Insurance prices rise as the risks bite, says Sanlam – newsdubai

South Africans could soon pay as much as 5% more on their premiums as insurers face growing risks both globally and locally.

The country is now considered “high risk” due to rising flood and fire hazards, as well as risks to people and infrastructure after last year’s deadly riots, according to Sanlam chief executive Paul Hanratty.

Africa’s largest insurance group has experienced increasing claims as a result of rolling blackouts as well as rising costs in connection with crime. Half-year results on Thursday showed a 7% drop in net operating income, dragged down by a 57% drop in non-life net income.

“I think it could push premiums up to 5% depending on the type of coverage you have, and that doesn’t sound like much, but remember when you’re already facing big inflation increases and you have to add that on top of that, it can be quite debilitating for consumers,” Hanratty said in an interview with Bloomberg.

The situation is exacerbated by reinsurers raising the price of cover, particularly in South Africa, where they have been losing money since the start of Covid-19, Hanratty said.

“None of the 30 reinsurers that Sanlam works with have pulled out, but the biggest and most important have indicated that they are not going to provide as much cover to us, and some have indicated as much as a reduction of 50% in coverage that they will provide to South Africa,” he said.

For the rest of the year, Sanlam expects the difficult operating environment to continue, while customers will feel the full effect of the price regulation in 2023.

“I think the economy will recover slowly and I expect to see some growth coming back, but the problem is the rise in inflation, energy prices and so on is putting consumer incomes under pressure,” Hanratty said. “Consumption, but also the savings rate, will come under enormous pressure.”

Sanlam climbed as much as 1.2% before paring gains to trade broadly flat at 10:36 in Johannesburg.

© 2022 Bloomberg