Gareth Beaver, Business Leader | SHA Risk Specialists
Another difficult year is behind us, having brought continued challenges and prolonged uncertainty with various levels of lockdown that now seems unending. However, when I look back at 2021, I don’t only see challenges; the last 12 months have brought both negative as well as overwhelmingly positive developments.
On the positive side, we saw the finalisation of much Covid-19 related contingency business interruption (CBI) claims in the courts. This has been very good for all parties involved since it at least brought closure to these claims after a lot of uncertainty.
Whilst the courts, in the majority of such cases ruled against insurers in favour of insured’s, this matter and the ensuing judgments helped to highlight the risks associated with a major industry issue, being contract certainty – i.e. the wording and construction of policy document clauses and the direction that the courts will take when there is any element of uncertainty.
As a result, we believe there will be an even bigger focus from insurers in the future to ensure that policy wordings are unambiguous and crystal clear as to intent in order to capture a meeting of the minds between insurer and insured.
On the negative side, we witnessed the tragic events of the politically motivated looting and riots, where the evil intent of the RET (Radical Economic Thieves) faction manipulated the plight of the poorest and destitute citizens of this country purely for their own gain, that of continued corruption and grand theft of the resources of our nation. This did nothing but give rise to more fear and uncertainty, driving the poor and destitute people of South Africa deeper into poverty, whilst unnecessarily fanning racial tensions between different communities.
The impact of this on the insurance industry and corporate South Africa is catastrophic from a long-term risk perspective.
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2022 awaits
Overall, there is no getting away from the fact that the economic landscape for the country is generally considered to be negative: inflation is most certainly expected to move upwards and with that interest rates too. Furthermore, business confidence within the private sector is in a slump having taken a hard knock following the inconceivable riot and looting scenes that remain firmly planted in our minds. More recently the looming uncertainty of coalition politics, Eskom’s continued power outages which have been amplified by growing incidents of internal sabotage, top-off an already challenging 2021.
While the insurance industry may well think it has seen the end of the dark days of 2020 and 2021, there are many other potential systemic risks lurking in the system that could come to the fore at any point.
On account of all these factors, our advice to all industry players is to remain risk averse. We sincerely believe that it would be a mistake to take on more risk at reduced rates in order to meet top-line targets. Now is not the time to reverse some of the hard market trends and gains made over the last 24 to 36 months – it is way too early as the potential for large unexpected losses remains ever-present.
There is good news too
That said, our outlook for the year ahead isn’t all pessimistic – as always, with risk comes opportunity.
A host of new risks have emerged including cyber, kidnap and ransom, environmental and climate change, brand and reputational risks and class action suits, to name a few. However, the opportunity to offer innovative risk solutions is as robust as ever. The biggest challenge for insurers is how to price these risks to ensure profitability and sustainability.
At SHA we believe that our human capital is our greatest resource and investing in it ensures that we are always creating value for our stakeholders. We will keep investing to ensure we have the best human capital, and that our available human capital is motivated and energised to lead the charge with our brokers and their clients.
Delivering superior client service at every touchpoint, enhancing this service and our niche product offering with the highest level of expertise is our commitment to navigating the future challenges for our clients and the industry.
We encourage our peers to face these challenges head on, stay focused and embrace them by exploring opportunities to innovate in order to keep driving our dynamic industry forward.