Premiums of roughly R10 per month have triggered average payments of around R400,000 for a small group of insurance clients who took out pandemic extensions to their business interruption policies, at a time the coronavirus disaster was nearly unthinkable.
The final numbers can only be determined when the dust settles, Outsurance said this week, but it has set aside a best-estimate R220 million to pay claims against business interruption policies.That is in return for a total of R38,000 it collected in premiums from those clients.
So far it has settled 135 claims, it said. And, in retrospect, it may have been slightly undercharging those customers.
“The cover was priced correctly for normal claim volumes but not sufficient for pandemic levels,” the company told Business Insider South Africa.
The company said it actively reached out to clients who had pandemic cover but had not lodged claims against it.
“The real moment of truth for service is in the claims experience,” said Outsurance CEO Danie Matthee in a statement this week. “We exist to pay claims and we take that responsibility very seriously – it is the basis of the trust in our brand.”
Though pandemic cover has been available in the South African market for some time, it has never been tested – and there is a measure of disagreement between clients and insurers, regulators say.
A number of insurers have argued that losses due to the national lockdown are not covered by insurance policies designed to cover the (more direct) losses caused by a virus, the Financial Sector Conduct Authority (FSCA) and Prudential Authority (PA) said in mid May.
At the time some insurance companies were still seeking legal advice on such interpretations, and the regulators simply warned them to keep clients informed of the process.
That has since developed into at least one full-blown legal fight between an insurance company and clients who believe they are owed money.
Several more such legal claims are expected in coming weeks.