The flash floods on the East Rand in Gauteng last week saw insurance companies inundated with claims, with some insurers declaring the area a “national catastrophe zone”. Although it’s likely that most claims will be processed without hassle, some may be rejected, because the policies do not cover flood- or weather-related damage. If, when the policyholders took out their cover, they focused simply on getting the lowest premium, they might be discovering only now that their policy covers “only the basics”.
The floods caused extensive damage to vehicles and property in the vicinity of Linksfield and the Gillooly’s interchange, in the eastern suburbs of Johannesburg, on November 9.
“As at lunchtime on November 10, over 150 claims had already been lodged in Aon’s call centre alone. Some insurers set up facilities at salvage yards for vehicles that were submerged to be immediately assessed. Huge property losses have also been incurred, especially in the vicinity of the Jukskei River, which burst its banks,” Mandy Barrett, the manager of personal lines marketing and sales at Aon South Africa, says.
When insurers declare a national catastrophe, Barrett says, it means that all losses created by the event are ring-fenced. “There is no impact on the policyholder – the measure is purely to understand the severity of a particular event and its impact on insurers’ profitability ratios,” she says.
Barrett says the event should be a lesson for people who just go for the cheapest cover without checking what they are and are not covered for. “Many people don’t have a clue what their policy terms and provisions actually mean. If they take the DIY approach without professional advice, it’s unlikely that they will be able to differentiate what is being sacrificed if the premium price is their only means of comparing insurance cover.
“Cheap insurance premiums are cheap for a reason – they usually cover only the absolute basics, and any additional cover, such as hail and flood damage, needs to be purchased at an additional premium. If you don’t know this, you could assume that you’re covered for a peril when, in fact, you are not. You’re likely to find this out the hard way – at claims time – when it is too late.”
According to Aon, severe weather conditions, from golf ball-sized hailstones to heavy rainfalls and flooding, occur far more regularly in South Africa than they used to and will continue to increase in frequency and severity. You need to be insured comprehensively for such events.
“If we look at the past five years especially, climate change looks set to continue to play havoc. One of the most important things that consumers can take out of the recent weather catastrophes is to assess whether they are properly covered for worst-case scenarios before it is too late. In this regard, a professional broker plays an invaluable role in guiding you through a proper needs analysis, interpreting the policy terms and conditions, helping you to mitigate your risk and, in turn, managing your premium costs.
“Insuring your most important assets – likely to be your vehicles, home and everything in it – and your ability to recover from a major catastrophe, should be approached in the same way as investing in the stock market: you’re unlikely to do it without professional advice,” Barrett says.