South African Insurance Association

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From the Desk of the Chief Executive- SAIA Bulletin June 2019

President Cyril Ramaphosa’s 2019 State of the Nation Address themed “Let’s grow South Africa together as we celebrate 25 years of freedom” highlights key priorities for government over the next decade. Many of these initiatives will have a direct bearing on business and the sustainability of the non-life insurance industry. In particular, the President’s remarks about support for growing productive sectors including agriculture and construction as well as committing to infrastructure development and improving the financial position of scores of municipalities across the country are welcome.

These remarks were in line with our key focus areas as directed by the SAIA Board which include industry transformation, motor insurance risks - with a focus on crime combating and road safety issues, and property insurance risks - with a focus on fire and flood risks. SAIA will continue with its initiatives of working closely with local governments and municipalities in the development and maintenance of infrastructure. Concerns around the perceived reluctance by property owners and municipalities to adhere to - and enforce building regulations - something of paramount importance in the pro-active management of risks such as property fires remain. The announcement by the President that seed funding of R100 billion into the Infrastructure Fund is welcome.

The SAIA Board also approved the Agricultural Insurance Project as one of the key priority projects as it has a significant bearing on both transformation as well as insurance risks. We hope that the announced R3.9 billion allocated to the Land Bank to support black commercial farmers will go a long way in ensuring that emerging farmers who remain vulnerable to changing weather patterns have a financial buffer against losses from drought, storms and floods. Innovative insurance products such as index-based insurance could protect small holder farmers from catastrophic weather losses (Also see article by Nico Esterhuizen SAIA has submitted its Agricultural Insurance Project Proposal to the National Treasury (NT) which has appointed the World Bank and FinMark Trust to evaluate and advise the NT on it.

The President commitment to stabilise and restore the credibility of institutions like the National Prosecuting Authority, the South African Revenue Service, the State Security Agency and the South African Police Service. This should help to improve crime and its impact on insurance losses. In its 2017 Annual Report, the Insurance Crime Bureau states that South Africa’s annual non-life insurance claim spend is estimated at R45 billion. The report states that if 12% of submitted claims are considered fraudulent, it equates to amounts in excess of R5.5 billion lost to insurance crime per annum. The ICB continues to do commendable work addressing the rise of insurance fraudsters by detecting and preventing such crimes from occurring.

Climate change models show that our region is likely to experience increased weather pattern shifts, with more severe and more frequent extreme weather events resulting in increased hailstorms, floods and droughts. The non-life insurance industry continues to be a vital player in our economic growth story, and we welcome the President’s announcement that government is developing a comprehensive integrated national plan to address water shortages, ageing infrastructure, poor project implementation as well as establishing an inter-governmental rapid response technical team to intervene in areas which are experiencing severe water problems.

Viviene Pearson
SAIA Chief Executive