CAPE TOWN - Santam has set aside a R1billion relief fund for potential business interruption claims from its policy holders.
Santam said that it was not pressured to establish the fund, but wanted to do the right thing in the light of likely claims arising out of the Covid-19 interruptions, particularly for small businesses.
Group chief executive Lizé Lambrechts yesterday told Business Report that the insurer had been in talks with brokers and hoped to commence payments from August 1.
“We really want to help our clients: we are not unsympathetic to what the lockdown has done to them,” Lambrechts said.
“This is for our own account; we’re getting no assistance from our reinsurers.”
The establishment of the fund comes just hours after some of the country’s biggest insurers reached an agreement with the Financial Sector Conduct Authority (FSCA), the Prudential Authority and some major insurers on interim relief for business interruption claimants.
The FSCA described the agreement as "a fair outcome” for both clients and insurers - as well as a world first.
Santam has been at the forefront of the contingent business interruption (CBI) saga since Business Report first revealed insurers were rejecting claims from travel and hospitality sector clients whose businesses were affected by the Covid-19 pandemic.
Insurance Claims Africa, a group of lawyers and academics, were representing hundreds of affected claimants, more than half of which were Santam clients, but Hollard, Bryte, Guardrisk, Old Mutual and others also refused to settle the claims.
Over the weekend, Hollard announced some small business clients qualified for interim payments, which will be capped at R200000 a policy.
The interim relief, in the form of once-off payments, is being offered to policyholders with appropriate contagious disease extensions, while legal certainty is sought through the courts.
Lambrechts said Santam had been deliberating on ways to help business clients for a while.
“The length of the lockdown has taken us by surprise,” Lambrechts said.
“We never imagined it would take so long. If we don’t help now, it will be too late for our clients.”
Santam is due in court on September 1, in a matter brought by Ma-Afrika and Stellenbosch Kitchen.
Lambrechts said while they believe the CBI policy wording is very specific and only covers businesses for interruptions due to a disease outbreak at a local level, or within a specified radius, the insurer had hoped for legal certainty sooner and clients cannot wait.
She said the relief would be calculated at 70percent of the sum insured, for two months. In its statement, Santam said it based these calculations on the fact that businesses would have experienced “variable expense savings” during lockdown.
The payments, aimed at small businesses in the hospitality, leisure and non-essential retail services, will range from R25000 to R1.5million.
The CBI extensions must have been taken out before March 18, 2020; Santam stopped offering that benefit after that.
Policies must also still be in force and not lapsed.
Asked about the reputational damage to Santam and the insurance sector, she said she hopes the interim relief will change customers’ minds.
“We don’t take the impact that this saga might have had on clients’ perception of Santam lightly. We think it’s the right thing to do.
“We looked at our clients and potential clients and wanted to give them something that would make a difference to them.
"Our R1.5m cap speaks to the fact that we want to make a meaningful difference and contribution.”