Premiums for insurance against natural disasters may soar as insurers are prompted by high volumes of claims to review tariffs, especially in high-risk areas.
Increased claims from the Vaal River area, Mpumalanga, North West and KwaZulu-Natal are mostly from residential dwellings, followed by business and car claims.
Trevor Devitt, the head of communications at Outsurance, said the flood of claims that the insurance industry had received so far would “undoubtedly affect” the cost of insurance premiums.
Even though he believed insurance costs would not necessarily soar, Devitt said the direct link between the high volume of claims, payouts and current premiums would influence the adjustment of premiums throughout the industry.
Reinsurers expect a considerable number of claims for the summer rainfall season as they admit that the “floods are more widespread and intense” than in previous years.
Devitt said Outsurance was coping well at present, but still had to assess all the claims when the flooding subsided.
The farming sector is expected to add to the claims as an estimated 20 000ha of farmland is still under water and damage to these properties has not been assessed.
Damages assessed so far indicate that grape, maize and sunflower farms have incurred damage worth about R1 billion, according to farmers’ organisation AgriSA.
It is not yet clear if there is significant damage to other grain fields as well.
Consumer organisations are already gearing up for any unreasonable costs that reinsurers may add to premiums as a result of the floods.
Clif Johnston, the vice-chairman of the SA National Consumers Union (Sancu), said although an increase in insurance premiums was bound to happen, the consumers union would not welcome unreasonable adjustments.
“It shouldn’t be too much because that’s what insurance is for. We put money away for rainy days,” he said.
He said Sancu believed a premium increment was reasonable for high-risk dwellings like those close to the Vaal River, but it would be uncalled for if everyone else was to see their insurance costs escalate.
Sancu is advising consumers to “shop around” if their current insurance firms want to dig deeper into their pockets.
“Insurance companies are not realising that they will be shooting themselves in the foot if they make unreasonable increases because consumers tend to cut back on expenses like insurance,” he said.
“And because we wouldn’t want consumers to be uninsured at the end of the day, we advise consumers to shop around for better prices.” - Business Report