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South Africans must brace for higher insurance premiums as weather-related claims soar

The growing cost of weather-related insurance claims will affect consumers’ premiums. Mick Haupt/Unsplash

The growing cost of weather-related insurance claims will affect consumers’ premiums. Mick Haupt/Unsplash

Published Nov 17, 2023


As weather-related insurance claims – and the value of these pay-outs, increase due to more frequent and severe storms and floods, consumers should expect their insurance premiums to go up.

The full extent of weather-related claims for 2023 is difficult to quantify at this stage, but some insurance providers have reported a 22 percent increase in the average cost of these claims over the past year.

And with replacement and repair costs continuing to rise with inflation, there is no way to avoid higher insurance premiums.

Although your premium won’t automatically go up when you claim as it is normally reviewed once a year, Ernest North, co-founder of digital insurance platform Naked, says insurers will look at a number of factors, including your risk profile, depreciation of your assets, and inflation to determine your new premium. Your claims history is one of the aspects that will be considered, but there is no guarantee that your premium will be increased after a single claim.

It is important to note, however, that, like most products and services, insurance costs are likely to rise.

“South Africans face higher risks to their property due to load shedding. Changing weather patterns also have an effect. Our actuarial models – which are used to predict risk and determine premiums, provide for occasional natural catastrophes, but the occurrence of these events is increasing.”

In addition, the costs of repairs and replacement of home fixtures, cars, furniture, appliances, electronics, and most other insured items are rising due to high inflation and volatile exchange rates.

“Ultimately, we expect that everybody’s premiums are going to increase to reflect an era of more extreme weather events and persistent inflation,” he says.

Echoing this, Sandro Geyser, managing director of IntegriSure Brokers, says one can safely assume that the vast majority of insurers, if not all of them, have and will continue to increase premiums for the continued sustainability of the industry. And while claiming does not invariably lead to premium hikes for insurance consumers, aspects like claims history, alterations in risk due to severe weather tendencies in specific regions, and underwriting measures come into play.

“The primary goal is to maintain affordability and safeguard clients against perils like the recent severe weather conditions we have witnessed.”

It is, therefore, in the best interests of all stakeholders to move from a ‘repair and replace’ mind-set to a ‘predict and prevent’ one.

“Sustainable and affordable insurance needs to include solid advice and a pro-active approach to risk management.”

As extreme weather events increase across the country, Reynier Rautenbach, head of specialist claims at Bryte Insurance, says the way these risks are managed needs to evolve to keep up with a changing climate reality. It is also important for property owners to appreciate that the cost of an insured event is going up.

“Factors such as inflation and a weaker rand are increasing the cost of construction work, while the cost of repairing or replacing vehicles has also steadily increased.”

With the increasing rate of severe weather incidents, consumers need integrated strategies to manage risk more affordably and effectively.

“That means ensuring you have the cover you need – but also taking the appropriate risk mitigation measures.”

Furthermore, North says people forget to adjust their policies when they improve their homes by, for example, buying and installing solar panels. They also forget to relook their policies regularly to ensure they’re keeping up with inflation.

“It’s easy to lose sight of how expensive some items might be to replace — especially things like furniture and large appliances.”

Climate change and the cost to insurers

In the South African Insurance Association’s 2023 Annual Report, chief executive Viviene Pearson says South Africa experienced unprecedented flooding in various parts of the country in 2023, due to rapid changes in weather patterns. These events had far-reaching consequences, including substantial damage to crop yields, property, and infrastructure. Additionally, prolonged dry spells have escalated the risk of destructive fires that pose a threat to vital infrastructure.

“These are all stark reminders that climate change is real. In July 2022, KwaZulu-Natal province experienced devastating rains that caused flooding in most low-lying areas, leaving behind damages to infrastructure, housing, properties, roads, bridges, and, most unfortunately, loss of lives and livelihoods.

“The cost of the damage was estimated to be more than R20 billion.”

In recent years, Southern Africa has also been plagued by devastating floods that have cost the non-life insurance industry hundreds of millions of rands.

Pearson adds: “Climate change risks have been catastrophic in nature and are inextricably linked to the damage caused by the impact on property and infrastructure. Climate change inaction will undoubtedly see a remarkable increase in the protection gap over the next decade.

“The scale of damage resulting from these rapid weather changes surpasses what insurers alone can effectively cover, necessitating the involvement of the Government as a partner in addressing the challenges.”

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