Most insurers still reluctant to pay tourist business interruption claims, despite some relief

18th August 2020

By: Rebecca Campbell

Creamer Media Senior Deputy Editor

     

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Public loss adjustment company Insurance Claims Africa (ICA) has reported that, while more major insurance companies are now offering interim relief payments to smaller businesses in the tourism and hospitality sector, larger such businesses were still excluded from the payments. These interim payments are to provide relief while these enterprises’ Covid-19 pandemic business interruption insurance claims are considered.

Business interruption insurance was intended to help companies survive unanticipated events, by allowing them to pay their staff, rates, rent and so on, and so survive a crisis. It could be for an agreed amount of money, or for an agreed time period. Tourism and hospitality enterprises could specifically insure against business interruption caused by contagious or infectious notifiable diseases. However, most (but not all) South African insurance companies have been claiming that business interruption had been caused by the government-ordered national lockdown, and not by the pandemic. 

The Western Cape High Court rejected this argument in June (although an appeal process is pending) and in July the Financial Services Conduct Authority (FSCA) instructed insurance companies to pay such claims and made it clear that it would take action against those insurers who did not give their customers fair treatment. Subsequently, the FSCA and the Prudential Authority reached an agreement with the major insurance companies that they would pay interim relief to some policyholders for business interruption caused by the Covid-19 pandemic.

“While we welcome any payment to businesses in this vulnerable sector, we believe that for SMEs [small and medium-sized enterprises], the relief is only a small portion of what these businesses are contractually due,” highlighted ICA CEO Ryan Woolley. “Equally concerning is that larger businesses, who employ many thousands of people, and on who[m] communities rely for their survival, have been completely excluded. We call on the insurers to broaden their relief payments to include these businesses. Their exclusion is shortsighted and prejudicial to the individuals who work in this sector.”

Of the insurance companies that have been refusing to pay out business interruption claims for Covid-19, ICA reported that Hollard and Bryte were now offering interim relief – Hollard to qualifying enterprises with annual turnovers of no more than R25-million each, Bryte only to enterprises with an annual turnover of less than R5-million. Guardrisk and Old Mutual are offering full and final settlements, but only to SMEs. AIG, CHUBB, F&I, Lombard, Monitor and TRA had not yet made any offers to their clients.

Santam has also offered interim relief but continues to insist that it will only pay out full business interruption claims if ordered to do so by a court. This despite the fact that in July the insurer told its shareholders that its balance sheet would be able to absorb the paying-out of all Covid-19 business interruption claims.

“It is disappointing that it has taken four months for Santam to realise its customers are in an extreme financial predicament and find its moral compass,” he said. “While Santam terms these payments as ‘relief’, the fact is that they are interim payments made against their customers’ legitimate claims. …A number of clients have also been excluded from Santam’s ‘relief’ payments, because they could not afford to continue paying their premiums, mostly because Santam did not pay their claims. While the insurer has said a committee will review these circumstances, the payment is not guaranteed and our clients feel it’s just another example of Santam making them beg for payment.”

ICA and the Ma-Afrika Hotels group have instituted legal action against Santam. The case will be heard in the Western Cape High Court on September 1.

Edited by Creamer Media Reporter

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