Conditions force tough measures
Short-term insurance providers were hit with a range of catastrophes in SA during 2017 including a large storm in the Cape and fires in Knysna that followed floods in Gauteng in November 2016, which cost the industry and its reinsurers, according to Barry Taylor, chairperson of the short-term insurance executive committee.
Taylor says SA’s highly variable climatic conditions, ranging from drought to floods, have seen an increase in the number and severity of claims.
“This is a concern to insurers as the cost of claims could impact consumers’ premiums, which in the current economic climate might result in the hardpressed consumer considering cancelling certain policies.
“Reinsurers who were affected by catastrophic events locally and globally have put pressure on the insurers in terms of the cost and availability of capacity which is no longer not as freely available as in the past. Terms and conditions for various risks have also become far more onerous than they have been for the past 10 years.
“The markets have turned tough, with insurers becoming far more intrusive regarding risk acceptance and scrutiny of risks and risk profiles with stricter requirements for risk management and risk protection systems.
“The ratings for risk have become tighter. The emphasis has been on risk acceptance and the criteria that underpin risk acceptance, which translates into costs. The liability market has seen an increase in terms and limited capacity for high risk entities.
“Risk acceptance and premiums, in particular for commercial/corporate business, are reflecting a different picture today from a year or two ago.”
Brokers have their work cut out to correctly advise clients on risk profiles, risk mitigation and insurance solutions which can only be done by having a sound knowledge of the client’s business and appropriate risk transfer models, he says.
“It is also vital brokers have a thorough knowledge of the insurances market to get the right product to match a particular client’s needs.”
He says there has been much pressure on the personal lines markets and the small business market. “Brokers need to find alternative solutions that can bring about reductions in premiums, but maintain cover.”
Taylor says the biggest focus of FIA’s short-term insurance executive committee has been interaction with the regulators — the Financial Sector Conduct Authority and National Treasury — to represent the association’s constituency and its clients in ensuring fair outcomes with regard to numerous changes in the regulatory landscape.