Manage business risks related to strikes

Johannesburg - The on-going riots and labour disruptions in the platinum industry is causing South African businesses to continually feel the impacts of strikes, according to Annelie Smith, corporate executive at Risk Benefit Solutions (RBS).

These are damaging economic growth and, in turn, negatively impact local businesses within the mining sector, as well as those inadvertently involved.  

Smith says the risks related to strikes and riots – across all sectors – are steadily growing as the number of strikes in South Africa continues to increase.

“Business owners need to ensure that they are covered for the various risks that strikes and riots may bring about for their business, such as damage to property and loss of income due to interruptions caused by labour unrest,” said Smith.

"Compared to a few years ago, when strikes were erratic, these incidents are steadily becoming more constant within the country."

She points to the 2012 Annual Industrial Action Report by the Department of Labour, released late last year, which revealed that strike activities increased by approximately 48% during 2012.

A total of 99 strike incidents were recorded in 2012 and, of these, 45 were unprotected.

Smith says that one such way for businesses to protect themselves from strike-related risks is by making use of cover provided by Sasria.

This is a state-owned short-term insurance company, which has a mandate to provide specialised risk cover for physical damage caused by riots, strikes, terrorism, civil commotion and public disorder to corporate, commercial and individual policyholders.

“Many businesses have short-term insurance solutions in place protecting them against catastrophic perils like fires, storms, earthquakes and other risks, however, damage to property caused both by politically-and non-politically motivated acts of destruction is excluded from these policies," said Smith.

"Many businesses may not know that this standard exclusion is a global practice and applies to all insurance policies.”

Reiterating the increasing need for strike-related risk cover is Sasria’s Integrated Report 2013, which revealed an increasing trend in claims frequency.

The report revealed a 91% increase in claims frequency, driven primarily by labour strikes, as well as an increase in claims severity of 135% for the period ending 31 March 2013.

Sasria cover

Smith explains that the trigger for Sasria to cover an instance is based on the direct damage to a business property, as a result of a strike or riot.

“Should a business premises be set alight by rioters, Sasria would cover the damage to the property, as well as the on-going costs requiring payment during the period, such as rates and taxes, loans and high purchase agreements for example," said Smith.

"However, should a strike take place near the property, resulting in the business ‘shutting down’ its operations temporarily, and sending staff home as a result of intimidation, there is no direct damage to the property."

Therefore, the instance will not be covered by either the property or the Sasria policies, despite the business suffering a financial loss as a result of the business being interrupted.

Smith explains that the type of cover offered by Sasria is specialised, and it is, therefore, important that business owners consult an insurance broker to fully understand the possible risks that a company may potentially be exposed to.

“Due to a common misconception of what Sasria covers, many claims have in the past been rejected and left clients infuriated,” warns Smith.

“While Sasria provides cover in receipt of the damages to an extent, it does not provide full gross profit cover unless specifically purchased."

Sasria does, however, offer various solutions to take into account the varying requirements business may have wherein companies can purchase a combination of standing charges or uninsured working expenses together with net profit cover only.  

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