Ina Opperman

By Ina Opperman

Business Journalist

Short-term insurance: as temperatures increase, your risks increase

Storms in the Eastern Cape and KwaZulu-Natal caused billions of rands of damage this past week, indicating weather-related risks.

The world just clocked up its twelfth consecutive month with the highest temperatures since measurements began and insurers are warning consumers that as temperatures increase, their risks increase, making it important to have short-term insurance.

The knock-on effects of climate-related incidents have led to a noticeable increase in personal and commercial insurance claims, both in terms of property damage and business interruption. This has been exacerbated by the impact of deteriorating infrastructure such as public roads, water and sanitation systems, Karen Rimmer, head of distribution at PSG Insure, says.

“With extreme weather events on the increase, households and businesses must ensure they have appropriate insurance cover as a financial buffer for when the unexpected occurs.”

In South Africa, extreme weather events not only represent serious risks in and of themselves, but they also place already failing infrastructure and public services under added strain, exacerbating the impact.

“For example, an inefficient water supply system and leaking pipelines can worsen water scarcity, while stormwater drainage systems may no longer be able to effectively cope with increasing rainfall intensity, especially as urban areas continue to grow and develop,” she says.

ALSO READ: At least five dead after heavy rains and tornado hit KZN

Damage caused by severe flooding

Evidence of this domino effect can be found in examples such as the severe flooding throughout KwaZulu-Natal in 2021 when torrential rain wreaked havoc on homes and businesses of billions of rands. In addition, several incidents of total infrastructure collapse were reported, including bridges, roads and water and sanitation systems.

Storms all over the country, as well as again in KwaZulu-Natal, caused serious damage once more this past week.

More frequent heat waves, on the other hand, can contribute to an increasing number of wildfires, which brings its own set of risks and challenges, Rimmer warns. “The absence of effective fire fighting resources, staff and equipment increase the impact and magnitude of losses incurred. This is particularly true in more outlying regions, where fire fighting support will take much longer to arrive to manage a fire.”

She says for households and businesses throughout the country, building resilience against these serious risks represents a growing need. “One of the most fundamental contributors to that much-needed resilience, is insurance. Having the right type and level of cover serves as a financial safety net that can cushion the potentially devastating blow of mounting climate-related pressure.

“While the current economic landscape has placed many households under financial pressure, cancelling an insurance policy or reducing the level of cover beyond the replacement value of a home or commercial property, for example, is a short-sighted solution.”

ALSO READ: Insurance claims mount as floods devastate Eastern Cape

Instead of deciding to forgo insurance completely, home-owners and businesses must consult their insurance advisers and work through the various measures they can take to make insurance more affordable, while ensuring they still have adequate cover in place, Rimmer says.

In addition, businesses must also ensure they have business interruption cover in place to safeguard against loss of income or loss of profits should their assets be damaged or destroyed.

Rimmer points out that insurance policies typically place a duty of care for the prevention of loss on the client In their terms and conditions. This means that home and business owners must take their responsibility in preventing unnecessary losses seriously.

For example, roofs and gutters must be well-maintained and cleared of any excess debris to avoid storm damage from escalating and causing buildings to sustain otherwise preventable damage. Similarly, it is advisable to store vehicles and equipment in buildings or under carports, where they are less vulnerable to turbulent weather patterns and especially if the terms and conditions of the policy require this.

“Your insurance adviser is here to provide advice and guidance on how to tailor your policy, keeping both your unique needs and affordability in mind. This role is likely to become ever more valuable in the future, as the nature of climate-related risks become increasingly clear: insurance advisers will become an indispensable partner to their clients, helping them in assessing risks and identifying appropriate mitigation measures as weather patterns become more extreme.”