The knock-on effects of an unprecedented pandemic has ushered in a multitude of new risks, as identified by the World Economic Forum. Here’s how our industry aims to handle them.
The Global Risks Report produced by the World Economic Forum tracks global risk perceptions from the findings of industry experts. The report claims the most serious problem of the pandemic is economic stagnation. Within this, the pervasive risks include cybersecurity, political unrest, mobility and transport, extreme weather, livelihood crises, mental health deterioration and service deliveries. We’ve spoken with South Africa’s industry experts on all of these topics and how to approach each of them as an intermediary.
As advised by their cybersecurity team, Discovery Insure has taken the necessary technical measures to ensure that the digital aspects of their business remains secure in the hybrid ‘work-from-home’ era where security levels need to also be maintained remotely.
“We have seen globally that it is rather the human aspect of error and susceptibility that acts as the largest contributor to a company’s level of cyber risk,” says Precious Nduli, Head of Technical Marketing and Marketing of Discovery Insure.
“We have therefore invested heavily in educating our staff around cyber risk, through highly educational and fun videos delivered in compulsory courses on our digital learning platform.”
Indwe has teamed up with tech support partner Dimension Data to keep safe.
“Security has received priority attention over the past twenty four months,” explains Peter Olyott, Chief Executive Officer of Indwe Risk Services. “Whilst no one can claim to be totally safe, we are satisfied we have taken all reasonable steps to safeguard our customer information but also our overall business data. We report on data integrity on our systems on a monthly basis.”
“On the client side of things, extrapolating the impact of a local or global cyber security breach or action is extremely complex to analyse and advise,” Olyott points out.
“The more reliant our clients are on technology – whether in the supply chain management side, manufacturing or management of the business – the more potentially exposed our clients and their suppliers and customers will be,” he says.
Discovery Insure knows this risk from the clients’ perspective too.
“We offer cyber risk cover as an option on our Discovery Business Insurance Plan and include a level of embedded cover as an additional benefit on our industry-specific packaged product offerings,” says Precious Nduli. “Our clients also get access to cyber protection packages from our partner AVeS Cyber Security, who offer immediate remote assistance in the event of a cyber-attack. These offerings help to protect our clients and their businesses, enabling them to respond quickly to minimise losses and help ensure that their business is able to recover following a cyber incident.”
Looking back at the rampant lootings of KZN and Gauteng last year, insurers have gained insight and made changes in approaching the possibility of more political unrest.
“The recent unrest has made the insurance industry more aware that this type of risk is not as negligible as we previously may have thought. It has emphasised the need for our commercial policyholders to have adequate SASRIA cover, as well as the need for brokers to provide the appropriate advice to clients in terms of the level and type of SASRIA cover that the business requires, based on its particular risk profile,” says Discovery Insure’s Precious Nduli. “This has also acted as a reminder to ensure that all business continuity plans for our own business are up-to-date, after seeing the multifaceted business interruption that was experienced following this event.”
The lootings of last year may not be a one-off event, though.
“One must assume that the potential for a similar event to occur still exists and almost no business in South Africa would feel immune from such an incident arising again,” says Peter Olyott.
Preparation is a necessity, he stresses.
“What we try to do is to ensure that adequate insurance is in place. This has become more difficult due to amongst other things the falling away of the SASRIA Excess of Loss cover and the major increases in the SASRIA insurance for our trucking clients.”
“We try to encourage the effective management of the risk by using communication and information to encourage proactive responses where possible,” Olyott says.
Mobility And Transport
“Unfortunately Covid-19 did not treat all transport businesses equally – some found their businesses severely impacted whilst others enjoyed a boom – depending on what segments of transportation they were in. Obviously, in South Africa mobility and transportation are closely linked to political unrest as well as arson and other such heinous crimes,” Peter Olyott mentions.
As we are moving back to the in-person way of doing business, there are more vehicles on the move and this will change the way we operate.
The telematics data that Discovery Insure has access to, through all the linked telematics devices on their Vitality Drive rewards programs, allows them to confirm that policyholder driving patterns are indeed returning to normal, explains Nduli.
“As a result, we are seeing a steady return to normal claims levels with this move back to doing business in-person. This is simply evidence of our collective resilience and a reminder that life will eventually return to normal,” he says.
“We also expect that our motor business will continue to grow over time, with product innovations such as our new heavy commercial vehicles product opening the doors for us to offer our products to a broader range of industries,” Nduli says.
“As a business which has focused on supply chain management risks over the past few years, we are well positioned to advise on the risks facing logistics companies including courier and delivery services,” Olyott points out.
Everyone has felt the financial pressure of the past two years. Despite the rise in expenses, insurance is a necessity. The challenge is to remind clients that insurance need not be the grudge purchase it is so often seen as?
In South Africa, where we see great disparities in income and a growing jobless market, one cannot help but be concerned for the millions of people living in extreme poverty,” says Kobus Wentzel, Executive Head of Distribution at 1Life Insurance. “It is with bated breath that we await the figures from the current census and its suggested further impact on an economy already under pressure.”
“With all this pressure, we see a direct correlation between the affordability of risk cover, such as life insurance, and lapses across the industry. The irony of this is not wasted, however, since life insurance is surely now needed more than ever,” Kobus Wentzel points out.
With under half of South Africans fully vaccinated against Covid-19, there is no doubt that we will face an increase in mortality, warns Wentzel.
