Escalating claims for losses incurred through service delivery protests, strikes and student protests have tested the strength and sustainability of state-owned insurer Sasria SOC Ltd.
Sasria, the only short-term insurer that provides individuals, businesses and government affordable cover against special risks – including civil commotion, public disorder, strikes, riots and terrorism – has managed to handle rapidly escalating claims, stay profitable and remain one of the few state-owned companies (SOCs) to get a clean audit and not put a strain on the fiscus.
It’s recently released annual report shows that service delivery protests accounted for 76.6% of claims in the year to end-March.
The number of claims increased by 32.4% and there was also an increase in severity.
The value of claims, however, decreased, with gross insurance claims amounting to R663 million, 13.5% below the prior year.
But since year-end, claims have surged – with circa R1 billion of new claims processed by Sasria in just five months, according to Fareedah Benjamin, Sasria’s executive manager for insurance operations.
“There has been a massive increase, and our financial stability means we can sustain ourselves and facilitate the rise in claims in this financial year,” she tells Moneyweb.
Sasria’s annual report shows that despite an increasingly difficult socio-economic environment, gross written insurance premiums increased by 8.2% to R1.99 billion in the year to end-March, which is higher than the industry growth of 7%.
Net investment income of R812 million was up 96.4% and pre-tax profit increased 83.7% to R1.37 billion, with administration and marketing expenses rising 13.8%.
The loss ratio improved, decreasing to 33.6% of net premiums earned from 42% last year.
Underwriting profit was up 62.2% to R580 million, assets under management grew by 11.7% to R7.6 billion and Sasria’s return on equity was 15.5%, up from 9.8%.
Finance director Bajabulile Luthuli says in the annual report that “this strong financial performance discipline assisted our customers in getting their lives back on track after suffering at the hands of riots and strikes, by paying their claims and our suppliers timeously”. She adds that “as an SOC that continues to be profitable, Sasria has met all its obligations to the fiscus by paying all its taxes on time and paying a dividend to our shareholder”.
Benjamin says the annual report reflects Sasria’s excellence, corporate citizenship and its contribution as a state company to the National Development Plan. “It reflects not only our strong financial results but our impact on society and that we contribute to the stability of the economy. We work with a sense of urgency to pay claims so that our clients can be operational as quickly as possible.”
She adds that Sasria is an SOC that again received an unqualified audit and was able to show that it manages the business with good governance and ethics.
She points out that there are many companies and individuals without adequate insurance against specific risks, which are clearly becoming more widespread.
“It is important to note that these incidents are not isolated to one province or one town. They are happening across South Africa, and the momentum is increasing.”
Sasria, formed in 1979 as the South African Special Risk Insurance Association to provide insurance cover for special political risks, saw its mandate extended in 1998 to cover non-political risks, such as strikes and labour disturbances.
It works through a network of insurance companies, which perform an administration function on its behalf and sells its products, and brokers who also sell Sasria special risk insurance cover on its behalf.
Its aim is to protect South African assets and contribute to financial inclusivity by ensuring that its products offer affordable protection.
Its premium income is driven largely by property values, whereas the short-term industry growth is typically linked to motor vehicles.
Sasria’s strategy from 2014 to 2019 was to ensure that it remains profitable and efficient, establishes itself as a thought leader in the special risk space, uses innovation to ensure financial product inclusivity, and remains sustainable.
Now it is looking at the next five years in terms of sustainable revenue growth, innovation in products and services, customer-centricity, maintaining a healthy financial position, investing in technology and information, developing people, capacity and capability, complying with regulations, and building a trusted and visible brand.
Benjamin says that because Sasria has proven its ability to be sustainable, it can look ahead and know with confidence that it can meet its mandate and new strategic imperatives. She says its 2018 results are not only financially significant, but its unqualified audit and its ability to meet its social and economic mandate means it can say with some confidence that it will meet objectives.
The next year will, however, be challenging. “Only certain incidents are reported on in the news. Until you see the extent of the claims, you don’t realise these events are happening with more frequency and [that] the extent of the damage is increasing.”
This is why more and more people and companies are encouraged to ensure that they are covered for these events.
Brought to you by Sasria.
Sasria is an authorised financial services provider (FSP number 39117).