Discovery Insure says a public-private partnership it is involved in with Dialdirect Insurance and the City of Johannesburg to urgently address the pothole crisis of epic proportions on the city’s roads has helped reduce vehicle insurance claims linked to road surface damage.
Almost 80,000 Johannesburg potholes have been filled in by the partnership, Pothole Patrol, since its launch in May 2021.
The project, launched with the support of the city’s late former executive mayor Geoff Makhubo, allows residents of the city to log pothole locations so they can be prioritised for repair via a dedicated smartphone app available on the Apple and Google Play stores.
While the initiative does have a feel-good corporate social responsibility aspect to it, it is also underpinned by a sound insurance rationale, with Discovery Insure saying it has resulted in pothole-related vehicle claims in Johannesburg falling 26% in the six months to end-December 2021. By contrast, insurance claims for pothole-related vehicle damage in the rest of Gauteng, where the project has not yet been rolled out, rose 45% at the same time.
“We saw the project as a unique data-driven initiative designed to make roads safer for all residents of Johannesburg, whether they are clients of Discovery Insure or not,” said Anton Ossip, CEO of Discovery Insure. “This model seeks to improve and minimise risks to our clients, and share the surplus value from this risk mitigation with our clients and society. The associated improved claims outcomes in Johannesburg are an excellent example of this virtuous cycle.”
While Johannesburg’s road infrastructure has become blighted with potholes partly due to unusually high rainfall and stormy weather, which also caused general household insurance claims to spike, pandemic-related restrictions have also affected repair work. The Johannesburg Roads Agency (JRA) said earlier in February that it was forced to reduce staff numbers at its asphalt production depot when Covid-19 restrictions were gazetted in March 2020 as it was not declared an essential service.
That left the agency unable to produce asphalt or carry out road repair and resurfacing work for at least five months, resulting in a big backlog that was worsened by unusually high summer rainfall that further damaged the city’s road infrastructure.
While Discovery Insure is reluctant to say whether the project will be rolled out in other parts of the country, it did not rule out the possibility in an interview with Business Day.
“This cross-sector partnership is the boost Johannesburg has needed to turn around the backlog of poor road infrastructure,” said Anneli Retief, head of Dialdirect Insurance.
Insurers were battered by the impact of weather and climate change in 2021, with a report by Aon on the impact of natural catastrophes showing that more than $343bn in economic damage occurred last year globally, compared with $297bn in 2020. That made 2021 the third-most costly year yet once inflation is taken into account.
Discovery’s interim results published last week showed its insurance unit posted an 86% drop in normalised operating profit to just R15m for the six months to end-December. That was largely due to the effect of adverse weather, elevated power surge and fire claims due to continuing power cuts, and escalating motor parts inflation due to pandemic-related global supply chain woes.
While CEO Adrian Gore emphasised that Discovery Insure’s client base remains of a high quality, he said the unit is investigating how it could “push back” on the soaring cost of vehicle parts.
“The weather was an issue — we’ve had massive thunderstorms, massive rain — but that actually wasn’t the big problem,” said Gore. “The biggest problem was the cost of motor parts. It may be the shape of our book so we’ve got to figure out how to deal with that. We’ve got to push back.”
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