Insurance Claims Africa (ICA), is the public loss adjuster that has been at the forefront of representing disgruntled policyholders in their fight with insurers over Covid-19 contingent business interruption (CBI) claims. CEO Ryan Woolley chats to Business Day and explains why he thinks insurers’ apparent reluctance to settle Covid-19 related CBI claims has been misguided.
Q: Insurance Claims Africa has spearheaded the fight by policymakers to get their Covid-19-related CBI claims settled. Tell us a bit about the history of the company and why it was founded.
A: ICA was started about 30 years ago by Mike Gaines, who was an insurance loss adjuster, and Ken Cox, who managed claims for one of the large insurance brokers. As a loss adjuster, Mike became aware that the insured parties were always at a disadvantage in formulating their claims when facing the combined expertise of a loss adjuster and the insurance companies’ sophisticated claims management personnel. In short, claimants were getting the short end of the stick and the brokers’ claims departments were not technically competent to formulate complex claims. They were also in a conflicted position because the brokers needed the insurers more than the insurers needed the brokers. This left the brokers unable to robustly challenge insurers on any claim disputes.
Mike spent some time in the US understanding how “public adjusting” worked in that environment and introduced the concept to SA where he stopped representing insurance companies and only represented the claimant to ensure they received their full entitlement in terms of the policy. The company was ultimately sold to Ernst & Young (EY), but after a number of years and the advent of a change in regulations, Gaines and Cox took over the business again.
I had previously been with the company from 1998 to 2005 and rejoined in 2014 as CEO, growing ICA to be the largest public adjusting/loss assessing business in Africa. Our network includes associate offices in the UK and Australia.
Q: One of the criticisms that has been levelled against ICA is that you are only doing this for money. Can you tell us how ICA is remunerated?
A: From its inception ICA worked on a “no cure, no pay” contingency fee basis because it seemed inequitable to ask a claimant to pay hourly based fees without certainty of success when all their assets had already been destroyed by an insured peril and they were already under extreme financial pressure. In addition to our own team of professionals, we also fund the cost of experts required. If the claim is not paid then we do not charge our clients a fee and we bear costs incurred.
ICA charges a percentage of the settlement received from the insurer which is always subject to negotiation between ICA and the client. This is the same system used by architects, quantity surveyors, insurance companies and any other commission-based fee structure.
In the context of Covid-19 CBI claims because of the acute financial anguish in the tourism and hospitality industry, we reduced our rate to 5% for pandemic-related claims. It was important for us to do all we can to assist these businesses, many of which are small and medium-sized operations that have suffered tremendously, and whose very existence — and the thousands of jobs they sustain — has been threatened by the pandemic.
It’s important to remember that we spent over R15m of our money to establish legal certainty without any guarantee of success. These small businesses, on their own, would have been unlikely to be able to force large insurers to agree to their claims without the backing and collective action funded and driven by ICA. Our job is to empower and consolidate the might of “David” in their collective fight against “Goliath”.
Q: Do you think the real issue with these Covid-19 related CBI claims is that insurance companies failed to adequately quantify the risk of a pandemic and the effect it would have on policyholders and, ultimately, themselves?
A: The brutal reality is that the insurers never gave “infectious/contagious disease” cover any thought whatsoever prior to the pandemic. This means that they are now having to try to retro-underwrite the inadequacies in their policy wording because they failed to apply appropriate underwriting criteria to this cover. Whilst we have some sympathy for the situation, the fact of the matter is that insurers were responsible for drafting this policy wording and it has fortunately offered very substantial relief to their clients — who they are now trying to avoid on the basis that “they negligently didn’t give this sufficient underwriting attention at the outset” — and that quite simply is inequitable.
From the outset more prudent legal counsel pointed out to insurers that a defence against CBI cover was not certain and they should act with caution. The less prudent legal advisers (mainly attorneys who normally represent insurers) were a lot more certain and made it very clear to us that the litigation against the insurers would not succeed.
Had the insurers looked at the CBI cover objectively at the outset, they could have settled all their claims within a very short period and probably limited their liability. This would have given their clients certainty on how to go forward, and it would also have given the insurers a reasonable interpretation to the cover. Instead, they blindly followed their attorneys who are now trying to introduce all sorts of contrived interpretations to the various judgments to limit the insurers’ exposure, and at the same time devastating the hospitality industry.
Q: Santam and Momentum Metropolitan have both indicated they will no longer be providing pandemic cover in future. What is your view?
A: It is an inevitable knee-jerk reaction that has become a trend in the market whenever a policyholder has a claim. That being said, there are always cycles to insurance products and markets. It probably won’t be long before a prudent underwriter develops a new policy providing CBI cover for infectious disease.
Q: ICA caused a stir when it presented research by independent economist Roelof Botha showing the short-term insurance industry earned massive premium windfalls in 2020 while claims payouts for events like vehicle accidents dropped. Insurers argue this is not indicative of how individual company profits have been affected by the pandemic. How do you respond?
A: You may recall that at the outset of these Covid claims, the insurers were trying to make the case that full payment would bankrupt the industry. We wanted to dispel that inaccurate statement and show the factual position as determined by independent economists. Insurance economics is driven by the ratio of claim costs against premium income, and they should always be in harmony. If claim costs reduce, then so should the premiums, which has not been the case and hence the concern that insurers are profiting from this unfortunate situation.
Q: ICA recently indicated it may launch groundbreaking litigation against the short-term insurance industry for additional damages that stem from CBI claims being rejected that go beyond the cover outlined in policy wording. Can you tell us more?
A: In the US, insurers are held liable for damages if they improperly delay the settlement of a claim, but in SA this is not the case and insurers have a virtual indemnity against bad claims management. We are looking to rectify the situation and this will require a new approach to claiming damages from an insurer beyond the policy coverage. The appropriate legal opinion and processes are still being formulated.
Q: We have just seen massive unrest and looting across SA. Is this likely to result in more CBI claims against insurers?
A: We have already received numerous calls to assist businesses in both KwaZulu-Natal and Gauteng with their insurance claims, and we expect that this will continue to increase as the situation unfolds.
These claims should be covered by Sasria, a state-owned non-life insurance company that provides coverage for damage to property caused by special risks such as politically motivated malicious acts, riots, strikes, terrorism and public disorders. Certain commercial insurers (who also are involved in disputing the Covid 19 CBI claims) chose to write political risk/riot wrap cover in excess of Sasria limits, and they will also be exposed to these claims.
Sasria has already committed to settle claims as quickly and efficiently as possible, and it is in a stable financial position, which is encouraging.
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