Short-term insurers showing ‘super profits’ during Covid, but still stalling business interruption claims

Insurance Claims Africa (ICA) has fired the latest salvo in their ongoing battle with South Africa’s short-term insurers over Covid-19 business interruption claims and settlement delays, saying on Tuesday that these insurance companies are “actually making super profits” during Covid, yet are still stalling paying out most claims.

The latest censure was made by ICA CEO Ryan Woolley and the group’s chairman Mike Gaines during a briefing update on the claims debacle which has been raging for over a year and with several cases still before the courts.

ICA – Southern Africa’s largest independent insurance claims specialist – is currently representing over 850 companies with Covid-related business interruption insurance claims against insurers. Western Cape-based Ma-Afrika Hotels, which won a high-profile case against industry giant Santam, is one of ICA’s clients.

Read: Ma-Afrika wins court battle against insurance giant Santam

While short-term insurers including Santam, Old Mutual Insure, Guardrisk, Hollard and others have either paid out or agreed to offer interim payment relief to the tune of more than R3 billion for such claims, a much larger amount in claims remain unpaid, in dispute in the courts or stuck in adjudication bottlenecks in these companies.

Woolley and Gaines backed up their ‘super profits’ condemnation against the short-term insurance industry at Monday’s briefing by highlighting new independent research undertaken by economist Roelof Botha, who is an economic advisor to the Optimum Investment Group, together with Keith Lockwood from the Gordon Institute of Business Science.

Botha expressed similar views during the ICA briefing and said that the research shows that “unappropriated profits” of the country’s short-term insurance (STI) or non-life insurance industry increased by more than 20% in 2020 to a new record of R53.5 billion.

He further pointed out that the total assets of SA’s STI industry increased 12% to a level of more than R220 billion.

However, he also noted that paradoxically the value of unpaid STI claims rose by more than 17% to a record high of R49.4 billion in 2020, despite record profits.

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“It is clear from this new research released today that the STI industry earned record profits during the pandemic, and has no reason to further delay settlement of all outstanding Covid-19 business interruption claims,” Woolley reiterated in a statement following the briefing.

“The gross inequity of the situation is blatantly prejudicial to claimants who are still awaiting settlement more than one year after the start of the pandemic. We believe that insurers are ignoring their clients’ extreme financial anguish and are underestimating the level of dissatisfaction and loss of trust from the delays in settlement,” he added.

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Woolley called for a more concerted effort by the STI industry to make interim payments to affected customers while the insurers “resolve the current bottlenecks within their systems that are preventing payments”.

“For too long now we have watched claimants struggle to survive financially, and I can only hope that the board members and shareholders of these insurers are alive to the difference between their financial positions compared to that of their customers,” he said.

Woolley reiterated that some insurers, particularly Santam, continued to “frustrate the process”.

“We are finding that insurers are adopting long, overly pedantic processes, and doing everything in their power, it seems, to delay payments. We are very concerned about some insurers attempting to limit the quantum that is due to policyholders, yet they have been sitting on the funds for over 14 months earning interest,” Woolley added.

He said the case that was won by Ma-Afrika Hotels against Santam in the Western Cape High Court last October is now being appealed by Santam in relation to the indemnity period of the policy. The court ordered Santam to payout for an 18-month period, but Santam wants to only payout for three months.

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“We have had positive interaction with Hollard South Africa and Old Mutual Insure. However, with Santam the process continues to be frustrating. Santam is working through its lawyers [Norton Rose Fulbright] to avoid liability for large claims in its Hospitality & Leisure Division,” he noted.

Santam is yet to comment on ICA’s latest salvo.