Joburg‚ Durban storm damage runs into millions

16 October 2017 - 11:53
By wendy knowler AND Wendy Knowler
Most insurers take out reinsurance policies with international companies to mitigate their risk in the event of major catastrophes.
Image: iStock Most insurers take out reinsurance policies with international companies to mitigate their risk in the event of major catastrophes.

South Africa’s short-term insurers‚ reeling with claims overload in the aftermath of this week’s two major storms‚ have not yet been willing to quantify the full extent of those claims.

Old Mutual Insure reported that it had already received more than R15-million worth of claims since last Wednesday‚ and by Friday‚ Outsurance had received 3‚000 claims arising from Monday’s Gauteng storm‚ and 1‚500 from clients affected by the KZN storm the next day.

While many of those who have submitted claims should brace themselves for a premium increase‚ along with a sharp increase in the excess payable for flooding‚ short-term insurance policyholders across the board could end up paying for the monster storms in the form of higher premiums.

“There will be no immediate increase to any of our clients’ premiums‚” an Outsurance spokesman said. “But at the client’s annual rerate‚ all claims that they experienced will be considered‚ along with many other factors‚ in determining their premium going forward. And an increase in reinsurance premiums would affect the entire book‚ but at this stage we don’t foresee a need for drastic premium increases.”

Most insurers take out reinsurance policies with international companies to mitigate their risk in the event of major catastrophes.

Auto & General spokesman Martin van Wyk said those who submitted storm-related claims will not be hit with premium hikes. “Storms are an insurable event‚ directly in line with why we exist as a business‚” he said.

But while premiums wouldn't be increased across the board either‚ he said that “if reinsurers take a view that there is an increasing trend in the occurrence and severity of these events‚ due to causes such as global warming‚ then ultimately the increased cost of reinsurance would have to be absorbed in the premiums charged by the insurance industry”.

Discovery Insure said none of its clients‚ whether they submitted storm-related claims or not‚ would have their premiums or excesses increased as a result.

Old Mutual Insure’s Johan Welthagen said premium and excesses increases would be considered on a case-by-case basis. “If someone has lived for years in a house that has withstood many storms without damage‚ but submitted a damage claim after one of this week’s storms‚ we are not going to penalise them‚” he said.

Zelda Neale’s low-lying Durban home was completely flooded in a major storm last July – for the second time – and she submitted a damages claim to Outsurance. While her premium didn't increase as a result‚ the excess payable for flood damage tripled – from R3000 to R15 000.

“Naturally the house is now considered high-risk for flooding‚” she said‚ “but ironically‚ in the lead-up to Tuesday’s storm I sealed the bottoms of all my doors and there was no water damage – so I won’t have to pay that huge excess.”

"Catastrophes impact different policyholders at different times‚ and there is an element of chance involved‚” said John Melville‚ head of risk services with South Africa’s largest insurer‚ Santam. "Those who were recently impacted would typically not be singled out for special increases.”

Regarding the possibility of an across-the-board increase‚ Melville said while it was likely that provision for catastrophes would lead to premium increases for "significant numbers" of policyholders‚ "the impact will vary depending on the exposure of the policyholder to losses from catastrophe events”.

As for the likelihood of excess increases for those who have submitted storm-related claims this week‚ Melville said this was possible "in some exceptional situations”‚ but it was unlikely to be the industry's “general response”.

In a statement on Monday‚ Public Works Minister Nkosinathi Nhleko revealed that the damage to public buildings in Gauteng and KwaZulu-Natal caused by last week’s storms amounted to around R16-million.

At least 30 state-owned properties were damaged by the inclement weather in KwaZulu-Natal‚ with another two indentified in Gauteng so far – the South Gauteng High Court and the Home Affairs building in Krugersdorp.