South African businesses can claim insurance payouts for COVID-19 disruptions

South African businesses which were financially impacted by the COVID-19 pandemic may be eligible for insurance payouts, according to a report from Rapport.

This comes after the Financial Sector Conduct Authority (FSCA) on Friday issued insurance companies with a new guideline regarding COVID-19 business interruption claims.

The FSCA’s head of the supervisory division of insurers Makgompi Rapasha determined that claims made by certain policy holders were valid and must be honoured.

Bloomberg previously reported that Insurance Claims Africa (ICA) was in talks with the regulator over the denial of claims from 400 companies in the tourism and hospitality.

Executive head of ICA Ryan Woolley told Rapport the guideline makes provision for claims where businesses can prove a COVID-19 case had been recorded in the workplace or within a defined radius of its premises and this lead to the closure of the business before lockdown.

This is in cases where the relevant policy wording contains terms including “radius”, “notification” and “radius and reportable disease”.

Severe impact

The COVID-19 pandemic has had a significant impact on South African businesses, with lockdown measures particularly damaging to the tourism, accommodation, and restaurant industries.

A survey conducted by booking portal LekkeSlaap.co.za showed hotels, lodges, and B&Bs struggled under the lockdown.

“Results show that a 56.5% majority of businesses have been largely impacted and that the next few months will be a struggle. 27.6% indicated a high likelihood that their business will not survive – of which 3.9% said that their business definitely would not survive the pandemic,” the survey said.

Chief executive officer of the Restaurant Association of South Africa Wendy Alberts said the situation was critical, adding that certain restaurants opening only for deliveries have not helped themselves, calling the move “financial suicide.”

This was partially because third-party companies who are facilitating deliveries take up to 40% of turnover, Alberts said.

Insurers can’t afford to cover pandemics

Business interruption insurance policies typically cover loss of income due to incidents that caused physical damage, such as a fire or a flood.

Sanlam Ltd CEO Ian Kirk previously told investors the entire cost of the COVID-19 crisis cannot be passed onto the insurance industry.

Sanlam’s property and casualty insurance unit Santam, South Africa’s largest, has reviewed its policy conditions and will cover its business clients against infectious diseases in very specific circumstances.

“The reality is that no insurer can afford to offer widespread pandemic coverage within its standard policies, the premiums would be too high and it would become unaffordable for the majority of businesses,” Santam said.

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South African businesses can claim insurance payouts for COVID-19 disruptions