Public loss adjustment company Insurance Claims Africa (ICA), which is representing more than 600 tourism and hospitality businesses, has welcomed an agreement reached between, on the one hand, the Financial Services Conduct Authority (FSCA) and the Prudential Authority (PA), and, on the other, major insurance companies. In terms of the agreement, the insurance companies will pay interim relief to some policyholders for business interruption caused by the Covid-19 pandemic.
Hitherto, most of the major insurance companies (in a previous press releases, ICA named them as Bryte, Hollard, Momentum – with its subsidiaries HIC and Guardrisk – Old Mutual, Santam and Thatch) have been refusing to pay out business interruption insurance to hospitality and tourism companies which had taken out contagious and infectious disease cover with them. These insurers have been claiming that the business interruption from which the hospitality and tourism sector has been suffering has been caused by the government-ordered national lockdown, and not by the pandemic.
“While this is definitely a step in the right direction, it will be important to see what the quantum of the relief measures will look like,” said ICA CEO Ryan Woolley. “We applaud the regulatory authorities for calling the meeting [on Friday] with insurers and for ensuring claimants, who are in an extremely vulnerable financial position, are treated fairly. While the interim payment could provide some relief for these businesses, it will be critical to understand what this relief will entail. From what we have seen thus far, it appears that the size of the interim relief is a small percentage of what the claimants are owed. To term this a lifeline, would be an exaggeration.”
The interim relief will take the form of a once-off payment to the policyholders. They will not have to repay it, whatever the results of legal processes are. The interim payment will also not affect the total amount of the claims being made. Should the courts rule for the policyholders, the amount of the interim payment will be deducted from the total payment due to the policyholders. The FSCA and PA have made it clear that the interim relief did not preclude any of the insurance companies from offering full and final settlements to their policyholders, instead of pursuing legal actions.
“We are pleased that the regulatory authorities have emphasised to insurers that such a settlement be fair, so that these vulnerable businesses are not further taken advantage of,” he stated. “The regulatory authorities have instructed insurers to ensure that the settlement be clearly explained in writing should a policyholder wish to accept settlement on this basis.”
“It is clear from the [FSCA/PA] statement that regulatory authorities were also deeply concerned about the long-term reputational damage that insurers’ unconscionable behaviour is having on the insurance industry,” observed Woolley. “Trust has been broken, and the insurers have a massive job to restore the public’s faith in their companies. While we are of course pleased that the insurers have recognised their duty of care to their customers, we remain disappointed that they have not agreed to a settlement and that they still wish to fight it out in court when there has already been a decided court case and the FSCA reinforcement to pay these claims.”