Insurance Claims Africa (ICA), the public loss adjuster spearheading the fight against insurers over Covid-19 business interruption claims, says SA’s short-term insurance industry reaped huge financial windfalls during the pandemic yet dragged its heels over settling claims related to coronavirus.
Using research by independent economist Roelof Botha and Keith Lockwood from the Gordon Institute of Business Science, ICA argues there is a vast disparity between the financial gains earned by short-term insurers since the onset of the pandemic and the struggles of policyholders battling to receive payment for Covid-19-related business-interruption claims.
“Outside of a mine that’s producing platinum or iron ore, thanks to the commodity supercycle, I don’t think there’s another sector of the SA economy that is laughing as loudly to the bank as the short-term insurers,” Botha said during a virtual media conference on Tuesday.
ICA, which is representing more than 850 claimants in their ongoing fight to receive final payments from insurers to settle business interruption claims related to Covid-19, lambasted insurers on Tuesday for hiding behind lawyers and bureaucratic process to delay claims settlements. The company said it had sought legal opinion on whether policyholders could seek additional damages beyond those outlined in policies and hinted it might launch “ground-breaking litigation” against the short-term insurance industry.
“It’s an unfair situation that insurers sit on these claims for the last 14 to 15 months with some clients still not even having been paid an interim payout, while they argue technical issues around claims,” said Ryan Woolley, CEO of ICA. “The claimants are being made to beg for payments and essentially the insurers are having record years.”
Botha argued that short-term insurers had not been affected as badly by the pandemic as their long-term counterparts, which typically provide life and funeral cover and are therefore more exposed to Covid-19-related mortality claims. He further argues that many short-term insurers have benefited from lower claims for events such as vehicle accidents as consumers drive less during lockdowns. Nevertheless, he says most short-term insurers have not reduced the premiums they charge customers, despite lower claims for events such as motor accidents.
Botha’s research shows that total premium income received by the short-term insurance industry rose to a record high of R130.5bn in 2020, resulting in unappropriated profits for the industry increasing more than 20% to a new record of R53.5bn. The total assets of the short-term insurance industry also increased 12% in 2020 to a record R220bn.
However, his biggest argument in favour of short-term insurers settling their outstanding contingent business-interruption claims is underscored by data showing that the ratio of premium income relative to claims settlements to policyholders has declined precipitously. Botha’s research shows that in the first three quarters of 2020, that claims ratio for the short-term insurance industry fell to 51%, down from a significantly higher ratio of 63% for the corresponding period in 2019. He also argues that the value of unpaid short-term insurance industry claims rose by more than 17% to a record high of R49.4bn in 2020.
“The delays we’re seeing with insurers in paying these claims is just further causing financial strife and hardship,” said Woolley.
“The insurers need to stop following a painful and bureaucratic process to get these claims paid. We still, to this day, are suffering from Covid-19 and because of the impact of lockdown regulations.”
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