Most insurers still reluctant to pay tourist business interruption claims, despite some relief
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 that 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 small and medium-sized enterprises (SMEs), 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 short-sighted 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.
Comments
The
content
you are trying to access is only available to subscribers.
If you are already a subscriber, you can Login Here.
If you are not a subscriber, you can subscribe now, by selecting one of the below options.
For more information or assistance, please contact us at subscriptions@creamermedia.co.za.
Option 1 (equivalent of R125 a month):
Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format
Option 2 (equivalent of R375 a month):
All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors
including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.
Already a subscriber?
Forgotten your password?
Receive weekly copy of Creamer Media's Engineering News & Mining Weekly magazine (print copy for those in South Africa and e-magazine for those outside of South Africa)
➕
Recieve daily email newsletters
➕
Access to full search results
➕
Access archive of magazine back copies
➕
Access to Projects in Progress
➕
Access to ONE Research Report of your choice in PDF format
RESEARCH CHANNEL AFRICA
R4500 (equivalent of R375 a month)
SUBSCRIBEAll benefits from Option 1
➕
Access to Creamer Media's Research Channel Africa for ALL Research Reports on various industrial and mining sectors, in PDF format, including on:
Electricity
➕
Water
➕
Energy Transition
➕
Hydrogen
➕
Roads, Rail and Ports
➕
Coal
➕
Gold
➕
Platinum
➕
Battery Metals
➕
etc.
Receive all benefits from Option 1 or Option 2 delivered to numerous people at your company
➕
Multiple User names and Passwords for simultaneous log-ins
➕
Intranet integration access to all in your organisation