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Short-term insurers showing ‘super profits’ during Covid, but still stalling business interruption claims

Record financial year for non-life insurers in stark contrast to financial devastation faced by clients largely in the tourism and hospitality industry.
Image: Moneyweb

Insurance Claims Africa (ICA) has fired the latest salvo in their ongoing battle with South Africa’s short-term insurers over Covid-19 business interruption claims and settlement delays, saying on Tuesday that these insurance companies are “actually making super profits” during Covid, yet are still stalling paying out most claims.

The latest censure was made by ICA CEO Ryan Woolley and the group’s chairman Mike Gaines during a briefing update on the claims debacle which has been raging for over a year and with several cases still before the courts.

ICA – Southern Africa’s largest independent insurance claims specialist – is currently representing over 850 companies with Covid-related business interruption insurance claims against insurers. Western Cape-based Ma-Afrika Hotels, which won a high-profile case against industry giant Santam, is one of ICA’s clients.

Read: Ma-Afrika wins court battle against insurance giant Santam

While short-term insurers including Santam, Old Mutual Insure, Guardrisk, Hollard and others have either paid out or agreed to offer interim payment relief to the tune of more than R3 billion for such claims, a much larger amount in claims remain unpaid, in dispute in the courts or stuck in adjudication bottlenecks in these companies.

Woolley and Gaines backed up their ‘super profits’ condemnation against the short-term insurance industry at Monday’s briefing by highlighting new independent research undertaken by economist Roelof Botha, who is an economic advisor to the Optimum Investment Group, together with Keith Lockwood from the Gordon Institute of Business Science.

Botha expressed similar views during the ICA briefing and said that the research shows that “unappropriated profits” of the country’s short-term insurance (STI) or non-life insurance industry increased by more than 20% in 2020 to a new record of R53.5 billion.

He further pointed out that the total assets of SA’s STI industry increased 12% to a level of more than R220 billion.

However, he also noted that paradoxically the value of unpaid STI claims rose by more than 17% to a record high of R49.4 billion in 2020, despite record profits.

Read:

Read:
Business interrupted, but insurers don’t want to pay
Santam clarifies Covid-19 position on business interruption cover

Santam has now paid out R506m in business interruption claims

“It is clear from this new research released today that the STI industry earned record profits during the pandemic, and has no reason to further delay settlement of all outstanding Covid-19 business interruption claims,” Woolley reiterated in a statement following the briefing.

“The gross inequity of the situation is blatantly prejudicial to claimants who are still awaiting settlement more than one year after the start of the pandemic. We believe that insurers are ignoring their clients’ extreme financial anguish and are underestimating the level of dissatisfaction and loss of trust from the delays in settlement,” he added.

Read:
Café Chameleon wants business interruption insurance case concluded at SCA
Guardrisk to appeal High Court business interruption insurance judgment
Cape café’s ‘precedent setting’ business interruption insurance victory

Woolley called for a more concerted effort by the STI industry to make interim payments to affected customers while the insurers “resolve the current bottlenecks within their systems that are preventing payments”.

“For too long now we have watched claimants struggle to survive financially, and I can only hope that the board members and shareholders of these insurers are alive to the difference between their financial positions compared to that of their customers,” he said.

Woolley reiterated that some insurers, particularly Santam, continued to “frustrate the process”.

Read:

“We are finding that insurers are adopting long, overly pedantic processes, and doing everything in their power, it seems, to delay payments. We are very concerned about some insurers attempting to limit the quantum that is due to policyholders, yet they have been sitting on the funds for over 14 months earning interest,” Woolley added.

He said the case that was won by Ma-Afrika Hotels against Santam in the Western Cape High Court last October is now being appealed by Santam in relation to the indemnity period of the policy. The court ordered Santam to payout for an 18-month period, but Santam wants to only payout for three months.

Read:

Santam to appeal Covid-19 ruling

Santam: High Court ‘erred’ in business interruption judgment

“We have had positive interaction with Hollard South Africa and Old Mutual Insure. However, with Santam the process continues to be frustrating. Santam is working through its lawyers [Norton Rose Fulbright] to avoid liability for large claims in its Hospitality & Leisure Division,” he noted.

Reacting to the latest salvo, Santam said in a brief emailed response to Moneyweb that it has “taken note of the statements made by ICA” on Tuesday about the payment of claims for contingent business interruption insurance cover.

“The statements contain a number of inaccuracies and false allegations. Santam views the statements in a serious light and will respond appropriately to the allegations.”

“Santam assures its clients and all interested parties that it continues to expeditiously settle all valid claims in line with the policy wordings and conditions of cover,” the insurer added.

* Some of the latest allegations made by ICA surrounding the debacle and Santam’s processing of claims have not been cited by Moneyweb in this story.

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The insurers that delayed or did not honor business interruption had better realize that a large number of people have long memories and are just waiting for finalization before swapping insurers.

I have read a lot about these business interruption claims in the news and there are some things we should talk about. One side of the case is getting a lot more press than the other, and it is creating a feedback loop where people only hear what they want to hear, and as a neat byproduct selling newspapers and ads.

There are points I agree with, namely clients that have the cover should be compensated, and other points where the court decided to change the benefit term from the one stated on the schedule to the longest one stated on the schedule, which I do not agree with. For example, if the benefit stated in the schedule for was 3 months for business interruption due to infectious diseases, the court shouldn’t be able to change it to 18 months.

Also remember that these companies mentioned in this article are listed companies with shareholders that demand growth for their investment, I am not hearing any cries for investment activism to force the companies to pay claims at the expense of their dividends.

The court did not change 3 months to 18 months. There is a long list of extensions limited to 3 months, explicitly done so in a schedule , infectious disease not being one of them. Although an extension, if you do not specify it together with the other extensions being limited to 3 months, the standard(chosen by insured) indemnity period applies.

I doubt any serious shareholder would shout that the Company pay less than the contract states. That is fraud or at minimum racketeering.

You’ve got love that useless umbrella logo.

Santam has insured SA against natural and political storms for decades and is part of the very fabric of the economy – but here they have badly let down the insured during Covid.

Does it have to do with the management’s stock options?

Lucky for us they must declare their financials ne! Same goes for mining houses complaining how difficult the business environment is but each time coming back with record profits. Maybe JUJU has a point?

Insurance good and proper, or poor and dodgy?

Insurance policies are contracts with terms, conditions and limitations which policy holders agree too when signing up….you want charity?, ask the anc!

I have a claim with Santam where their appointed repairmen did poor workmanship. In the end they came back 4 times to try to finish the job that they were meant to do. It is now a year and a half later and now Santam want me to apply for a separate claim for the problem that their workmen caused and that has still not been repaired.

Disgraceful service from Santam. I will be going to the insurance ombudsman for this.

End of comments.

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