The Financial Sector Conduct Authority (FSCA) will take action against insurers who are deliberately avoiding paying Business Interruption claims where no grounds exist to do so.

The authority said in a press release: “The national lockdown cannot be used by any insurer as grounds to reject a claim. Such conduct goes against the principles of treating customers fairly and breaks down confidence and trust in the insurance sector.”

An FSCA spokesperson said one of the key principles underlying the Twin Peaks (see note below) reforms was to ensure customers were treated fairly and that, where products were designed to meet customers’ needs, they were sold in such a way that customers understood what they were buying.

The reforms also ensure that unfair barriers such as fine print or unfair proof of claims are not put in the way of customers exercising their rights in terms of those policies. 

“The FSCA has assessed different BI wordings and found that, although there are nuances in BI policy wording, they may be broadly grouped into the six categories identified in communication 34 of 2020,” read the FSCA statement.

Furthermore, based on the information received and analysed by the FSCA to date, it has found that, although it could not find evidence that the national lockdown could be a trigger for a valid BI insurance cover claim, policyholders are able to claim in instances where they can show that they have satisfied the requirements of their specific policy, whether it was before, during or after the national lockdown.

“In other words, if a policyholder can prove that it suffered a loss – for example, fewer bookings, cancellations of bookings etc – as a result of the contagious/infectious disease in the area specified in the radius clause (generally within a 50 kilometre radius of the business), and that his/her business was interrupted or as a result of measures taken as a consequence of the contagious/infectious disease (including the national lockdown), then the policyholder has a valid claim,” the FSCA statement highlighted.

Dire situation for tourism and hospitality sector

CEO of the Tourism Business Council of South Africa (TBCSA), Tshifhiwa Tshivhengwa, has been vocal in his disapproval of the stance taken by many of the insurance companies.

“The situation is dire and the industry is facing massive retrenchments on the back of several challenges caused by the COVID-19 pandemic. For insurance companies to make the distinction between lockdown and the pandemic is disingenuous. The two are clearly interlinked,” he said.

“The true test of a company’s ethics and values is how they treat their most vulnerable customers at their time of need. Thus far, the actions of these goliaths don’t match their words, which are all centred on behaving responsibly and in line with deep ethical values,” said Robert More, CEO of the MORE Family Collection, who started a petition against the insurance companies. .

‘Massive step in the right direction’

 Meanwhile, loss adjustment firm, Insurance Claims Africa (ICA) – which is representing over 500 insurance claimants in the tourism and hospitality sector – has welcomed the “categorical statement” by the FSCA as a “massive step in the right direction”.

“FSCA’s statement unequivocally rules out this interpretation of these policies. Nonetheless, we still invite the insurers to talk to us about a sensible compromise settlement,” said CEO of ICA, Ryan Woolley.

NOTE:

In April 2018, National Treasury announced that South Africa’s financial regulatory system would fundamentally change, as two new regulators come into operation – the Prudential Authority (PA) and the Financial Sector Conduct Authority (FSCA). This saw the implementation of the Twin Peaks model of financial sector regulation in South Africa.