Despite the instruction by the Financial Services Conduct Authority (FSCA) to “expeditiously” pay over 600 Business Interruption (BI) insurance claims by the tourism and hospitality sector, insurers continue to reject these claims, according to loss adjustment firm, Insurance Claims Africa (ICA).
In its July 9, announcement the FSCA also called for these claims not to be buried in protracted litigation, noting further that the insurers’ conduct went against the principles of treating customers fairly and broke down confidence and trust in the insurance sector.
The insurers have been rejecting claims on the basis that the national lockdown forced the sector to close down. But the FSCA, ICA and SATIB Insurance brokers have stated that the lockdown was prompted by the global COVID-19 pandemic.
Insurers such as Santam and Guard Risk are now seeking legal certainty on this, thus further delaying pay-outs.
ICA CEO, Ryan Woolley, said urgent settlement by insurers of the sector’s COVID-19 BI claims was needed to provide the oxygen to keep businesses in the sector going. “Without this, 600 000 jobs will potentially be lost across the country.”
Woolley pointed to Statistics South Africa’s latest figures for May 2020, highlighting that income for tourist accommodation industry decreased by 98% in May 2020, compared with May 2019. Furthermore, income in the food and beverage industry decreased by 87.9% during the same period.
The Tourism Business Council of South Africa (TBCSA) has previously highlighted that around 49 000 businesses may not survive the pandemic, and 600 000 jobs have already been impacted.
“While we are ready to meet the insurers in court, this is not going to be a speedy process. Every day that pay-outs of these valid claims is delayed is another nail in the coffin of these businesses,” said Woolley.
He pointed out that many of the larger operations, which have been around for years, will survive – albeit with continued retrenchments – but much of the industry is made up of small businesses, which simply do not have access to the critical cash flow needed to sustain them through the pandemic.
“We are once again saying to the insurers: in the spirit of solidarity, let’s find a way to reach a responsible settlement which will offer these businesses a lifeline to pay their staff and stay afloat. A fair and responsible settlement will also go a long way in restoring trust in the insurance industry, whose reputation has been battered as they continue to reject claims,” said Woolley.
“Our claimants, who are vulnerable small and medium-sized businesses in the tourism and hospitality sector, would consider a fair offer, which could include payment terms of 50% payment upfront, with the rest payable over time.”
Meanwhile Executive Head of SATIB Insurance Brokers, Dewald Cillié, believes there are signs that the lobbying efforts by the tourism and hospitality sector are starting to pay off.
He said SATIB had received feedback on its submission – requesting immediate interim relief to prominent insurers – with a request to discuss the matter further.
“I know the prospect of further discussions does not elicit much reassurance at this point. It must feel like old news, what with all the various discussions since March leading us in circles. But I sense the mounting pressure is working in our favour,” Cillié said.
He added that it was encouraging to see the FSCA being “increasingly receptive to the industry’s plight”.