Are insurers the only bad guys when it comes to Covid-19 BI claims?

A prominent article in my early morning paper contained rather scathing comment on the short-term insurance industry, claiming that it was making a profit while its clients were languishing because their claims were not being paid.

This is a rather sweeping statement, given that it only refers to claims relating to Business Interruption resulting from the Covid-19 pandemic. What also needs to be borne in mind is that insurers are not non-profit organisations – they are, legally, allowed to make a profit. In fact, they are supposed to. One of the main reasons is that this allows them to salt away money in the good years to provide for the bad ones. As I recall, this is also a biblical prescription.

Research shows that premium income for all insurers increased by 2.2%. Whilst claims were naturally lower, a huge surplus was carried over to this year, when a substantial increase is expected in terms of specifically business interruption claims.

While it is easy to blame the insurers, client ignorance of the terms and conditions of their contracts, and a lack of support and guidance from advisers contribute to the problem.

Santam sent out a request to its contracted advisers this week urging them to “…encourage clients to submit the large amount of supporting information that remains outstanding.”

Time Bars

Santam has issued five communications related to the application of time bars since July last year. It has now drawn the line with a final submission date of 31 August 2021.

“We would like to emphasise that Santam is no longer accepting notifications of new claims relating to COVID-19. With regard to all claims notifications that have been received timeously, clients have until 31 August 2021 for the statement of particulars of such claims to be formulated and submitted. Claims not formulated and submitted by this date will be forfeited in accordance with the policy provisions and the terms of our previous communications.”

 Relief payments in August 2020

“Many clients have indicated that the relief payments they received in August last year represent effective full and final settlements of their claims.”

Many clients are reluctant to sign release forms in the hope that the cover term will be extended beyond what is stated in their contracts. There is really very little chance of this happening as the only issue is with bigger companies who contest the fine print which Santam says reduces BI due to a pandemic to three months. Most smaller clients have a three-month cover period under this specific section of their policies, albeit in the fine print.

Indemnity period appeal

“The appeal of the Ma-Afrika judgment relating to the indemnity period applicable on the policy has been set down to be heard by the Supreme Court of Appeal on Friday 27 August 2021. The outcome of the appeal may impact a limited number of our Hospitality & Leisure (H&L) policyholders who have policy wording and schedules similar in construct to the Ma-Afrika policy.”

“Statement of particulars of claims for these policies must still be formulated and submitted by 31 August 2021, otherwise they will become forfeit as referred to above, unless a release form is signed converting any Relief Payment to a final Indemnity payment. Interim settlements on a three-month indemnity period continue to be offered to clients on the terms previously communicated.”

The communique concludes: “Claims paid to policyholders will far exceed those paid in response to any other catastrophe in our country’s history and have and will make a meaningful difference to thousands of clients.”

Whilst one has sympathy with those clients who still await an outcome, the insurers are bound by its contractual agreements and obligations to all their policyholders, and the negative impact on the rest, should they not fulfil these.