Specialist public loss adjustment company Insurance Claims Africa (ICA) has again thrown the spotlight on major insurance companies that are refusing to pay out business interruption claims submitted by small and medium-sized enterprises (SMEs) in the hospitality and tourism sector, despite a Western Cape High Court ruling and a directive from the Financial Services Conduct Authority that they must do so. ICA named the insurers as Bryte, Hollard, Momentum (with its subsidiaries HIC and Guardrisk), Old Mutual, Santam and Thatch.

The business interruption claims stem from the collapse in business caused by the Covid-19 pandemic. ICA also highlighted that recently released Statistics South Africa figures showed that income for the tourist accommodation sector in May was 98% down on that for the same month last year; for the food and beverage sector, the collapse came to 87.9%.

Business interruption insurance is intended to help companies survive unanticipated events. It is intended to allow businesses to pay their staff, rates, rent and so on, and so survive a crisis. It can be for an agreed amount of money, or for an agreed time period. Tourism and hospitality enterprises can, and did, specifically insure against business interruption caused by contagious or infectious notifiable diseases.

However, according to ICA, the above-mentioned insurance groups were continuing to maintain that the business interruption was caused, not by the pandemic, but by the national lockdown – which was imposed by the government to counter Covid-19. ICA also reported that these insurers were also claiming that their policies were not intended to cover pandemics.

“While we are ready to meet the insurers in court, this is not going to be a speedy process,” affirmed ICA CEO Ryan Woolley. “Every day that payouts of these valid claims is delayed is another nail in the coffin of these businesses. Many of the larger operations which have been around for years will survive, albeit with continued retrenchments, but much of the industry is made up of small businesses, which simply do not have access to the critical cash flow needed to sustain them through the pandemic. Already, 49 000 small businesses in the tourism industry have been impacted so severely that it seems unlikely that they will reopen.”

“We are once again saying to the insurers: in a spirit of solidarity, let’s find a way to reach a responsible settlement which will offer these businesses a lifeline to pay their staff and stay afloat,” he urged. “A fair and responsible settlement will also go a long way in restoring trust in the insurance industry, whose reputation has been battered as they continue to reject claims. Our claimants, who are vulnerable small and medium-sized businesses in the tourism and hospitality sector, would consider a fair offer which could include payment terms of 50% payment upfront, with the rest payable over time.”