Through the data generated by their reinsurance provider, 1Life has determined that vaccination status has a substantial impact on mortality rates, specifically for ages 30+. Furthermore, as age increases, the gap in mortality rates between vaccinated and unvaccinated policyholders widens considerably.
Another unsurprising finding is that unvaccinated individuals with pre-existing health conditions face considerably higher Covid-19 mortality rates than their comorbidity-free counterparts. Again, these differences become more prominent with age. The vaccine appears to greatly reduce this gap.
“General findings from the 1Life data show that the trends in excess mortality experienced nationally for the four waves are also reflected in 1Life’s claims experience,” says Kobus Wentzel. “During each of the waves, there was a large increase in the absolute number of claims at all ages, with older ages being relatively more affected.”
Based on the research, it was expected that people with comorbidities would be significantly more vulnerable to Covid-19 than healthy individuals.
This means that life insurance and dread disease cover must be considered, which determines that the demand for insurance is expected to keep rising worldwide, he says.
“But while technology will be the driver of opportunity, insurers need to find ways to balance technology adoption with maintaining the human touch. One of the ways to ensure this is through a financial adviser,” says Wentzel. “It is now more necessary than ever to sustain partnerships between the insurers and intermediaries to create opportunities to boost stakeholder trust.”
“Consumers know they need cover, and we know value and affordability are key,” he says. “But consumers need to prioritise it over other non-essentials to provide for their family if something happens. Life cover remains a means of providing for income replacement, but unless it is offered with flexibility and added value, it will continue to be viewed as a grudge purchase.”
“A well-structured insurance program should ensure that these predictable losses are kept away from the insurance program and they are better managed through implementing effective risk management strategies,” says Peter Olyott.
He makes special mention of handling clients who are struggling financially.
“The temptation may be to cancel the insurance or large parts of it without doing the calculations and what if analyses. Through careful analysis, it is possible to ensure that clients are protected against catastrophes and are perhaps forced
to more effectively manage smaller attritional risk exposures rather than giving these to an insurer.”
Mental Health Deterioration
Discovery Insure has provided access to their digitally-enabled Healthy Company platform.
“The programme focuses on the management of the four key dimensions of well-being: physical, emotional, financial and legal. It is underpinned by health and wellness screening that provides data-driven insights which allow for the provision of proactive, tailored support,” explains Precious Nduli.
Unfortunately in the remote world it becomes easier to utilise time with very small or few breaks between meetings, but this need not be the case with careful management of one’s time,” Peter Olyott says.
“We are also mindful of the psychosocial aspects of mental health during these past two years in particular. We did everything in our power to limit the financial impact of the pandemic on our employees.”
Extreme weather conditions are driving massive financial losses – both for the insured and uninsured. According to reports, about 36% of natural disasters that have occurred in Africa in the past four decades were in Southern Africa and they carried an estimated cumulative economic loss of R640 billion, says Garth Napier MD Old Mutual Insure.
“Overall, in 2021 we noticed a decrease in claims from disasters like floods and fires. This is despite events like the Cape Town fire on Table Mountain that happened in March, as well as the flooding experienced in various parts of the Southern Cape in November in 2021.”
Napier says this is expected to change given the onset of extreme weather events, such as the global weather phenomenon La Niña, which brought unprecedented rainfall and floods to Gauteng, central South Africa, and Kwa-Zulu Natal this year.
“We anticipate this to extend to higher and more volatile weather-related insurance claims in the foreseeable future,” Napier says.
“Given how climate change and extreme weather events are shaping our future, it is top of mind and something we’re seriously thinking about and applying daily to our actuarial and risk modelling. The industry is reviewing and adapting current pricing models to include weather-related risks at the underwriting and pricing stage as climate change risk affects all classes of insurance,” says Napier.
“Underwriting should include weather risk assessment and changing levels of exposure, as an unanticipated increase in weather losses can disrupt claims assumptions,” he adds.
“Like any natural disaster, extreme weather will continue to impact infrastructure and supply chains significantly and inevitably add more financial pressure on businesses and critical industries,” says Jeffry Butt, National Marine Sales and Marketing Manager of Bryte Insurance Company Limited.
“In light of this, Bryte has several insurance solutions that include vehicle, household and contents insurance, which is our way of partnering with the customer to approach risk with purpose,” he says.
“Bryte also recognises the important role our broker partners play in the risk journey of the client. Hence, we encourage collaboration towards effective risk identification and management.”
Loadshedding is a paradox in that it’s disruptive but also predictable to a degree. This makes it a complex issue to put numbers to.
“On our personal lines business, we experienced a 23% increase in power surge claims as a result of 37% more hours of loadshedding in 2021 than in 2020,” Nduli says.
Loadshedding and other cessation of public utilities – whether electricity, water, gas or telecommunications – is receiving a lot of attention recently with the news that from the next renewal, many insurers are now making the business interruption insurances far more restrictive and with a great burden of proof on the client who may allege a break in power, water or telecoms.” Olyott cautions.
“Any losses emanating due to lack of maintenance and repair, sabotage or other dereliction of duty will no longer be insurable and the onus of proving the contrary will reside with the insurer. This is a fundamental and significant change to cover and brokers are advised to ensure that this change to cover is discussed in detail with clients and in particular those who have no alternative energy, water or telecoms resources.”
“As loadshedding moves from being largely unpredictable to something which is now fairly predictable and frequent, it moves away from being an insurable risk to one which is better suited to being risk-managed,” he explains.
While the risks of the moment are many, they are clearly defined – and that makes it easier to respond to. Our industry is, after all, built on reacting to risks – and now is our chance to.