IIG News

Insurers Need to Adapt to Extreme Weather Events

These events are increasing in intensity and frequency

Insurers need to prepare for extreme weather as the new norm. This means reacting and adapting to climate change-related financial risk and partnering with organisations, such as meteorological institutions in order to analyse and anticipate extreme weather trends. What is certain, is that these events are increasing in severity, frequency, and unpredictability and insurers should adjust their risk methodologies to suit.

The extreme weather problem is further compounded in Southern Africa, which is warming up at double the global rate.  It is predicted that this will likely result in more extreme rainfall events and more intense thunderstorms. This pattern has already started to take hold as Southern Africa has recently been severely affected by deadly weather systems that have resulted in significant human and financial costs. Cyclones Idai and Kenneth have left devastation in their wake in Mozambique, Malawi, and Zimbabwe, with the scale of the impact only becoming clear long after the weather systems have come and gone. The Eastern Cape and Durban have seen intense flooding too, with many lives lost and significant damage being meted out to residential and commercial property.

The consequences of this on the insurance industry can only be estimated at the moment, even with the best available data. However, what is clear is that in the absence of mitigating measures, the frequency of claims will increase as will the costs of repairs, pushing up insurance premiums. There will be more potholes, mud-slides and damages to private property and public infrastructure, placing the insurance sector and the fiscus under considerable pressure.

Infrastructure planning in South Africa needs to evolve alongside changing weather patterns for us to truly start to mitigate the inherent risks of unstable weather. It would thus be wise for insurers to consider working with other sectors of the economy and government to use insights obtained from claims data and compare these to meteorological data to inform a recalibration of designs for roads and other infrastructure.

Until this level of coordination exists, we can only focus on ensuring that we assist our customers recover from damages suffered by processing claims quickly and efficiently.

We have already communicated with our brokers to ensure they understand the expedited claims process set in motion for people affected by the recent floods or that incurred damages related to extreme weather.  Proactively empowering our customers to meet their most urgent needs is our number one priority and this will be achieved by making the claims process as simple and efficient as possible.

For a sustained solution, a holistic and collaborative approach to collectively managing and mitigating against extreme weather events will be required.  Working together will result in safer customers, reduced damages from unexpected events, better-managed claims processes and a contained impact on insurance premiums. A win-win scenario for insurers and their clients.

Article written by Cloud Saungweme, Chief Claims Officer of 
Bryte Insurance Company Limited.