk of the claims we have received.”

Santam, South Africa’s largest short-term insurer, may face further legal battles around the issue.

Specialist public loss adjustment firm, Insurance Claims Africa (ICA), is trying to secure some sort of settlement with Santam related to numerous Covid-19 business interruption insurance claims involving tourism and hospitality clients.

In a strongly-worded statement released earlier this month, ICA said it “is disappointed by Santam’s decision to outright reject a settlement proposal” from hundreds of tourism and hospitality businesses. ICA is representing around 500 tourism and hospitality sector claimants against several insurers.

“These businesses all bought pricey business interruption insurance policies that included extensions for claims arising from infectious or contagious notifiable diseases from Santam and a number of other insurers. Covid-19 qualifies as a declared notifiable disease, yet insurers are either rejecting the claims, or frustrating the process by making it near impossible to claim,” it said.

Read: Lockdown causes ‘total devastation’ to tourism & hospitality

Meanwhile, OUTsurance’s contrasting position on the issue seems also to be a play for a bigger share of the business insurance market.

Market share move?

The group, which initially offered just car and home insurance, has been growing in the business insurance space. In a Google search for ‘business interruption insurance’, the advert for OUTsurance’s offering is at the top.

Kawulesar said it’s all part of the group being “top of mind” in the market.

“We are focused on growing our client base in terms of business insurance…. OUTsurance has about 80 000 business clients and approximately R1.5 billion annual premium income comes from this sector,” she said.

The FSCA has not issued an official media statement on its latest guidelines for insurers to deal with business interruption insurance claims, however, Moneyweb is in possession of the regulator’s eight-page communique to the insurance industry.

In its concluding remarks the regulator notes: “While the FSCA acknowledges that business interruption claims are complex in their nature, insurers that have policy wordings which fall under the (1) Radius and Notification, (2) Radius; and (3) Notifiable Diseases categories must, when they have received all relevant documentation from a policyholder, not delay the payment of any claim provided policyholders are able to prove the requirements highlighted.”

Essentially, the FSCA also pointed out that the actual Covid-19 lockdown could not be regarded as a trigger event for such claims.

Listen/Read: SAfm Market Update’s interview with Ryan Wooley, CEO of Insurance Claims Africa (ICA)

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Well Done Outsurance,
Shame on the rest, you are just a bunch of rent seekers.

By doing what Outsurace has done they will convince more people to take up insurance policies as everyone’s nerves have been rattled by this global pandemic.

All I am saying is let’s see some activism by the shareholders of the other businesses.

Could one of the Outsurance clients that have the extended cover for business interruption due to disease please publish the wording of their policy in this regard?

Congratulations OUTSURANCE. A few of my business owner friends were hoodwinked by their insurance and they DID NOT PAY. Just a problem the industry has had for 24 years I have been here

That is not the true situation as my BI claim has been rejected due to the Outsurance reasoning that Covid 19 is not covered as an act of Nature is this just marketing or reality ? Maybe I can expect answer from Outsurance?

Hi Stardustcapetown

It is important to note there are two parts to the Business Interruption cover. We have clients with standard Business Interruption cover who would not have had cover for this incident. The claims that we settled are where clients had the extended cover, under their Business Interruption cover. If you have the extended cover in place, we will gladly review your claim. You may mail me directly on kawulesarn@out.co.za . Regards Natasha

Could you please provide the link to this extended cover in your policy wording because it is nowhere to be found on your website.

Great to see a company on here replying to comments and looking to assist and help. Well done @ Outsurance!

Dear Natasha from Outsurance,
First of all thank you for your reply. This was not expected and very much welcomed.
To the point of your reply:
When I took out business interruption cover, my intention was to be covered in the event of business interruption.
My policy covers “acts of nature” Outsurance is excusing itself from commitment based on technicalities. No one could foresee Covid 19, therefore no one could state this as a specific reason that would cause BI in any policy.
In my humble opinion, some sort of compensation for an undoubtedly unexpected act of nature is necessary for anyone covered for Acts of Nature that may cause business interruption. Ignoring that is neither ethical nor moral. I will contact Natasha which will hopefully result in a positive response from Outsurance for all to applaud.

All the comments are valid and impressed by Natasha open representation on the issue. Yes there is a angle” to risk / reward – that why there are reinsurance businesses, to spread the cost when the day both the client and insurer hopes never comes!!
Our business was with one of the bigger insurer for 18 years, then we had a robbery( 9 months later they settled on “ their terms” so when they informed they were increasing the first amount payable on a claim there after & increasing the premium significantly – I packed my bags and joined MiWay business.. OK they did not pay on the business interuption( but then I only had the standard not extended cover, so accepted that roll of the dice…however having been monitoring the hospitality class action , and the various underwriters response to claims made under business – I will definitely askoutsurance for a quote to cover my business , solely due to their actions towards the claimants

Let’s be honest, Outsurance is not being a contrarian in this instance, it’s just business. What Outsurance has effectively done is allocated money towards advertising. They said that they allocated R 220 million, when they know what their actual risk exposure is (all the insured amounts are linked to the policies and if it isn’t it wasn’t insured in the first place). They could have said that they allocated a billion rand, it doesn’t mean they are gonna pay it (but would have believed it?). Ask yourself, if you could pay R 38 million to smear your competitors in such a way that you still look good and not go to prison, would you do it?

Hi Wynandlw

The facts are that our expected claims amount is R220 million, that’s the amount we have reserved for the payment of these claims. We have, to date, paid R37 million of the R220 million to our clients. This is certainly not advertising spend but money actually paid in claims to help support our clients’ businesses and keep their staff employed. Regards Natasha

Come now, R220 million is peanuts in the bigger scheme of things, dont be disingenuous. Whats your monthly advertising budget as one can’t avoid your ads?

This entire industry deservedly has a bad name. Remember the instance when an insurer didn’t want to pay out a life policy because a person got shot during a hijacking, but then they came up with the excuse that he didn’t tell them he had high blood pressure? Always looking for excuses not to pay, but strangely quite keen to take your premiums.

I’m surprised that Outsurance didn’t try to negotiate a lesser payment.

They usually do when it comes to motor insurance payments.

Cannot find the policy wording for this extended BI Cover, only the standard policy wording is on their website. Please provide a link @Outsurance.

Hi Ryno

This is not available on our website but drop me an e-mail and I will gladly assist you. Mail me on kawulesarn@out.co.za Regards Natasha

I am a business owner who’s had an Outsurance policy for years, with 2 seperate Business Interruption covers included. When I phoned Outsurance in May to claim for my business being interrupted, I was told Outsurance doesn’t pay out for Covid-19 interruption. I had a complete meltdown and immediately cancelled my policy with Outsurance as I couldn’t afford to waste any more money. So exactly who will actually get paid out now??

Hello ADP
We are sorry about your experience. It is important to note there are two parts to the Business Interruption cover. We have clients with standard Business Interruption cover who would not have had cover for this incident. The claims that we settled are where clients had the extended cover, under their Business Interruption cover. If you have the extended cover in place, we will gladly review your claim. You may mail me directly on kawulesarn@out.co.za . Regards Natasha

End of comments.

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