Santam to provide R1 billion in relief to business customers


Santam to provide R1 billion in relief to business customers

Published Date: 2020-07-28 | Source: Stephen Gunnion | Author: Stephen Gunnion

Santam to provide R1 billion in relief to business customers

Insurers have been under pressure from the authorities to provide some relief to their clients as an interim measure ahead of court rulings.

Santam has extended an olive branch to clients whose businesses were affected by the Covid-19 lockdown. However, the short-term insurer is still going to court to seek clarity on Contingent Business Interruption (CBI) claims lodged against the group.

The group has defended its position not to pay insurance claims from customers whose businesses were affected by the national lockdown, which it maintains is not covered by their CIB policies. It maintains that the insurance covered the interruption of a business as a result of a localised outbreak of a contagious or infectious disease that had directly impacted the business's operations and caused a loss. Business interruption losses as a result of governmental restrictions on activity, such as the national lockdown, were not covered. It said this view was in line with the majority of its counterparts and reinsurers in the short-term industry, locally and globally.

A full bench of judges in the Western Cape High Court will hear Santam's arguments on 1 September after an insured hotel group took it to court when its claim was rejected. However, the group said due to the lengthy process that could follow it would provide up to R1 billion of relief payments to support mainly its small and medium-sized commercial policyholders in the hospitality, leisure and non-essential retail services industries that have the CBI cover and had suffered due to the national lockdown.

Insurers were also under pressure from the Financial Services Conduct Regulator (FCSA) to provide some relief to their clients as an interim measures while they sought legal certainty through the courts.

The R1 billion relief equated to 70% of two months' value of the sum insured for Santam's policyholders in the identified industries. The two months covered the period when most businesses were impacted by the restrictive trading environment imposed by the Level 4 and 5 lockdown. The 70% was based on a view that the businesses would have experienced variable expense savings during the lockdown. The relief payments would be set at a minimum of R25,000 and a maximum of R1.5 million for individual CBI policyholders.

Santam said if the courts ultimately ruled in its favour, then the amount paid would still be considered relief payments and would not be recovered from policyholders. If the courts ruled against it, the amounts paid would become advanced payment against any finally determined claims against Santam under the CBI extension, it said.

The company's shares rose 4.1% to R268 yesterday.

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