Santam, South Africa’s largest short-term insurer, released the third edition of the 2022/2023 Santam Insurance Barometer Report, which revealed that the tough economic climate and loadshedding are the biggest challenges currently impacting South African households and businesses.
The study, which tracks emerging risk trends in the country, was conducted against the backdrop of the rising frequency and severity of natural catastrophe losses, unprecedented levels of inflation and the soaring cost of repairs due to geopolitical issues impacting supply chains, as well as a fluctuating currency.
The third edition of the biennial report offers deep insight into the evolving risk trends impacting South Africa, and surveyed more than 900 consumers, businesses and brokers from across the country. The findings were combined with Santam’s own claims data to create an insightful report, that examines how the local industry can adapt to changing market realities and customer needs.
Climate change, infrastructure concerns and socio-economic challenges have created a tough environment for local insurers who bear the responsibility of ensuring their balance sheets can sustainably withstand the cost of the risks dominating the environment they operate in; while also protecting the financial well-being of clients, and the safety of communities.
The impact of South Africa’s deteriorating infrastructure, particularly that of Eskom, and the socio-economic challenges due to the constrained economy and high inflationary environment were visible in Santam’s claims statistics. Economic challenges also manifested in higher volumes of crime-related claims.
Two standout claims trends developed in both the personal and commercial lines categories over the past two years that required corrective actions. The most notable being an exponential escalation of power surge claims related to loadshedding, followed by high-value vehicle hijacking and theft
He added that Santam had experienced an exponential jump in both volume and value of power surge-related claims across personal and commercial lines of business for two consecutive years, in 2021 and 2022. The combined claims volume was up by 39% in 2022 (37% in 2021) and the value of claims paid across both lines soared to 48% in 2022 (after an astonishing 53% in 2021).
On the motor side, the high-value vehicle hijacking and theft claims increased by 355% year-on-year in 2022, breaking a long-term declining trend. Fortunately, the risk mitigation efforts in the form of tracking devices proved effective and resulted in full-loss incidents declining by 80% in the first half of 2023.
RESPONSES FROM CORPORATE AND COMMERCIAL ENTITIES
The survey revealed that 80% of corporate and commercial entities have been negatively impacted by emerging risks in the past three years. The challenging economy (66%, up from 62% in 2021) remains the key concern for business respondents, but other emerging risks are becoming more of a concern. Political unrest (59%, up from 48% in 2021), cybercrime (48%, up from 36%), and climate change (47%, up from 35% in 2021) have become increasing threats over the past two years.
CONCLUSION
Insurance makes individuals, businesses, and populations more resilient. Insurers that take the lead in democratising insurance – by providing affordable, appropriate solutions to the low- and mid-income markets, the youth, and small and medium-sized enterprises (SMEs) – will help drive financial inclusion through greater insurance uptake, building a resilient, sustainable future for our industry, our communities, and our economy.
Click here to view the full 2023 Insurance Barometer.
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Article written by: Thabo Twalo
