South Africa: what hides record short-term insurance benefits in the face of Covid-19

Assurance Road Sign with dramatic clouds and sky.

The South African short-term insurance (STI) industry has made record profits during the pandemic and has no reason to further delay the settlement of all outstanding business interruption claims due to the Covid-19. This is the result of a study conducted by Dr Roelof Botha, economic advisor of Optimum Investment Group, and Keith Lockwood of the Gordon Institute of Business Science, published on July 6, 2021 on the great disparity between the substantial financial gains made in the over the past year by short-term insurers and their clients.

Despite the closure of several businesses linked to the economic and financial crisis caused by the pandemic, the study finds that many insurers are late in paying commercial claims during the pandemic, while others have already complied.

Dr Botha stressed the importance of prompt payment of these debts for the survival of small businesses, some of which are forced into bankruptcy in the event of lengthy legal proceedings that follow the appeal route. While virtually no sector of economic activity has been untouched by the extraordinary socio-economic disruption of the pandemic that businesses around the world have faced, Botha points out that the worst of the macroeconomic effects of the pandemic had passed in some months.

A situation that worries Insurance Claims Africa CEO Ryan Woolley, for whom “the flagrant unfairness of the situation is clearly detrimental to claimants who are still awaiting a settlement more than a year after the start of the pandemic. We believe that insurers ignore the extreme financial anguish of their clients and underestimate the level of dissatisfaction and loss of confidence due to late payments. ”

“It’s not too late for insurers to redeem themselves by finalizing these claims quickly, ethically and fairly. We urge insurers to make interim payments to customers while they resolve current bottlenecks in their systems that prevent payments. For too long now, we have seen claimants struggle to survive financially, and I can only hope that the board members and shareholders of these insurers are aware of the difference between their financial situation versus that of their customers, ”said Ryan Woolley.

According to the report, total bonuses received in 2020 rose 2.2% to a new record of 130 billion rand ($ 9 billion), while unallocated profits jumped more than 20% to reach a new record high of 53.5 billion rand ($ 3.7 billion), and total assets of 12% to 220 billion rand ($ 15.2 billion).

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