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South Africa’s Santam seeks to limit Covid business pay-outs to three months

By David Whitehouse
Posted on Wednesday, 13 January 2021 19:19

Virus Outbreak South Africa
A scuplture of a buffalo is seen with a face mask at Easigrass in Cape Town, South Africa, Thursday, May 21, 2020. (AP Photo/Nardus Engelbrecht)

South Africa’s largest general insurer Santam, which has finally acknowledged that it is liable for business interruption claims filed by policyholders as a result of COVID-19, says it will offer hospitality and leisure customers a “full and final” settlement to cover three months of losses.

That’s despite the fact that many policyholders have cover than runs for six, 12 or 18 months. As it stands, each policyholder would need to take Santam to court to challenge the three-month indemnity period.

The resistance to paying out by Santam and other insurers undermines the industry’s claims for the wider benefits of insurance in terms of capital formation and economic development.

READ MORE Swiss Re: Insurance industry can’t foot the bill for COVID-19 damages

Tourism and hospitality employs over 740,000 people directly in South Africa and creates a further 1.5 million jobs indirectly. Yet the reinsurers who have the final financial liability for pandemic business losses have pushed Santam and other insurers to resist claims every step of the way.

  • Some insurers even asked claimants to identify individuals infected by COVID-19 within a specific radius of their properties.

Santam claimed that COVID-19 and the government lockdown response were two separate events, a line of argument which South Africa’s courts have consistently rejected. In November, the Western Cape High Court ordered the insurer to pay plaintiffs Ma-Afrika Hotels and Stellenbosch Kitchen for the impact of COVID-19 over the entire policy period of 18 months, without limitations.

Santam said on January 4 that it “respects the decision of the courts and believes that the recent judgments are sufficient to provide legal certainty” of the cause of business interruption losses. Yet there are “valid reasons to appeal the judgment of the Western Cape High Court in the Ma-Afrika case with respect to the indemnity period.” Santam is seeking leave to appeal to the SCA.

READ MORE South Africa: Santam to appeal court’s verdict on COVID-19 claims

A request to Santam from The Africa Report to explain why in the meantime it is limiting pay-outs to three months went unanswered.

Similar, not the same

Santam’s three-month offer is “unconscionable” says Ryan Woolley, CEO of Insurance Claims Africa (ICA). “Policyholders, who are already financially decimated, will now have to find the money to fight the insurer in court to enforce the indemnity periods contained in their contracts.”

In December, South Africa’s Supreme Court of Appeal (SCA) dismissed an appeal in a separate case, ordering the insurer Guardrisk to settle the full claim from Café Chameleon, plus legal costs. Guardrisk wrote to clients confirming it accepted the SCA ruling and would abide by it.

Santam refuses to accept the Café Chameleon ruling, arguing that the cases are materially different. Yet it earlier wrote to the SCA asking for the Café Chameleon and Ma-Afrika cases to be taken together, which would have delayed the schedule for the Ma-Afrika appeal.

READ MORE As Santam loses COVID-19 claims case, reinsurers call the shots 

In its letter to the SCA, Santam wrote: “While there are small differences in the policy wordings in both matters, the issues being dealt with are very similar”.

After ten months of delaying tactics, the only way for Santam to treat its customers fairly is to offer an interim payment of three months, and leave the balance to be dealt with after the SCA decision on duration of claims, says Woolley.

Bottom line

The COVID-19 payments debacle is likely to set back the growth of South Africa’s insurance industry by decades.