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Short-term insurer Santam has reported an exponential rise in load shedding-related power surge claims and high-value vehicle hijacking and theft claims as South Africa’s economic reality and ailing national grid continue to stress households.
This is detailed in the insurer’s 2022/2023 Santam Insurance Barometer Report, which was released this month and tracks the emerging risk trends affecting consumers, businesses, and brokers.
“Climate change, infrastructure concerns, and socio-economic challenges have created a tough environment for local insurers who bear the responsibility of ensuring their balance sheets can sustainably withstand the cost of the risks dominating the environment they operate in while also protecting the financial well-being of clients, and the safety of communities,” CEO Andrew Coutts said in a commentary on the elevated risks facing the local short-term insurance industry.
Leading claim trends
According to the study, the economy, as well as load shedding and power surges, were identified as two of the top three risks for households by consumers (57%) and brokers (71%).
Brokers further singled out crime (43%) – including burglary, hijacking and theft – as another pressing risk for the personal insurance market.
According to Santam, the volume of personal line power surge claims rose by 37% in 2022 compared to the 33% increase registered in 2021. Additionally, the insurer noted that the value of reported claims had nearly doubled in 2022 for the second consecutive year, rising by 47%.
Additionally, hijacking-related claims indicate a rise in ambition by criminals, with the insurer reporting a 32% increase in vehicle hijacking claims in 2022, while vehicle theft claims rose by 92% in the same year.
High-value vehicles like double cabs and SUVs have become the preferred target for hijackings as criminals aim higher and show a reduced appetite for older, cheaper vehicles.
According to the insurer, high-value vehicle hijacking, and theft claims increased by 128% y-o-y in 2022.
It said this was evidenced by vehicle hijacking and theft claims accounting for just under 10% of total claims cost in 2022, compared to 6% pre-pandemic, as the severity of the claims spiked and not necessarily claims volumes.
The vehicle hijacking and theft risk reportedly spiked in geographical areas closer to border crossings and for cars with keyless access, with the report noting that “certain makes and models were up to 20 times more likely than similar-priced models to be hijacked or stolen, specifically in Gauteng”.
Mitigation
Santam says it has managed to stabilise the exponential increase in power surge claims by implementing stricter underwriting measures and raising excess and power surge pricing. It says such measures have already been evidenced in improved claims reporting in the first half of 2023.
The insurer also noted that greater take-up of alternative generation systems has contributed to a reduction in claims as consumers reported installing UPS devices (45%), inverters (34%), generators (24%), solar panels (20%), and portable batteries (15%) in their homes to reduce reliance on the frail national grid.
While acknowledging that this is a welcomed improvement to mitigate damage caused by power surges on household appliances, Santam cautioned that the additions would alter the consumer’s risk profile as the potential for theft strengthens.
“Santam is watching its Personal Lines fire and theft claims to determine whether any premium adjustments will be necessary. The potential for theft of solar panels is also high on the risk ‘watch’ list,” the insurer said.
“Insureds must, however, take note of the general conditions of their Personal Lines insurance policy and meet the requirement for maintenance of these installations, as well as any regulatory requirements.”
To fight against vehicle hijacking and theft, Santam is reportedly increasing the requirement for vehicle trackers to be installed in targeted high-value vehicles.
The insurer also noted its interest in addressing tech-linked weaknesses with vehicle manufacturers to help in this effort.
“Fortunately, the risk mitigation efforts in the form of tracking devices proved effective and resulted in full-loss incidents declining by 80% in the first half of 2023,” Santam said.
This story first appeared in Moneyweb and is republished with permission.
