Power surges to potholes: Five claim trends affecting SA’s insurance landscape

Infrastructural challenges, increasing pressure on the national power grid, climate change and the residual effects of the Covid-19 pandemic are just a few of the factors that have triggered indelible changes to SA’s risk landscape.

These shifts are reflected in insurance claims data, which has shown significant upticks in certain types of policy covers. Trends of this kind, particularly with regard to commercial claims, will continue to shape the insurance sector as it adapts to help businesses mitigate new and emerging risks.

“SA's unique socioeconomic environment and its affect on local businesses necessitates a high level of agility among major players in commercial insurance,” says Thabo Modise, head of claims at Western National Insurance.

“The noticeable rise in claims and the changing nature and scope of said claims has only reaffirmed the importance of helping businesses to ensure that they have adequate cover to navigate these, and future, uncertain times.”

With this in mind, Western National Insurance highlights five trends affecting the sector:

1. Covid-19 as an example of the importance of being prepared

Though the prevailing national sentiment is that the “worst is over”, as the country re-emerges into a post-pandemic reality, we cannot underestimate the far-reaching effects that Covid-19 has had on SA businesses. This is evidenced by the marked increase in the purchase of public liability policies. 

The pandemic brought the potentially catastrophic consequences of unexpected crises to the fore. And for the companies which were able to weather the storm, public liability as well as insurance for business interruption, has become an essential part of a sustainable and comprehensive risk strategy.

2. Load-shedding and its impact on the nature of commercial claims

In the wake of the pandemic, SA businesses are also faced with risks posed by load-shedding.

In the past few years, there’s been a dramatic increase in claims relating to damages caused by power surges, which coincide with persistent load-shedding.

Across all regions, the buy-up of commercial property insurance relates closely to greater awareness about the risks posed by power surges during rolling blackouts.

With no clear indication of when the national power grid will be stabilised, SA businesses need to be as prepared as possible to mitigate this risk. 

Not only should a renewed focus be placed on adequate cover for this type of damage, but businesses need to pay close attention to the terms and conditions of their policies. System failures due to load-shedding need to be factored in and businesses need to ensure that power surge protection devices are installed, backup energy supplies for alarm systems are maintained and that they adhere to the burglar alarm warranties specified on their policies.

3. Natural disasters on the rise and the tangible threat posed by climate change

Another prevailing trend in commercial insurance is the increase in claims related to natural disasters, particularly over the past two years. This trend is particularly apparent in Gauteng, where there is strong evidence of a cyclical effect from October to April each year. 

Storms, lightning and minor earthquakes are among the most common disasters which affect South African businesses. This trend is likely to be compounded by the affect of climate change, with the recent devastating floods in KwaZulu-Natal being a case in point. 

Climate change has become a bigger focus area for insurers over the past few years. The increase in natural disasters pose serious risks to businesses in terms of both property damage and public and employee casualties. This reality is something that both insurers and businesses need to consider in building resilience against the effects of climate change

4. Infrastructural failings and the risks for businesses

Insurers are keeping a close eye on the impact that SA’s infrastructural failures will continue to have on businesses.

Reports reflect that some of the most pressing concerns include an increase in potholes, brought about by poor road maintenance. Challenges such as these pose multiple risks to company fleets, particularly for businesses that operate within outlying areas. 

5. Cyber insurance has become a necessity

Another main driver of change on the local risk landscape is the prevalence of cybercrime. With SA being one of the world’s biggest hotspots for crimes such as identify theft, data theft and ransomware attacks, cyber insurance has transitioned from being an “added extra” to being a risk strategy imperative. 

This has become even more crucial with the advent of remote working culture, which has taken off both globally and abroad. With more employees working from home, businesses of all sizes and across all sectors need to become acutely aware of the potentially devastating financial and reputational damage that cybercrime can cause.

Cyber insurance is a vital component of risk management and should complement internal cyber security policies and protocols, which are now vital to the survival of businesses in the digital age.

“On the whole, SA businesses are relatively well insured, but should keep their eye on the ball when it comes to understanding the evolving nature of risk,” says Modise. 

“We’re seeing an increase in maintenance-related claims. Simultaneously, however, we’re seeing a rise in claim rejections due to lack of proper maintenance cheques and procedures, as well as gradual property deterioration. This is indicative of the added strain local companies are under given tough economic conditions.”

This article was paid for by Western National Insurance.