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‘No insurer can afford to offer widespread pandemic coverage within standard policies’
Specialist claims preparing company, Insurance Claims Africa (ICA), is alleging that local insurance companies are frustrating legitimate claims by businesses following COVID-19, insisting that the virus is a declared notifiable disease – but can any insurer afford to offer widespread pandemic coverage within standard policies? The answer from the industry is a clear ‘no’.
In a statement, Santam says it is committed to supporting its clients through the COVID-19 pandemic and playing a significant role in the economic recovery of the country. “To date, we have committed more than R400m in COVID-19 funding to provide relief through premium reductions, premium refunds, as well as direct support to insurance industry business partners and key government initiatives. Due to the unprecedented impact of the pandemic on economic activity, we have received a number of claims and enquiries about the extent to which businesses are covered by their short-term insurance policies.”
Against this backdrop, Santam says it’s imperative to offer clarity on the full scope of its ‘Contingent Business Interruption’ insurance and ‘Cancellation of Bookings’ cover with specific reference to COVID-19. More so in view of the widely held perceptions that short-term insurers will cover all claims linked to the lockdown and COVID-19.
“As with the majority of our counterparts in the short-term insurance industry locally and globally, our Contingent Business Interruption and Cancellation of Bookings policies do not cover pandemics. The reality is that no insurer can afford to offer widespread pandemic coverage within its standard policies; the premiums would be too high and it would become unaffordable for the majority of businesses.”
At Santam, a small minority of its business policyholders have chosen to buy cover that includes protection against contagious or infectious diseases. “In these cases, this protection is very specific and covers businesses for interruptions as a result of the outbreak of a disease at a local level. Our policy wording is quite clear in that it states that a business needs to be directly impacted by a disease such as COVID-19 in order for the cover to respond. If a policyholder can show this to be the case, then we will pay their claim.”
Santam says that what it is seeing is that a number of its policyholders were forced to close their businesses at the start of the national lockdown. “The national lockdown is not a peril that is covered by our policies and so they would not be able to make a successful claim for this event. It is a requirement in terms of the policy that the business is directly affected by a case of COVID-19. For example, if a policyholder ran a hotel and one of their workers became infected with COVID-19, forcing them to close their operations, then they would have a claim for as long as it took them to clean their premises and return to operations. The intention was never to provide cover for widespread pandemics or a national lockdown.”
Santam adds that it expects to pay many claims related to COVID-19. “As a company we pride ourselves in doing ‘Insurance Good and Proper’, and all claims that meet the definition of loss described in our policies will be settled quickly. We are very aware that some of our clients will be disappointed when they discover they are not covered against the lockdown. We will treat all claims in a fair manner, and where we are liable, we will not hesitate to settle.”
Editor’s note: Just before going to press the FSCA issued insurance companies with a new guideline regarding COVID-19 business interruption claims. The FSCA’s head of the supervisory division of insurers, Makgompi Rapasha, has concluded that claims made by certain policy holders are valid and must be honoured. The guideline makes provision for claims where businesses can provide proof that a COVID-19 case had been reported in the workplace or within a defined radius of its premises and this led to the closure of the business before lockdown.
