Santam, South Africa’s largest short term insurer, is making good progress in handling contingent business interruption (CBI) claims and has made payments to approximately 60% of policyholders that have submitted claims.
Since January 2021 Santam has paid R600-million to policyholders in addition to the R1-billion paid in interim relief to 2 500 policy holders in August 2020, bringing total CBI payments to date to R1,6-billion.
A number of the 2 500 clients who received the R1-billion interim relief in August 2020 have subsequently received additional payments. Most of these beneficiaries were SMMEs in the hospitality, retail and leisure sectors.
A total of 3 252 policyholders notified Santam of their intention to formulate and submit a claim. This represents 2% of the company’s Commercial and Corporate clients.
To date, Santam has received formulated claims from 1 851 policyholders, who represent 57% of the number of clients who previously indicated their intentions to claim. Final or interim payments have been made to 1 094 of the 1 851 clients that have submitted claims.
The remaining 757 claims are currently going through the assessment and settlement process with loss adjusters. Earlier this year Santam contracted more than 40 additional expert business interruption loss adjusters to strengthen its internal capacity and to enable the faster processing of claims.
All claims where documents have been submitted have been or are currently being attended to. However, Santam is very concerned that 43% (1 401) of the clients who initially registered their intention to submit a CBI claim have still not done so.
Since January 2021 the company has communicated extensively with intermediaries and clients, urging them to submit their claims documentation. Santam has on numerous occasions extended the deadline for submission of claims information. The final deadline for affected policyholders to provide documentation in support of their claims is now 31 August 2021.
Santam has simplified the process and put a fast-track claims process in place
The company has made considerable efforts to simplify the claims process for businesses where the sum insured is less or equal to R10-million per annum and the indemnity period is not greater than nine months. This represents the majority of clients.
For these clients, Santam implemented a Fast Track process from 28 January 2021 and provided a basic spreadsheet of two pages that an accountant or bookkeeper can complete.
In February, Santam further simplified the requirement for clients to provide proof of the occurrence of Covid-19 within a certain radius of their premises. The insurer secured an agreement with the National Institute of Communicable Diseases (NICD) to use its geo-location data for this purpose, saving clients considerable time and effort.
Santam believes that the claims documentation requested is fairly standard for commercial entities, as it includes financial statements that would ordinarily be used for tax purposes. It is important for the clients to demonstrate the before and after impacts of the business interruption through financial statements.
Santam’s financial performance
Santam provided R3-billion for net CBI claims in its 2020 financial results. The company therefore assures clients that it is committed to paying all valid claims.
With regard to financial performance for the year ended 31 December 2020, Santam’s income attributable to ordinary shareholders decreased by 75% to R542-million (2019: R2 199 million). Headline earnings dropped by 47% and no interim or final dividend was declared in the 2020 financial year. The economic capital coverage ratio of the Group as at 31 December 2020 was 161%, slightly above the midpoint of the capital target range of 150% to 170%.
The net underwriting margin achieved by Santam Conventional Insurance in 2020 was 2.5%, well below the target range of 4% to 8% and the 5 year average margin of 6.4%. Additionally, Santam settled claims amounting to R21-billion in 2020 (2019: R19-billion), the highest in our history.
In line with the comments that have already been made by the industry body, the South African Insurance Association (SAIA), Santam disagrees with conclusions that the insurance industry has unduly benefited from the pandemic and finds the recently published research misleading and inaccurate in its generalisations.
Santam’s overall contribution to reducing the impact of COVID-19
At the outset of the COVID-19 pandemic in March 2020, Santam committed to assist clients, intermediaries, its staff and other stakeholders through an array of initiatives that amounted to R400-million.
These efforts included:
- Refunding premiums to personal and commercial clients
- Assisting individual clients and SMMES in financial difficulty with premium relief
- Assistance to SMME suppliers – focused on suppliers with less that R10m annual in turnover
- Contribution to the Solidary Fund
- Contribution towards other COVID-19 specific CSI initiatives
- Employee assistance programmes: support to commission-earning employees impacted by low sales
- Significantly reducing renewal increases for clients
At a practical level, the Santam Group further responded to clients who were mainly working from home and travelling shorter distances. Within a few months of the start of the pandemic the Santam Group launched products such as SmartPark and MiWheels at Home, that offer discounted premiums on the basis of lower distances travelled, putting millions of rands in the hands of clients.
“As Santam, we are absolutely committed to treating our customers fairly and finalising the CBI claims as soon as possible. We urge our clients and intermediaries to furnish the relevant claims information that will enable us to conclude this process speedily,” said Santam Group CEO Lizé Lambrechts.