Santam triumphs over adversity

Hailstorms don't register on the Richter scale but their effects are felt in the books of insurers.

"The hailstorm in Gauteng on November 26 cost the industry nearly R2-billion," said Santam CEO Ian Kirk.

Now summer is coming and with it severe Highveld thunderstorms that can result in thousands of motorists being stuck in gridlocked traffic, unable to avoid hail damage to their vehicles.

Santam is processing about 600 claims resulting from the earthquake in Orkney last month.

The short-term insurer expects it will have to fork out R20-million and that the earthquake will cost the insurance industry as a whole about R100-million. The quake measured 5.5 on the Richter scale and was felt in Johannesburg.

But a single weather-related event can cause 10 to 20 times as much damage.

"Catastrophic events during 2013 - including floods in Limpopo and Western Cape, and two severe hailstorms in Gauteng - cost the insurance industry an estimated R2.5-billion and Santam almost R600-million."

The cost to the insurer of such events so far this year is nearing R200-million.

Conditions have not been easy in the insurance market. Battered middle-to-lower-income consumers often stop paying their premiums when they are stretched for cash.

"Some consumers don't pay, some cancel policies, some just buy cheaper policies," said Kirk.

Despite this, Santam's results for the six months to the end of June showed a growth in net insurance income to R850-million from R297-million in 2013.

"We continue to operate in challenging underwriting conditions, with low GDP growth, historically low interest rates and a tough economic environment," he said.

The weakening of the rand placed strain on the motor and property insurance businesses by raising claims costs.

"The average claim cost in motor insurance has gone up significantly because the rand has weakened by almost 35% since the start of 2012," Kirk said.

Santam reported a 10% increase in gross written premiums and a net underwriting margin of 7.4%.