With the ever-changing economy and the severe weather patterns being experienced in South Africa of late the insurance landscape has changed quite substantially as to how a policy is underwritten and the premium charged including the excess structure that has been applied.
Underwriting Methods
In the past, a complex would be looked at purely for its merits and what risk it posed as to how the underwriting rate was determined. This has now changed where a complex is looked at in detail however the following factors will also apply or be engaged with to determine the rate applied:
Where reinsurance has to be requested a higher rate will be applied due to the rate changes in reinsurers’ approach in the past year.
For some insurers, a geographical layout and scan are completed on the complex to establish flood zones, water table levels, soil type, and exposure to the elements to name some examples.
Geographical location has always been a factor however this in particular is scrutinized with several insurance companies no longer placing insurance or retaining insurance coverage in those areas due to it not being within their risk appetite.
With the changes in the economy and the increases in the cost of living, many claims that are not insurable items, are being requested to be submitted which has an impact on all the players involved from the broker to the insurance underwriter to contractors involved in the matter. This has added to how the underwriting is approached where complexes are rated as higher risk due to the number of claims made even where there are repudiations as the time factor and manpower required for this now play a part.
With the increased reinsurance rates and general increases some of the insurance underwriters, have opted for a higher excess structure to be applied to reduce the applicable building rate. This has a knock-on effect on the individuals on the other end at the time of the claim who are impacted with the higher excess/first amount payable expected to be paid, with no reductions applied to other expenses.
Large claims linked to the weather patterns including lack of maintenance, theft, fraud, and multiple additional elements this has led to insurance underwriters and insurance companies being inundated, and this factor has had an impact on the turnaround times and service delivery with delays being experienced due to the volume of the claims. This knock-on effect has caused clients to move insurance underwriters/companies annually adding to the volume of work experienced.
How do we combat this, at face value it seems that not much can be done however that is not the case. Some elements are out of the control of the complex however this is where due process must be followed, a proactive approach taken, and continuous maintenance plans carried out timeously. Damages that must be attended to as prompt action, for example, a burst pipe, waterproofing on a roof or windows that are broken for some examples ensuing follow-through is always conducted to ensure the finalisation of all repairs to prevent additional damage being caused, this does not apply to damages where the insurance company or underwriter have the right to decide on the way forward. Ensuring there are no continuous older damages/ unnecessary wear and tear etc or repairs that have not been completed.
Donna-Leigh Elder
CEO – TI Brokers Pty Ltd
www.tibrokers.biz