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(Reuters) — South African insurer Santam aims to pay out around $60 million in relief within months to clients hit by the coronavirus pandemic, its CEO said on Monday, amid criticism of the sector's handling of policies that companies thought would cover them.
Many small South African businesses in the hospitality and tourism sector in particular are at risk of collapse after insurers — along with the global insurance industry more broadly — said business interruption policies did not cover the impact of coronavirus lockdowns.
Legal battles over the matter are ongoing in both South Africa and beyond, but locally many restaurants, hotels and other tourism businesses remain closed or operating at vastly reduced capacity and may not survive in the meantime.
The Financial Services Conduct Authority (FSCA) said last week that the main South African insurers involved would offer clients relief payments to help see them through, though some businesses or their law firms raised concerns including about how long it would take to pay out the money.
Santam, which has offered 1 billion rand ($60.78 million) in relief to clients, aims to start processing payments next week and have the money paid out entirely within months, CEO Lize Lambrechts told Reuters in an interview.
“We're doing this because we think it's the right thing to do,” she said, adding the sum represented a significant amount for Santam and the aim was to get the most money to the most vulnerable firms.
Santam, South Africa's largest short-term insurer, and its peers have suffered a significant blow to their reputations over the dispute. RMB Attorneys, which represents a number of affected clients, said the relief was purely an attempt by insurers to claw back lost trust.
“This ... behavior should have been displayed from the outset and not only when the potential catastrophic reputational damage to the insurers was triggered when their loyal clients were miserably let down,” it said in a letter to the FSCA, adding insurers should be settling claims instead.
More insurance and risk management news on the coronavirus crisis here.