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.
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.”
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.
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.