Wednesday, January 19

Drastic increase in Sasria’s premiums after the July riots


Businesses across the country will pay up to 1,700% more for riot insurance from February 1 after the South African Special Hazard Insurance Association (Sasria) adjusted its premiums following the destructive riots in July that cost the US government. country about 50 million rand.

Mike Schüssler, an economist at economists.co.za, says that everyone in the economy will now pay the price for the government’s inability to prevent and contain unrest. He says that this cost will now be a permanent burden on the economy.

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Several structural changes have also been made to reflect changes in risk exposure.

There are no increases in Sasria coverage for individuals and vehicles for personal use. Tertiary institutions have also been spared the raises.

The socio-political unrest that followed the imprisonment of former President Jacob Zuma centered on the KwaZulu-Natal and Gauteng companies.

Read:

The government had to come to Sasria’s aid with an allocation of R11 billion in the October adjustment budget after the claims it received drained its coffers (and more will come later); Of this, R3.9 billion would be disbursed in the current financial year.

The police service was widely criticized for failing to protect businesses, property owners and staff against violent looters.

Sasria is a state-owned company that provides coverage against damages caused by special risks, such as politically motivated malicious acts, riots, strikes, terrorism and public disorder. In November, it declared that it had received 14,051 claims, valued at R32 billion.

Increments and justification

Commenting on the claims, Sasria previously said that “the highest amount and value in rand occurred in the following order: commercial fire, heavy commercial vehicles, light commercial vehicles and business interruption.”

As a result, premiums on the coverage of light and heavy commercial vehicles, as well as taxis and goods in transit, have increased dramatically.

Light commercial vehicles and taxis used to pay a flat fee, but this will no longer be the case.

A circular sent by Sasria to its agents and intermediaries shows the impact on annual premiums (not including value added tax):

Source: Sasria

For the purposes of fire damage coverage, business office property has been de-linked from other business properties, such as shopping centers, due to a “different risk profile.”

According to Sasria, commercial property, excluding the office, “is among the hardest hit in terms of the severity of the claims.”

Goods in transit

According to a letter from Versaflex Insurance Brokers, which specializes in heavy commercial vehicle insurance, Sasria’s insurance on goods in transit will increase from 1.476% of the insured value to 1.7712%.

Therefore, the monthly premium for goods with an insured value of R3 500 will increase from R51.66 to R61.99.

However, a minimum premium of R50 will apply, which means that insuring an item with an insured value of R500 against riot will increase dramatically from the current premium of R8.86.

Schüssler says this will hurt the developing e-commerce sector, “typically the kind of products that Takealot sells.”

Township-related risks are now in a class of their own

Sasria has also created a new category for “all risks related to the municipality.” These premiums will be calculated at a rate of 0.02958% of the insured value that is comparable to the new fire insurance rate for commercial property, excluding offices.

Sasria says the volatility of claims in the municipalities has warranted a review of the rating structure for this risk.

“Therefore, we are introducing a new ‘MUN’ rating class specifically for all risks related to the municipality to be added with their own risk profile.”

The logistics industry is not impressed

Gavin Kelly, CEO of the Road Freight Association (RFA), says it’s unfair that the logistics industry should bear the brunt of increased risk.

“Why should we – the victims here – suddenly I have to rescue Sasria in terms of this. We are the ones attacked, this is not an insurance risk where a change in behavior can be implemented by the insured (such as accidents / driver behavior, etc.) ”, he says.

Ask what happened to the billions of rand that was collected by Sasria over the years?

“Where has that money gone to the state coffers, but now it is missing / not available to cover these costs?

“These costs must be assumed by the state. They did not react. They did not avoid the damage, no matter how many times we request assistance, action, investigation and follow-up to attend to those responsible ”.

Kelly says that companies cannot go to insurance companies and get this type of coverage. “It is the domain of the state. Specifically, then [as] to keep premiums low and [as] an incentive for the state to ensure that political unrest and protests are addressed.

“Companies will now have to choose whether to contract this optional coverage and assume the risk. Obviously, this will mean that more companies will be vulnerable and face total destruction and closure. More job losses. ”

Kelly says the RFA, along with its insurance associate members, is looking for a way to ensure that its members receive some form of coverage at affordable prices. The association has had interaction with Sasria but they have not been able to resolve the issue of the huge increases.

Conflict

The organization also met with Transport Minister Fikile Mbalula last week in an effort to find a lasting solution to the conflict in the trucking industry between local drivers and foreign counterparts, believed to be the main cause of much of the violence in the country. industry. Local drivers are opposed to employers hiring foreign drivers instead of South Africans, allegedly for lower than minimum wages.

Read: Foreign truck drivers attacked under cover of looting, demand compensation from SA

Schüssler says that customers regularly require service providers in the logistics industry to take out insurance and it would be difficult for them to avoid rising premiums.

However, the increases will be passed on to the end users of the relevant goods and services, meaning that “everyone” will pay the price for the July riots and looting.


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