As you read this, the country is busy mopping up after the most devastating looting incident in our history. Political, criminal and social factors all played a role in the chaos that ensued over a period of seven days. We have already heard from SASRIA that they expect to be capitalized well enough, with the needed reinsurance backup, to cover the cost of claims. It is too early to speculate on the total economic loss expected but in conversation with insurers and reinsurers it seems like the insurance loos would be in the region of 15 to 20 billion rand, with economic losses potentially reaching R50 billion.
I have also seen figures from various business councils in Kwazulu-Natal and Gauteng that most small businesses affected (70% of which are black owned) were uninsured. This also means that a large percentage of them will not open again, resulting in big job losses and losing multiple entrepreneurs from the production and employment cycle. While the larger businesses and chain stores will have the most of the needed insurance covers in place and the resources to recover, the same does not hold for their smaller counterparts.
Some of the blame for the large number of uninsured businesses should fall on the shoulders of the insurance industry. There is clearly a lack of urgency with small businesses across the country to take up insurance. This could be a result of them being reckless, not understanding the risks or the solutions to the risk, not having received appropriate advice or our products seemingly being unaffordable.
The fall out will not just be those businesses directly involved in the looting and destruction. The upstream and downstream effect, most of which will not fall within the insurance field, will add to the economic losses suffered. Closed businesses were part of the supply chain to others that might, as a result, experience business interruption. Suppliers to those destroyed businesses have suddenly lost distribution for their products, spreading the impact further and further.
As an industry, there seems to be a great opportunity in front of us. An opportunity that many have been trying to exploit but that we, as an industry, clearly need to rethink. How do we ensure that most small businesses are insured, even if just to some extent. Brokers are the main drivers in this quest to get, especially small businesses, insured, but I have also lately seen direct insurers launching products aimed at this segment of the market.
Now is definitely the time for the insurance and risk management industries to up their game. The following are a few main opportunities or responsibilities that we should be focussing on:
- Ensuring we have appropriate and affordable insurance products
- Providing effective, convincing risk assessment and mitigation advice
- Ensuring these products and advice reaches small businesses
- Holding to account the various arms of Government for their failure in providing what is needed to avoid or manage these risks (eg effective policing and efficient fire protection services)
It is time for us to step up and take our rightful place in solving the problems of our country. That’s the place where we are the experts and where we have influence. Now, more than ever.