The past few years have tested the resilience and strength of insurers to the greatest magnitude. This has been the case worldwide and, more so, here in South Africa. Many insurance-triggering events occurred, requiring insurers to respond. Although most of these occurrences were relevant mainly to short-term insurers, some were relevant to long-term insurers. After all, both belong to the same industry and, an occurrence of a major event is ordinarily likely to affect both. This will become evident during the course of the discussion hereunder. This piece will therefore specify some of these major occurrences and briefly discuss the lessons or reminders that can be deduced from such occurrences, for both the insureds and the insurers.
Although Covid-19 broke out in 2020 and was declared a pandemic by the World Health Organisation in 2020, the raging effects and implications of same were still magnificently felt in 2021 (and this is still going to be the case for the foreseeable future). When Covid-19 broke out, insurers were flooded with a plethora of business interruption claims – throughout the world. This ignited fierce litigation, worldwide. In most jurisdictions, the courts favored the insureds and, as a result, insurers made huge payments. South Africa was not sparred from such litigation and, insurers, similarly, had to make these huge payments. A prominent case in this regard is the Ma – Afrika Hotels (PTY) LTD and Another v Santam Limited case. In 2021, there were 3 (THREE) waves of Covid-19 – second wave (which started late 2020), third wave and the fourth wave (which extended over to early 2022). Although most insurance policies had been reviewed and amended to specifically exclude Covid-19-related business interruptions, there were still lots of disputes carried over from 2020. Some related to the validity of the claims whilst others had to do with the quantum of the claims. The latter issue was entertained by the Supreme Court of Appeal late last year, 2021, in the case mentioned above. Long-term insurers also had their fair share of difficulties emanating from Covid-19. Firstly, Covid-19 caused (and still does) lots of deaths and, therefore, pertinent covers (in accordance with the policies in place) were triggered. Secondly fraudulent life insurance claims were submitted. There were reports early 2021 that such cases were gaining momentum, people taking advantage of the situation (i.e. influx of claims relating to life policies). Thus, Covid-19 was still one of the major occurrences in relation to insurance law for 2021, although the actual break out was in 2020.
In addition to the above, the other major occurrence was the July 2021 civil unrest. The devastation of same is still lingering, to date. Infrastructure, all kinds of businesses, goods, and services were destructed in an unprecedented manner, since the dawn of our democratic dispensation. Hundreds of lives were lost in the process. To highlight the magnitude of destruction is the fact that the inquiry relating to the July civil unrest is still ongoing. Given the nature of the triggering event (i.e. civil unrest), this has not majorly affected private commercial insurers, financially, but rather it has affected SASRIA. The extent of liability is evident in that SASRIA has had to make a plea to government for support, so that it could make necessary payments to the insureds. Over the years, SASRIA had not been hit with claims in such a large-scale. Although, in most instances, SASRIA would have the ultimate responsibility to pay, insurers have been actively involved in the claiming process and, in some cases, assisting with the claiming process. Mostly, however, have been rightfully handled by brokers. For long-term insurers, this event was equally pertinent due to a number of deaths that occurred which would trigger relevant policies. Of course, not every covered individual would have a successful claim under life polices, as the conditions and pertinent exclusions would determine the outcome.
Further to the abovementioned occurrences, there were many other big events, including major fires that erupted in Cape Town – causing severe destructions and putting businesses to a sudden halt. From this, there could possibly be claims of business interruptions, loss of income/business, etc. Furthermore, towards the end of last year, there was an unsettling surge in cyberattacks in South Africa. Major companies and entities suffered huge setbacks as a result. For example, the Department of Justice had a major cyberattack which led to loss of data; the Road Accident Fund was also hit by a similar attack. Moreover, the Durban Port was hit by a cyberattack which drastically crippled operations for a number of days. Then there were various truck drivers’ protests throughout the year – these would have possibly triggered logistics and fleet policies, in addition to others. Depending on conditions and exclusions of the policies, claims stemming from protests may have been unsuccessful or successful. Lastly, loadshedding continued, as it does to date, to pose a threat for insurers. For more on loadshedding and its potential implications for insurers, please see https://www.golegal.co.za/loadshedding-business-insurance/ .
These are but some of the major occurrences in relation to insurance law, in 2021. Some were least expected whereas some may have been foreseeable. They all, nonetheless, sent a reminder to all the relevant stakeholders, mainly the insurers, brokers, and insureds, of the need to examine their policies and ensure that conditions are always adhered to. Further, for smaller and medium-sized businesses, such events remind them of the significance of having insurance covers in place – so as to survive, if and when events like the unrest, for example, re-occurs. For the already insured businesses, such events are a reminder of the need to always review and renew their policies timeously and, ensure they abide by the conditions, whilst keeping in mind any applicable exclusions, and putting contingencies in place with regard to the exclusions. Similarly, for the insurers, there is a need to always ensure that they honour their contractual obligations. Furthermore, for smaller to medium size insurers, more especially, there is a great need for reinsurance. The past 2 (TWO) years have shown how sudden a huge occurrence may trigger various huge claims. If, as a result of such occurrence, the insurer suffers a huge financial setback, the insurer itself may lose be forced to close down or, at worst, be liquidated. Thus, the need for reinsurance.