Insurance customers view challenging economy
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THE SANTAM Insurance Barometer 2021 report on insurance trends, showed that the challenging economy, political unrest and the pandemic had an impact on businesses.
Cybercrime and climate change were among the top risks highlighted by consumers, intermediaries and corporates polled.
“Even if people still deem insurance as a grudge purchase, they need to start viewing insurance as an enabler of economic continuity. It requires a complete shift in mindset and an understanding that insurance has the capacity to rebuild all aspects of society,” said Andrew Coutts, Santam’s services group head of intermediated business.
Key findings of the report found that over the past 18 months 50 percent of consumers reduced the number of kilometres driven each week by an average of 44 percent, from 162km to 90km per week.
On the technology front, 16 percent of consumers upgraded their computers and connectivity to enable them to work from home, and three in four people reported an increase in their use of technology.
The Insurance Barometer revealed that consumers were more concerned with crime-related risks compared to other polled groups. Unemployment was also a growing concern. Motor vehicle accidents and burglary were less of a concern in the 2020/21 survey, possibly due to the lockdown.
Some 81 percent of consumers reported a negative impact due to the pandemic with 60 percent experiencing financial loss, being unable to work or contribute to household finances while household expenses increased. Some 81 percent of those who experienced financial loss were able to use savings to see them through, 19 percent borrowed from friends and relatives and 8 percent were able to draw on insurance policies.
Only 1 percent cancelled short-term insurance policies for home contents, all risk and motor vehicle, 26 percent were offered premium relief by their insurers and 93 percent say this eased their financial burden and 2 percent switched to a different insurer.
The struggling South African economy remained the biggest emerging concern for commercial entities as 62 percent of respondents ranked this as their number one worry.
“The economic downturn has impacted businesses across our specialist lines of insurance. In particular, we’ve seen the marine, heavy haulage, taxis (including e-hailing), aviation, travel and the construction industries contract as a result of the economic challenges,” said Coutts.
Overall, the average cost per claim in the commercial insurance lines increased by a staggering 103 percent year-on-year 2019/2020, mainly driven by contingent business interruption (CBI) claims resulting from the pandemic. Property claims increased by 7 percent last year while there were fewer fire claims than usual due to business premises being unoccupied for an extended period during the hard lockdown. Fire was historically the leading claim category by value.
The hospitality, transport, aviation, marine and construction industries were particularly hard hit by the pandemic. About 45 percent of small/medium commercial enterprises polled, reported a very negative impact on their businesses due to Covid-19, with 30 percent of large corporates and 21 percent of large commercial enterprises also recording a similar impact.
About 62 percent of corporate and commercial entities had seen a loss in profit, 31 percent had lost clients. Some 41 percent of hospitality sector enterprises were faced with business closure, 84 percent lost profits and 59 percent retrenched staff. Some 80 percent of transport sector businesses had profit losses compared to 77 percent of construction companies.
Some 59 percent of intermediaries reported negative pandemic impact, 43 percent said they had experienced a loss in profits. Only 9 percent saw an increase in profits.