{"id":1582,"date":"2024-01-02T05:37:22","date_gmt":"2024-01-02T05:37:22","guid":{"rendered":"https:\/\/www.innov8fs.co.za\/blog\/?p=1582"},"modified":"2026-03-18T11:46:08","modified_gmt":"2026-03-18T11:46:08","slug":"government-failures-raise-cost-of-insurance-in-south-africa","status":"publish","type":"post","link":"https:\/\/www.innov8fs.co.za\/blog\/2024\/01\/02\/government-failures-raise-cost-of-insurance-in-south-africa\/","title":{"rendered":"Government failures raise cost of insurance in South Africa"},"content":{"rendered":"

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South Africa\u2019s insurance industry is grappling with a difficult and changing risk environment, with infrastructure deterioration, load-shedding, and crime increasing the number and value of claims, which makes it more expensive to insure goods.<\/p>\n

This is feedback from Santam\u2019s CEO, Tavaziva Madzinga, who outlined these changes in a piece titled\u00a0South Africa\u2019s Shifting Risk Landscape.\u00a0<\/em><\/p>\n

Madzinga warned that increasingly common catastrophic events, such as Covid, the July Riots, and Durban Floods, are exacerbated by the country\u2019s poor infrastructure, load-shedding, and crime.<\/p>\n

\u201cClimate change, infrastructure concerns and socio-economic challenges have created a tough environment for local insurers, who have a responsibility to ensure their business is strong and able to withstand the cost of the risks in the environment,\u201d Madzinga said.<\/p>\n

Locally, rioting and looting caused an estimated R50 billion in economic losses in July 2021, with the April 2022 KwaZulu-Natal flood losses estimated at R54 billion.<\/p>\n

The insurance industry carried half of that total. Climate change-related extreme weather events also dominated the insurance industry\u2019s claim statistics in 2022 and 2023.<\/p>\n

The growing number of large catastrophe reinsurance claims locally has caused reinsurance premiums to increase significantly. This will increase the cost of insuring goods in South Africa.<\/p>\n

Additionally, attritional weather losses \u2013 weather-related claims not associated with a catastrophic event \u2013 also threaten the sustainability of the insurance industry.<\/p>\n

According to the 2022\/2023 Santam Insurance Barometer Report, Santam experienced a spike in flood-related claims across all lines of business during 2022.<\/p>\n

The trend continued into the first half of 2023, as the April 2022 KwaZulu-Natal floods were followed by flooding along the Orange and Vaal Rivers and extensive flooding in the Western Cape around June.<\/p>\n

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These events revealed an additional layer of risk in that South Africa\u2019s infrastructure degradation increases the extent and severity of flood-related losses.<\/p>\n

This is a major challenge that will have severe consequences for the insurance industry and the businesses and communities that rely on them.<\/p>\n

Worsening road conditions, fire-fighting capabilities, sewerage systems, and floodwater drainage \u2013 to name a few \u2013 are becoming increasingly vulnerable to disasters.<\/p>\n

Damages following disasters are extensive, the cost of repairs exorbitant and downtime is lengthy. Most importantly, infrastructure that is not structurally sound also impacts the number of lives lost in a disaster.<\/p>\n

\u201cTo ensure sustained insurability, significant focus and financial resources from the government are required to turn things around, as well as a collaborative effort by the private and public sectors,\u201d Madzinga said.<\/p>\n

\u201cFor the full 2022 financial year, we experienced an increase of approximately 67% in claims for damage to sensitive electronic items due to power surges across our personal insurance and commercial insurance portfolios, totalling R609 million.\u201d<\/p>\n

From a socio-economic perspective, the steady increase in crime has also become a systemic risk we are tracking closely.<\/p>\n

The 2022\/2023 Santam Insurance Barometer Report showed South Africa is seeing a significant shift in vehicle crime.<\/p>\n

Additionally, the report found that a growing number of industry stakeholders believe cybercrime to be the next potential black swan loss event for the insurance industry.<\/p>\n

Despite this, there seems to be an inertia in both risk mitigation and risk transfer efforts in this space.<\/p>\n

The current high-risk environment presents many challenges for insurers who must prioritise ensuring they can carry these risks sustainably.<\/p>\n

\u201cA thriving insurance sector is a critical cog in a healthy economy as insurance empowers individuals and businesses with the freedom to be more resilient,\u201d Madzinga noted.<\/p>\n

\u201cIt is therefore vital that we understand and respond to both traditional and emerging risks in an increasingly complex risk landscape.\u201d<\/p>\n

Credit: Shaun Jacobs<\/h6>\n","protected":false},"excerpt":{"rendered":"

South Africa\u2019s insurance industry is grappling with a difficult and changing risk environment, with infrastructure deterioration, load-shedding, and crime increasing the number and value of…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-1582","post","type-post","status-publish","format-standard","hentry","category-innov8ions"],"_links":{"self":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1582","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/comments?post=1582"}],"version-history":[{"count":2,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1582\/revisions"}],"predecessor-version":[{"id":1586,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1582\/revisions\/1586"}],"wp:attachment":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/media?parent=1582"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/categories?post=1582"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/tags?post=1582"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}