It’s not just the landscape of verdant KwaZulu Natal that’s been changed forever by two recent mass flooding incidents that followed last year’s riots and unrest, all hot on the heels of the COVID-19 pandemic – the insurance industry that has to pick up the tab for all the damage to insured assets has had to respond and adapt too, with more change likely in the future.

That’s the view of Brandon Saunders, executive, short-term insurance at ASI Financial Services, an independent financial advisory.

“The vast number of claims already settled after these devastating events highlights how the insurance industry has made a positive and sustainable difference to the people and businesses who had short-term insurance cover, who were able to have their insured assets restored to their original condition,” Saunders explains.

“Despite several court cases around the nuances of business interruption insurance cover during the COVID-19 lockdowns, businesses have been kept alive and their employees still have a livelihood in KwaZulu Natal, as a result of this type of cover,” says Nicholas Govender, regional principal at ASI Financial Services in KwaZulu Natal.

By its very nature, the insurance business will always provide cover for people and businesses who want to protect their assets. However, developments in the industry mean that insured parties need to be more meticulous in understanding their cover, and that they should be prepared for increased premium costs as insurers adapt to the increased cost of claims.

For example, SASRIA premiums increased by between 67% and 1736%, depending on the insured asset, since the public enterprise’s resources were massively diminished after claims arising from the 2021 unrest – so much so that it sought additional funding from Treasury later that year.

The international reinsurers that underpin local insurers have also indicated that they may be unwilling to reinsure certain risks, given the current economic climate of high unemployment and high risk of social unrest. Those that are willing to do so, will re-evaluate the risks at rates that they deem more appropriate, which in turn will have cost implications for insured people and businesses. their cover at more expensive rates, which will in turn have to be passed on to insured assets. Local insurers just don’t have the depth to take this on themselves.

Govender notes that the local insurance community in KwaZulu Natal has also been affected, with the small, independent brokerages that serve this price-sensitive community taking strain after the three major claims events of the last 12 months.

“Negotiating the cheapest possible cover when you’re (mistakenly) confident that you’ll never need to claim for a particular type of event unfortunately, means that you’re likely to not be covered to your full real need when that event happens,” Govender explains.

“Brokers that have bowed excessively to pricing pressure may not have explained the full implications of less cover for a lower cost, and they and their clients are now paying the price when insurers repudiate their claims. Many are finding that the level of risk on their books is becoming too unwieldy for them to handle, as small businesses,” he adds.

“Insurers are in the business of restoring assets affected by unexpected events, and they generally will assist as much as they can, within the bounds of the policies that insured parties hold with them,” Saunders explains. “Their actuaries factor in the ebbs and flows of events, and have long been considering the effects of global warming. They want to maintain loss ratios at a sustainable level for the industry, and will have to adapt their offerings to align with this.

“All of this means that insurance policies are likely to be more carefully and specifically worded than they already were, and that premiums are likely to increase,” Saunders explains. “Make no mistake – insurers are in the business of providing cover for just about any eventuality – but the conditions around providing that cover are likely to change.”

It’s in navigating the changing insurance environment that insured parties will benefit from the advice of a national, independent financial advisory service that has a holistic view across insurers, and of South Africa’s diverse insured population.

“An independent advisor will be able to negotiate the best possible premium for an insured asset or business, while also explaining the nuances and ramifications of each element of the contract,” Saunders explains.

“Their purpose is to build and nurture a relationship with each client, making sure that they understand their policy and are properly covered. When it’s time to claim, they turn to that contract to make sure that the insurer honours the commitment that they have made, and that there are no technicalities that have been missed,” he adds.

“While smaller brokerages certainly do offer these services, along with personal attention and sometimes lifelong relationships, they and their clients would benefit if they were part of a larger organisation with the benefit of an experienced support team, like we are able to offer at ASI,” Saunders says.

With global warming likely to escalate and lead to more extreme weather events across the country, and South Africa’s socio-political environment being as complex as it is, insurers will be managing their risk more carefully than ever before. Businesses and individuals need to be confident that they fully understand the extent of their cover, so that they can mitigate any potential gaps in cover, and that have the best possible team on their side when it comes to navigating unexpected catastrophic events.