By: Peter Olyott, CEO Indwe Broker Holdings and director at FIA
I have been instructed to be informative without being boring and I have been permitted to be slightly irreverent and controversial. So the views and thoughts expressed here are my own and do not represent the views and thoughts of my employer, the associations to which I belong, and/or which I represent. But, I have worked with insurers, underwriting managers and administrators, product developers and brokers, and risk managers over the years, so I would like to believe (based on past predictions and what has occurred year to date) that I do have a reasonably good feel for our market and the economy in general. Besides if I am wrong, it is going to take quite a while for one to prove I was wrong and by that stage, I may have finally exited the industry and gone fishing.
The story of 2023 must be Loadshedding. With the insurance sector implementing the Public Grid Failure Exclusion, it appears as though only SASRIA ( with some initial goading by the FIA ) appears to have stopped short of also implementing this important exclusion. Despite the horrific cost of loadshedding in South Africa, we appear to have once again survived so far, with some light ( pardon the pun ) on the horizon.
As though to order, we have had some turbulent water related claims in the Western Cape during June and in September. Flooding, due to higher than expected rainfall in the case of June and a phenomenon we had all but forgotten about in September: storm surge. Having been on holiday recently in the Western Cape along the particular sea-board – the effects of the storm surge can clearly still be seen.
Then just when we thought it could not get any more depressing, a string of major thatch fires occurred over a three month period culminating in the destruction of one of South Africa‘s best loved Family holiday hotels. It is obvious that the underwriting and risk management of these risks will be revisited.
In between all of these, there was an increasing trend of fire losses in towns and cities and who could forget the day the proverbial @#%$ hit the fan in Johannesburg city center, sending cars and taxis flying and creating a wide crack in the tar an earthquake would have been proud of. Deteriorating infrastructure has an impact on individuals and the business community, including insurers. There does not unfortunately appear to be any meaningful large scale willingness towards improvement other than the specific contributions made by some of our major South African insurance groups – so we should give thanks for their efforts.
We have seen an increasing trend in vehicle thefts and hijackings again as the economy came out of the COVID Era and back into the recessionary or economic stagnation era . I must add, that although nothing really to do with the state of the economy, the quality of our driving appears to be aligning with the trajectory of our economy. I witnessed some overtaking maneuvers that would have scared the living daylights out of some of our former and current motor racing champions! As consumers and businesses come under pressure and insurer losses have mounted since 2020 , it appears as though matters are coming to a head as Insurers are forced to increase pricing and limit cover, consumers and businesses are more exposed to risk than ever but with less available resources and the good ship South Africa sails perilously close to the increasingly rough waters of economic stagnation and the R-word.
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So what does 2024 hold for us?
Should we be depressed and anxious? No, we should be very excited as I believe we are in the middle of the greatest era of change in our Industry. The Gods of Perils, Economics, Global Pandemics, Healthcare, Technology, Legislative and Societal changes are creating the perfect storm for fundamental change in our industry across all of its sub sectors. For sure, doing what we have done up to now, even if we do it well, will be insufficient to save us from ourselves. The time now is to be bold, innovative and decisive, and, dare I say it, even a little “Elon Muskish” in approach to what should change and why.
I see our local motor vehicle manufacturers, suppliers and financiers see vehicle leasing as the next best thing since smartphones, with some very bullish numbers being bandied about – what will that do to the traditional South African motor insurance markets when the cost of insurance and maintenance is included in the lease? Whilst South Africa climbs in the global ratings as one of the countries moving to the top of the pile from a cyber crime point of view, we still have individuals and small businesses who don’t insure themselves for cyber risks – all the while electronic banking, emails, online trading and the like is going through the roof – does not quite make sense to me.
After decades of packaging risks together to make them more economical to distribute and to provide some risk hedging for insurers, the technology now exists to go back to the way things were and to allow consumers (and businesses for that matter), backed by suitable advice of course, to be able to put together their own bespoke insurance covers for when they need it, and to allow the whole bang shoot or parts thereof, to be put on hold when they don’t.
In conclusion, we live in a state of unprecedented global turmoil. We have two major regional conflicts on the go, with Ukraine and Israel, and threats of a third in the South China seas. Some significant global and regional leadership elections going on in 2024, and we have kickstarted the year with some significant regional disasters such as earthquakes and flooding. However, I do not foresee any alien invasions or encounters of the close kind, just yet. I can however, categorically say that South Africa shall remain Rugby World Cup champions until at least 2027, sheep shearing champions until 2024 and I shall be most surprised if we advance beyond the semi-finals of any other major sport type during this year. As is the norm, the predictions of Nostradamus shall maintain their level of post-event hindsight interpretation accuracy.
All of the best for 2024 – may it be a great year for you and your businesses.