The widespread unrest seen across KwaZulu-Natal and in parts of Gauteng in July has given the insurance industry a lot to think about. The sector was already facing a vastly disrupted industry amid the pandemic; the riots, fires, theft and vandalism means both private insurers and our state insurance body are now looking at billions of Rands in payout. The concern is that current reserves may not be enough to cover the costs of the damage.
While the unrest was devastating, the good news is that – since the 1976 Soweto uprisings – businesses in South Africa have had the option to secure insurance coverage for special risks such as civil commotion, public disorder, strikes, riots and terrorism. This thanks to the formation of the South African Special Risks Insurance Association (Sasria), a state-owned entity which provides cover to all people and businesses that have assets in South Africa. While Sasria does not work directly with the public, they enter into agreements with other short-term insurance companies in South Africa who then represent and sell Sasria’s products to the end-customers. Many effected businesses have this cover, and have been able to submit their claims.
Viviene Pearson, CEO of the South African Insurance Association (SAIA) says “Sasria’s team of claim adjusters are still counting the cost of the damage that has left more than 200 shopping malls and 3000 stores destroyed. Sasria has been working with National Treasury and the government to prepare for the claims. We therefore welcome the recent announcement by the President, and the Minister of Finance, Tito Mboweni, on 28 July that government will be making a provision of R3.9 billion to assist Sasria, and this may be revised as events unfold.” With an extensive membership reach, SAIA has been encouraging its members to expedite and settle claims on behalf of Sasria and within the mandate given to insurers by Sasria, where possible. “However, we recognise that that they also have a duty to properly assess and determine pay-outs that protect all their policyholder’s interests.”
While Sasria does cover loss caused by political unrest, government protest, riot, strike and public disorder, it does not cover looting and theft, unless caused by any of the covered events. This means that despite some claims that the looting had nothing to do with former president Jacob Zuma’s imprisonment, the link between the two is vital if victims of theft are to stake their claim.
Fortunately, Sasria recently made a public statement that damage and looting as a result of the July riots are claims that fall into the ambit of Sasria perils. “Sasria has been consistent that all valid claims submitted to Sasria will be paid,” the statement said. It also said: “In our 42-year history, Sasria has not witnessed any incident of this magnitude.”
While cash reserves are tight, it appears that National Treasury is committed to ensuring claims being settled. For the moment, small claims under R1 million are being expedited to help small businesses start rebuilding.
Pearson says that the events of July have surely highlighted the importance of insurance. “Insurance must be viewed as a necessity, not a grudge purchase or a luxury good. Insurance adds greatly to your financially sustainability and will be vital in the rebuilding of businesses after the July unrest. Without it, many businesses would never recover,” she concludes.
