Santam says it is only in a position to process 57% of the contingent business interruption (CBI) claims related to Covid-19 that it has received since the pandemic began, because the remaining clients have not yet submitted all the required documentation.
SA’s largest short-term insurer says it has received a total of 3,252 CBI claims, roughly 2% of its commercial and corporate clients, but has been able to process only 1,851 because some customers failed to submit all the required documents. The company said it has appointed 40 additional expert business interruption loss adjusters to help it process CBI claims and is going through assessment or settlement negotiations with about 757 claimants.
“We are absolutely committed to treating our customers fairly and finalising the CBI claims as soon as possible,” Santam Group CEO Lizé Lambrechts said in a virtual media conference on Thursday. “We urge our clients and intermediaries to furnish the relevant claims information that will enable us to conclude this process speedily.”
CBI claims related to Covid-19 have emerged as one of the most controversial topics in the short-term insurance sector after policyholders had to turn to the courts to get insurers to pay for losses linked to the forced closure of their businesses. Insurers including Santam, Guardrisk and Old Mutual initially refused to pay CBI claims by employing a variety of legal tactics that included arguing that their policy wording covered diseases only within a certain radius of clients’ premises or saying it was the lockdown that caused the business losses rather than Covid-19.
However, after a string of court losses in 2020 insurers now face having to pay billions in CBI claims settlements. Santam, which has been heavily criticised by the public loss adjuster Insurance Claims Africa (ICA) for dragging its heels in settling Covid-19 CBI claims, is contesting its court loss against Ma-Afrika hotels over the length of time it must pay compensation for in a case that will be heard by the Supreme Court of Appeal towards the end of August.
In response to questions by Business Day, Lambrechts admitted that insurers had not accurately quantified the risk of a global pandemic and its subsequent impact on client businesses.
“You’re right, we never charged an accurate premium for that,” she said. “We have to take accountability for the fact that there was, according to the courts in SA, not enough clarity in our policy wording.”
Santam says it has paid out a total of R1.6bn in CBI payments, including interim relief, with a significant portion going to small businesses in the hospitality, retail and leisure sectors. While Santam says it is attending to all claims where the required documentation has been submitted, Lambrechts said she is concerned about the 1,401 clients who initially registered their intention to submit a CBI claim, roughly 43% of such claimants, but have not yet done so.
Santam’s deadline for submitting this documentation, which includes annual financial statements, tax returns, proof of expenses and details of any steps taken to litigate business interruption losses, is August 31.
“Those are not unreasonable documentations to ask for and it should be readily available for most businesses,” said Lambrechts.
The insurer also hit back at recent claims by ICA that short-term insurers had earned massive windfalls during the pandemic as their premium income had continued while claims payouts for events like vehicle accidents had declined during lockdown.
Santam CFO Hennie Nel said the company’s underwriting margin had fallen to 2.5% in 2020, the lowest in seven years, while it also paid out R21.1bn in claims last year, the highest yet. Santam declared no dividend to shareholders in 2020.
Nel said Santam’s net CBI claims provision, including the money it received from reinsurers, was R3bn.
Santam revealed that ICA had presented it with a settlement offer for the clients it was representing and that it had responded in writing to propose a way forward.
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