We've been considering Covid-19 relief for some time, say Santam and Guardrisk

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  • Santam announced on Sunday that it would provide R1 billion in relief for clients whose business interruption claims had not been paid if they had contagious disease extension.
  • Santam CEO Lizé Lambrechts said the insurer had many internal discussions before the engagements with the regulator about what it could do for clients while it waited for the courts to provide clarity.
  • Lambrechts said if the court rules in Santam's favour, it will not ask clients to pay it back, but if the judgment is in favour of clients, it will deduct the relief paid from their claims.
  • Old Mutual, Guardrisk and HIC Underwriting Managers have not confirmed whether they'll also consider relief packages for their clients.

"We didn't need the protests to know how much our clients have been suffering," said Santam CEO, Lizé Lambrechts after the insurer announced that it would be providing a R1 billion relief package to some of its business interruption clients.

After restaurant owners, tourism industry operators and other businesses in the hospitality sector took to the streets last week to protest against trading restrictions that have left millions out of jobs, the Financial Sector Conduct Authority (FSCA) and the Prudential Authority announced on Friday that they had reached an agreement with insurers that could help these businesses in the short-term.

The short-term insurers who offer business interruption (BI) insurance will consider interim relief for their policyholders who had contagious disease extension on their policies, said the FSCA. Most of these businesses' claims have been delayed or rejected by the insurers on the basis that the lockdown was never underwritten by the industry and therefore it is not a trigger for valid business interruption claims.

Guardrisk to offer settlements to policyholders

Guardrisk, which underwrites HIC Underwriting Managers, said it announced two weeks ago that it was looking for ways to provide support to businesses in the tourism and hospitality sector. Since then, it has been in discussions with the regulators and its reinsurers to formulate a commercial settlement for its policyholders.

The company said its view is still that the lockdown is not covered by its policies but it will, with immediate effect, be making commercial settlement offers to policyholders who are clients of HIC and have submitted claims. Guardrisk did not specify how much this will add up to.

"These policyholders are currently being contacted by HIC, via their brokers, to set out the offer terms. The commercial settlement being offered is equal to the first three months of lockdown, less the relevant savings and other relief payments received; and there is no limitation on the maximum amount payable," Guardrisk.

Fin24 reached out to Old Mutual, but the insurer said it would confirm on Tuesday whether it will offer any relief to its customers. 

'We are not forced'

Prior to reaching the interim relief agreement, the FSCA had already nailed its colours to a mast earlier this month, saying that insurers cannot use the lockdown as an excuse to reject claims.  

Without the authorities' intervention, would insurers have considered the relief?

"We are not forced to do anything by the FSCA," said Santam CEO Lizé Lambrechts. "The relief is something that we have been thinking about for a while and now we are doing it with the full support of the regulator," she added.

Lambrechts said even before last week's protests, stories and images circulating in the media of small business closing down had been heart-breaking to watch.

"And it's not just our clients. There are many more that aren't our clients. And it is really sad to see. It's a big part of why we are coming up with this relief proposal. But it’s not only that. It's everything that has been happening in the past four months in this country that has brought us to this point," she added.

Lambrechts said there had been pleas from clients too, asking the insurer for this relief while it awaits to hear if the Court says the lockdown should be covered or not. So far, only one legal challenge brought by Santam clients is heading to court.

Having committed R1 billion rand to the relief package, which Lambrechts said is "substantial" given Santam's R2.3 billion profit for the 2019 financial year, what will happen if the court rules in clients' favour?

"If the court case goes for us, then we definitely won't ask for the money back. To be fair towards us, if the Court should rule against us and eventually we have to pay claims, we will offset on the amount that will be received by the client because they shouldn't be compensated for the same loss twice," said Lambrechts.

She said 3% of Santam's commercial clients have business interruption cover with the contagious disease extension.

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