South African small businesses fighting rejected coronavirus-related claims said insurers’ offers of relief are too little too late for many and could leave some already struggling to survive with nothing at all.
Insurers around the world have argued COVID-19 lockdowns were not covered in policies many clients thought would protect them as the pandemic brought business to an abrupt halt.
Facing pressure from the financial services regulator and with reputational damage mounting, South Africa’s insurers have offered to either settle with some clients or provide interim relief payments while court cases play out.
Ryan Woolley, CEO of Insurance Claims Africa, which represents around 600 affected businesses, warned such offers were unlikely to fend off widespread layoffs and closures.
Around 30% of his clients would likely receive nothing, he said. Others saw settlement offers as “unreasonable.”
“We’ll put the money to good use to those that receive the benefit. For the balance, it’s… just more agony,” he said.
Santam, South Africa’s largest short-term insurer, and Hollard Insurance Group are proposing interim relief payments on some claims while court cases are ongoing.
Businesses expecting to receive payouts from Santam said the money could help them stay afloat.
To get a payment, however, policies must still be in force, Santam said when it announced the offer. That’s a potential problem for Wynand du Toit, whose tented safari camp company had to stop paying premiums when revenues abruptly dried up.
“Reading the fine print broke me, literally broke me,” he said in an open letter to the insurer.
Santam told Reuters that such cases would not automatically be excluded from relief and be reviewed on a case by case basis.
“We will look favorably at those businesses that have not been able to afford their premiums due to the impact of the lockdown,” the company said.
Hollard said around 80% of its customers with contagious disease coverage could get relief under its offer provided they can prove a 30% drop in revenues between April and June.
Old Mutual and Guardrisk have announced settlement offers that would see them pay out on some claims.
“Guardrisk opted for a commercial settlement, in line with our policy conditions, rather than to make interim payments because it provides immediate certainty for all stakeholders,” the company said.
Old Mutual’s settlement offer only applies when the sum insured is below 5 million rand ($298,471.8) annually, however.
Glynis Hyslop said her events company was insured with Old Mutual for well above that cap and will therefore likely receive nothing.
Payment on her 28 million rand claim would allow her to rehire some 70 laid off staff, she said. “Just one little claim could save a lot of people.”
Old Mutual told Reuters it understood its customers were struggling due to the pandemic and was responding with interest-free loans and payment extensions.
“Our response to this crisis as an organization has been to provide support to as many of our customers and communities as we possibly can,” it said.
As the battle over the claims has dragged out, many small businesses, including restaurants – a sector particularly hard hit by lockdown restrictions – have already collapsed.
Since they are no longer trading, they may not qualify for payouts under business interruption policies, which often require companies to be in operation in order to claim benefits.
“If the insurance companies had paid out properly, many of these restaurants may not have gone out of business,” said Wendy Alberts, head of the Restaurant Association of South Africa.
($1 = 16.7520 rand) (Additional reporting by Wendell Roelf in Cape Town; editing by Emelia Sithole-Matarise)
Photograph: Empty streets with lonely figure and stay-home sign on April 6, 2020 during the coronavirus lockdown in Cape Town, South Africa.
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