Insurance Claims Africa (ICA), a group representing lockdown-hit companies in the tourism industry, said only a third of its clients insured for business interruption insurance have qualified for financial relief from SA’s insurers.

ICA has been representing about 700 businesses in the tourism and hospitality industry in their battle to get large insurers to pay out on the Covid-19 business interruptions claims.  

Short-term insurers who have been receiving business claims have pledged to offer some policyholders interim relief payments pending a court decision on whether they should pay out.  

The decision was taken after a July agreement with the Financial Sector Conduct Authority (FSCA) and the Prudential Authority (PA) who expressed concern over the refusal by insurers to make payments.

Ryan Woolley, CEO of ICA, said only about 210 of the businesses it represents have qualified for relief.

Some of the funds being offered to the companies are insufficient, he said.

“It’s very low in terms of what the claims are worth because of the caps in place. We’d say it’s only about 10% to 15% of their losses. So they’ve still got significant losses that they still have to carry themselves,” Woolley said.

According to Woolley, Old Mutual’s short-term insurance arm, which said in July it would spend more than R650m in settlements to small and medium enterprises whose businesses had been affected by the lockdown, did not have any qualifying clients.

“In terms of the number of clients that qualified, for Old Mutual, we had no clients that qualified,” he said.

“Their threshold was extremely low. They said you had to have a [maximum] sum insured of R5m and that essentially ruled out the majority ... all of them fall above that, even marginally,” he said.

SA’s largest short-term insurer, Santam, which is involved in a business interruption case that will be heard by a full bench of the Western Cape High Court on September 1, pledged R1bn, more than half of which has been paid out.

“We are cognisant of the fact that Santam may appeal but we hope that with this legal certainty ... we will be able to treat this as the watershed case that could influence the rest of the industry,” Woolley said.

Guardrisk, a subsidiary of Momentum, lost to Cape Town restaurant Cafe Chameleon in a landmark case. Guardrisk settled with 700 clients to stave off costly legal battles.

Woolley said about 12 insurers who offer contagious and infectious disease cover have approached the FSCA about convening a test case similar to the ones that have been conducted in the UK to give guidance on policy wordings.

Proposals, which can be submitted until September 14, will give guidance on about 30 policy wordings, Woolley said.


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