Economy worries companies
In an increasingly complex risk landscape, the biggest emerging concern for commercial entities remains the struggling South African economy.
“The economic downturn has impacted businesses across our specialist lines of insurance. In particular, we’ve seen the marine, heavy haulage, taxis (including e-hailing), aviation, travel and the construction industries contract as a result of the economic challenges,” says Andrew Coutts, Santam’s head: intermediated distribution.
The barometer is a survey that measures the collective concerns of over 950 respondents that include consumers, corporates, commercial users and intermediaries across the country to identify insurance-related trends, perceptions and client needs.
The survey specifically measured the risk trends impacting South Africa, the impact of Covid-19 on individuals and businesses, the insurance industry’s response to the pandemic, perceptions of the industry, how it needs to adapt to changing market realities and client needs, and the changing role of intermediaries.
Commercial motor claims showed a 16% (2019/2020) decline in volumes – with the downward trend continuing into Q1 2021 with a six percent decrease. However, motor claims are still the biggest claim category by value (excluding the recent business interruption claims) despite the drop in volumes.
The average cost per claim was up marginally between 2019 and 2020 with 2.8% and increased further, by 8.2% year-on-year in Q1 of 2021. Overall, the average cost per claim in the commercial insurance lines increased by a staggering 103% year-on-year 2019/2020, this was mainly driven by contingent business interruption (CBI) claims resulting from the pandemic.
Property claims increased by seven percent in 2020 while there were fewer fire claims than usual due to business premises being unoccupied for an extended period during the hard lockdown.
Fire is historically the leading claim category by value.
In terms of Covid-19, the hospitality, transport, aviation, marine and construction industries have been particularly hard hit as well as those who don’t take risk management seriously.
Key findings in order of significance
Impact of Covid-19
“Business owners are urged to remember that insurance cover and good risk management practices go hand-in-hand to provide the necessary protection. Effectively managing risk leads to fewer claims, which results in more affordable insurance premiums over the long term,” says Coutts.
“Given the critical role insurance plays in facilitating business continuity in the event of a claim incident, the decision to purchase insurance must involve more than a cost analysis,” he adds.
*corporates and commercial users only
The full report can be accessed here