Recent crime statistics reveal that Commercial Crime is a rapidly growing risk for organisations in South Africa, yet many businesses are caught unprepared when an incident is discovered or when it is suspected that some fraudulent activity had taken place. 

According to the latest crime statistics released by the South African Police Service (SAPS) earlier this year, commercial crime increased by 15.1% from October to December 2021. In the first quarter of 2022, commercial crime – that can be potentially damaging to the economy – showed 13% increase over the previous year, with more than 25 000 cases reported.  

This alarming increase is in line with a longer-term trend that has seen commercial crime spike over the past two years. It is perhaps not surprising then that employee fraud is at an all-time high in South Africa, while local businesses also face an increase in extortion attempts. Essentially, a business mafia has evolved that threatens businesses, demanding inducements to avoid consequences. 

With South African businesses facing a slew of Commercial Crimes coming at them from different quarters, it is understandable that business owners need to manage these risks and are seeking to protect their businesses by way of Commercial Crime insurance. 

Strange business market 

However, this is perhaps becoming harder than one would expect, says Gizelle Pereira, Commercial Crime Product Expert at iTOO Special Risks. She notes that finding an insurance partner willing to cover Commercial Crime is becoming increasingly harder in the South African market, with many insurers electing to avoid writing this line of business in the last 24 months. 

“I would say that the sharp rise in Commercial Crimes is due to the fact that the increasingly tough economic conditions are forcing people to resort to desperate measures. Yet, the local insurance market is becoming a little uncomfortable with insuring commercial fraud,” says Pereira. 

“Most insurers are only sticking with what is already on their books but are declining to offer this class as a new approach. A notable exception is iTOO Special Risks, which is still open for business in terms of Commercial Crime coverage, in a market where few are prepared to venture.” 

Pereira explains that ITOO has committed to staying loyal to its brokers, however, the insurer has implemented a host of conditions that go with providing a quotation or policy renewals to clients. 

“Over the last 18 to 24 months, iTOO has dissected its Commercial Crime book of business and put in place minimum underwriting guidelines and criteria. In short, this is a result of the state of the local and global commercial crime market, at this point in time,” she says. 

Increase in frequency and severity 

“We, along with the rest of the market that offers Commercial Crime coverage, have and are still experiencing severe increases in both frequency and severity of claims in this class of business.” 

As a result, Pereira says, if the company does not implement drastic and material changes to this class of business in terms of deductibles and premiums, she believes that within the next 12-18 months this class of business could become uninsurable. 

“We have, as all insurers do, developed actuarial models to further understand the trends and losses within our classes of business and we have also calculated what minimum premiums, deductibles and policy structures are required to sustain the portfolio,” she says. 

“Commercial crime was not exempt from this process, and we feel that in order to ensure that we run a sustainable commercial crime book of business and ensure longevity of this class of business, we need to and have to and will continue to apply material adaptations across our portfolio.”