Rising Insurance Claims Risks: Why South Africans Are Claiming More Than Ever

South African consumers are increasingly relying on their short-term insurance as climate-related severe weather incidents escalate and persistent crime remains a concern. Recent insurance industry data shows that nearly one in five consumers claimed against a short-term insurance policy in the past year, the highest proportion in over six years.

Climate Change Hits Home

Around the globe, the impacts of climate-related adverse weather events are intensifying. International climate experts have stated that soaring temperatures and extreme weather events should now be considered the new normal rather than rare occurrences. Locally, while only a small percentage of survey respondents reported suffering financial loss due to extreme weather over the past two years, nearly half of consumers expressed being "very concerned" about this risk, with another third "somewhat concerned."

International environmental agencies confirm that extreme weather events such as heat waves and large storms are becoming more intense due to human-induced climate change. Insurance data reflects this reality, showing that recent comparisons of flood and storm damage claims reveal fewer incidents but higher claim values, indicating an increase in severity rather than frequency.

Unfortunately, the damaging impact of severe weather is often exacerbated by consumer negligence. Financial pressures are causing some consumers to neglect important building maintenance, leading to preventable weather-related claims. For example, insurers have noted a rise in weather-related claims where loss or damage stems from gutters not being cleaned and maintained, or flat roofs being neglected.

Industry data shows year-on-year increases in claims volumes due to flood, storm, and wind damage, though hail claims have declined. As flood risk remains prominent, insurers are deploying advanced geocoding and geo-mapping technology to understand risk accumulation better and identify high-flood zones. This helps ensure the sustainability of cover for the majority of consumers in the long term.

Crime Remains Top of Mind

According to international crime statistics, South Africa ranks among the countries with the highest crime rates globally. South Africans are acutely aware of this reality, with half of insurance survey respondents citing societal issues such as crime as a top concern. Respondents were particularly worried about bur, mugging, and hijacking.

These societal stresses are evident in insurance data for consumer technology products like laptops, smartphones, and tablets. Insurers have observed notable increases in claims volumes for muggings and petty theft, particularly in shopping centres and public spaces.

On a more positive note, while previous trends flagged an alarming rates of keyless vehicle theft and high-value SUV hijackings, recent data shows a decrease in both hijacking and theft claims. This improvement supports the effectiveness of underwriting interventions such as requiring multiple tracking devices in high-value vehicles. Applying these interventions doesn't prevent all vehicle theft or hijacking, but significantly increases recovery rates. In some cases, these interventions also affect premiums, with over a third of personal insurance customers now trying to reduce monthly premiums by installing tracking or other monitoring devices.

The Cyber Security Gap

Industry surveys also highlight digital criminal risks as top of mind for consumers, yet there's a growing disconnect between perception and action. Recent surveys show that over 80% of consumers are concerned or very concerned about future cyber threats, yet only 2% have purchased cyber insurance. Recent cybersecurity reports rank South Africa among the top countries globally for cybercrime density, based on the proportion of internet users affected.

The growing complexity of cyber risk highlights a clear market need. While commercial cyber policies exist, there's a significant gap for personal insurance products that protect individuals from everyday digital risks they face. Social media hacking, data loss from malware attacks, bank and credit card theft, and email hacking are among the top threats facing ordinary South Africans.

Insurance Industry Response to Insurance Claims Risks

Insurers are closely monitoring the evolving risk landscape for emerging exposures, particularly focusing on the interplay between financial pressures and consumer behaviour. These pressures are driving individuals to make strategic choices about cover, balancing affordability with protection. This is evident in growing trends of opting for higher excesses or self-insurance, and installing monitoring devices to proactively mitigate risks.

The emphasis remains on empowering consumers to maintain essential cover while minimising risks associated with underinsurance or neglecting necessary household maintenance. Through targeted interventions in both underwriting and customer education, the industry aims to foster resilience in the face of complex challenges and unpredictable perils.

The message is clear: whether it's climate change, crime, or cyber threats, South Africans face an evolving Insurance Claims Risks landscape that requires appropriate insurance cover and proactive risk management.