PETER BRUCE: Sturdy, reliable and always there when you need them – until you do

I’m a bit late to this story but it’s been a busy month and one is no longer a machine. Perhaps you know all of this but it has had me mightily amused.

The story is about businesses in the tourism sector trying to claim on insurance policies that they have been paying for years to the great stalwart insurers we all love and respect – Santam, Hollard, Old Mutual. You know, sturdy, reliable and always there when you need them.

Anyway, not unreasonably, quite a few businesses took out versions of business interruption cover from these giants and now that their businesses have been hit by lockdowns triggered by the Covid-19 pandemic, they’re all queuing up to get paid so that they survive.

Naturally, the insurers aren’t that keen to pay. Moneyweb covered the story earlier in June.

Insurance Claims Africa, a specialist loss adjuster, is now acting for about 500 clients trying to get payments for their broken tourism businesses. One of them is Chris Mulder, owner of the Lofts Boutique Hotel on Thesen Island in Knysna. He discovered the need for business interruption insurance when a fire near Knysna triggered an electrical fire at the hotel in 2015.

He contacted the local offices of AIB, a broker, which set him up with a new and improved comprehensive policy underwritten by Old Mutual. Did he specifically want something covering diseases? “No,” he says. “That was on page 24 or 36 or something. It was just a comprehensive policy.” Now, he says, AIB “has come back and said the insurer won’t pay”.

In the middle of all of this, Santam developed a neat answer. While, yes, you were indeed covered for a disease like Covid-19 in its policies, your business, which we value highly, was not closed down, or interrupted, by a virus but instead by the government and its lockdown. You’re not insured against lockdown, understand? There’s nothing here where we say we’ll insure you against lockdown.

Some insurers have begun rewording their policies, to exclude infectious diseases. Some are demanding claimants give them the names of virus-infected people in a 20km radius of their business.

But for sheer skin-crawling hypocrisy, nothing beats this statement from Santam earlier this month as it tried to explain its inability to pay. I’ve written this article simply to include this. As an example of what not to do when you’re in a corner, this will take some beating. Here is the Santam statement, published on Sens on June 3: “At Santam, we are committed to supporting our clients through the Covid-19 pandemic and playing a significant role in the economic recovery of the country. To date, we have committed more than R400m in Covid-19 funding to provide relief through premium reductions, premium refunds as well as direct support to insurance industry business partners and key government initiatives.

“Due to the unprecedented impact of the pandemic on economic activity, we have received a number of claims and enquiries about the extent to which businesses are covered by their short-term insurance policies.

“Against this backdrop, it is imperative that we offer clarity on the full scope of our ‘Contingent Business Interruption’ insurance and ‘Cancellation of Bookings’ cover with specific reference to Covid-19. More so in view of the widely held perceptions that short-term insurers will cover all claims linked to the lockdown and Covid-19. As with the majority of our counterparts in the short-term insurance industry locally and globally, our Contingent Business Interruption and Cancellation of Bookings policies do not cover pandemics.

“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.

“At Santam, a small minority of our business policyholders have chosen to buy cover that includes protection against contagious or infectious diseases. In these cases, this protection is very specific and covers businesses for interruptions as a result of the outbreak of a disease at a local level. Our policy wording is quite clear in that it states that a business needs to be directly impacted by a disease such as Covid-19 in order for the cover to respond. If a policyholder can show this to be the case, then we will pay their claim.

“What we are seeing is that a number of our policyholders were forced to close their businesses at the start of the national lockdown. The national lockdown is not a peril that is covered by our policies and so they would not be able to make a successful claim for this event. It is a requirement in terms of the policy that the business is directly affected by a case of Covid-19.

“For example, if a policyholder ran a hotel and one of their workers became infected with Covid-19, forcing them to close their operations, then they would have a claim for as long as it took them to clean their premises and return to operations. The intention was never to provide cover for widespread pandemics or a national lockdown.

“Santam expects to pay many claims related to Covid-19. As a company we pride ourselves in doing Insurance Good and Proper, and all claims that meet the definition of loss described in our policies will be settled quickly. We are very aware that some of our clients will be disappointed when they discover they are not covered against the lockdown. We will treat all claims in a fair manner, and where we are liable, we will not hesitate to settle.”

Anyway, the story may end well. Outsurance has craftily made it clear that it will, after all, pay out all claims where clients have extended infectious disease cover, lockdown or not. It has set aside R220m to cover its decision, which probably implies it has, until now, not been a market leader in the tourism insurance space.

That may be about to change. While lodge, hotel and restaurant owners may still pursue the other insurers, using the Outsurance decision to bolster their arguments, it’s unlikely they’d stick around even if they win. “I’ve decided to move to Outsurance anyway,” says Mulder. “I had the same fight with Old Mutual after the fire [at his hotel].”

It’s amazing to watch issues like this play out, and grand brands like Santam make such public mistakes. The virus, I have repeatedly said in columns, will make fools of us all. As is happening now, with Gauteng and the Eastern Cape becoming swamped with new cases. Not long ago my Twitter feed was stuffed with baying, almost gleeful, insults at the Western Cape from these provinces, because it is led by the DA. Today, not so much.

We still know very little about this novel coronavirus, SARS-CoV-2. How come, for instance, has it been found in water samples taken from sewage plants near Milan, the epicentre of Italy’s dreadful battle with the virus, before Christmas, when Italy’s first case was diagnosed in late February and even before the Chinese realised they had a problem in Wuhan? It’s truly eerie, as this note in The Spectator explains.

But, not to be outdone by FM editor Rob Rose’s fine survey of the battles around the world about face masks, I have found irrefutable evidence of history repeating itself, and final proof, if any were needed, that we are as foolish a species now as we were a hundred years ago, when the Spanish Flu struck San Francisco in the US. There were mask wars back then, just like there are now. Check out these newspaper stories from what I presume is the San Francisco Chronicle in late 1918.

And then enjoy this report about the great face mask struggle in that city after it declared its own lockdown. It is quite a story.