Gauteng has seen three major hail storms in the last two years that has cost the insurance industry in the region of about R 2.5 billion! Although this may seem like a staggering amount, South Africa has something called catastrophe reinsurance. Effectively this is insurance for insurance companies. In fact South Africa has a catastrophe model of up to R30.8 billion in the event a serious disaster such as an earthquake or a Tsunami. If the country experience a loss of more than R450 million, the reinsurance catastrophe layer is then activated which assists the insurance companies to pay for the loss collectively.
Hail storms are not an uncommon occurrence. “They take place across the length and breadth of South Africa on an annual basis but what makes the three events in Gauteng noteworthy is the net retained exposure that the province represents. Gauteng’s built-up area constitutes only 0.5% of SA’s land surface area but due to the fact that the area is densely populated, Gauteng constitutes 35% of the exposure to catastrophic events such as hail storms,” explains Pieter Visser, a well-known Catastrophe Analyst.
This problem is further exacerbated by the growth of lower income households. Houses, unlike cars, are quite similar in terms of the repair cost. A broken window on a R500 000 house and that of a R2 million is actually quite similar, regardless of the property location. Even in the motor vehicle insurance market, losses are much higher than in the past due to changing manufacturing methods, increasing costs of vehicle parts and the like,” says Pieter. The main problem with this eventuality is that on lower valued house the catastrophe premium component is comparatively lower and insurance companies cannot recoup their costs effectively. Ultimately insurance companies will have to raise their excesses in the event of a catastrophe.
It is possible to manage your own risk to a certain degree. Keeping an eye on the weather and the typical hail storm patterns will help significantly. Keeping your home maintained properly, especially keeping an eye on the condition of your roof tiles is critical. It is also good to note the thickness of your window glass around the house and consider replacing thin, exposed glass with a more durable type. Many houses these days also have solar panels and solar geysers, it would be wise to check if these were included in your household policy.
The cost of these claims is likely to impact the premiums negatively as insurers are more than likely to profile clients on an individual basis, rather than generally. “A well-conceived insurance program is achieved by consulting with a professional broker who can assess your unique needs, risk profile and budget, and tailor-make an insurance offering that will safeguard your hard earned assets in the event of a loss. Your broker will also be able to advise you on the effect that a possible claim will have on your individual risk profile and, most importantly, ensure that you are paying the right price for the right amount of cover,” concludes Mandy Barrett.
If you have any questions about your risk profile or the possibility of a hailstorm in your area, please don’t hesitate to chat to one of our specialists on 0860 072 765.