Three years ago, insurer Santam flighted an advert focused on the risks of runaway innovation, painting itself as the company that would always ask: "What could go wrong?" You can bet its equation didn’t include a pandemic, its clients claiming billions in "business interruption insurance" due to Covid-19, and its lawyers scrambling for technicalities to ensure Santam doesn’t have to pay. So, what went wrong?
Well, for starters, its hard-won reputation as an insurer that "looks for reasons to pay you, rather than not" is beginning to wilt under the weight of its legal machinations.
Last week, a full bench in the Western Cape High Court roundly rejected Santam’s argument that it ought not to pay the Ma-Afrika group, which operates various hotels, including the Best Western Cape Suites, Coopmanhuijs Boutique Hotel and the Stellenbosch Hotel, for the hit it took to its sales when Covid-19 rolled into town.
Initially, Ma-Afrika wasn’t worried. Why would it be, when it thought it had R120m insurance cover for any interruption to its business, due to a "notifiable disease occurring within a radius of 40km"?
The problem was, Santam didn’t agree. And neither did a number of other insurers, like Guardrisk and Old Mutual, which repudiated more than 800 claims from restaurants, hotels and others wiped out by Covid-19.
Last week, judge Patricia Goliath dismissed Santam’s arguments, ruling that Ma-Afrika has "to be put in the position that they would have been in had the insured peril not occurred". And she criticised the fact that Santam sought to rely on technicalities in the fine print to limit its liability.
(The verdict wasn’t the biggest surprise, though. In July, the high court also found against Guardrisk, which had argued that it shouldn’t have to pay a restaurant called Café Chameleon for business interruption insurance.)
But if Ma-Afrika thought last week’s ruling meant it would finally get paid, it had another thing coming. Days after losing the case, Santam said it would appeal.
Ryan Woolley, the CEO of Insurance Claims Africa, which took on the cases for Ma-Afrika and Café Chameleon, tells the FM that this delay will only further cripple tourism operators hanging on by a thread.
"Since the court was so clear and direct, you’d think that Santam would have tried to find an amicable solution. Instead, it ran back to court, creating an unconscionable delay. So much for it wanting to resolve this quickly ‘for its clients’," he says.
This delay will only further cripple tourism operators hanging on by a thread
At best, says Woolley, this means Ma-Afrika will now only get paid next year — a delay which he says will hurt the insurer more than it realises.
"I don’t know why it is flogging this to death. Can it see the damage it’s doing, fostering the view that it’ll go to any lengths to avoid paying? Santam used to be a shining light, but I don’t know what happened," he says.
Santam CEO Lizé Lambrechts doesn’t see it that way.
Speaking to the FM, Lambrechts says Santam was obliged to go through this process to get "legal certainty". Had it paid a claim it shouldn’t have, she argues, its reinsurers would balk at covering it — which would leave insurers high and dry.
Lambrechts bristles at talk that Santam says one thing in its marketing (think unicorns dishing out cash), but then hauls out rapacious, dead-eyed lawyers who won’t admit so much as their own birth date when it’s time to pay.
"You really must give credit to what Santam has done for more than 100 years. When there’s a valid claim, in 99% of cases we pay out. It’s not in our DNA to use lawyers to get out of claims. In the five years I’ve been here, it’s the first time we’ve had to use this mechanism."
Anyway, she says, Santam chose to pay out R1bn to clients affected by this insurance issue (out of a possible R3bn in claims). It meant that for the six months to June, Santam’s pretax profit fell 65% to R550m, from R1.57bn last year. "We didn’t have to do this. We really do feel for our clients and we’re trying to help. And this money has really helped many of them survive this period," she says.
Woolley says this is "absolute" spin. "We’re grateful for the relief payments, but let’s be honest: when the industry conduct regulator said [insurers] had to pay out, [they] struck a deal to make these relief payments, which can be offset against any final award. This bought [them] time to get legal certainty. To make it out that Santam is doing this just because it’s a nice guy is disingenuous," he says.
It also contrasts against the behaviour of Outsurance, which paid out R220m in business interruption insurance for Covid-19 without a quibble. Three months ago, Outsurance CEO Danie Matthee told the FM: "We firmly believed our policy wording covered this event."
As a result, several companies, like the Lofts Boutique Hotel on Thesen Island in Knysna, tell the FM they’re switching from insurers that didn’t pay out, to Outsurance.
However, Lambrechts says Santam hasn’t lost a swathe of clients due to its handling of this issue.
"Look, we pride ourselves on paying out all valid claims, so this noise suggesting we don’t hasn’t been pleasant. But we know why each client cancels their policies, and it’s only a handful which cancelled because we didn’t pay out business interruption insurance," she says.
In all, she says, this business interruption insurance affected just 4,000 of its 1-million policies. Which would seem to ring-fence its risk on this issue — provided the view that it’ll fight legitimate claims in every court in the land doesn’t stick.
What could go wrong?
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