Risk managers warn insurers are letting them down as rates rise

Risk managers have accused insurers of letting them down as premiums begin to rise. They said longstanding relationships have been threatened by a lack of support from the market. Some risk managers have said they are facing huge increases. One said: “It is not just double the rates. One of our risks cost ZAR1.5m to insure last year, now they want ZAR8m – it is a really massive increase.” The risk managers have not been surprised by the rate hikes – something that’s been expected for the past six months – however, they admit to being shocked by insurers walking away from the business entirely. One South African risk manager said she was furious when she thought “of all the years we have given them money and now they have just dropped us”. Globally, insurers were hit by some huge loss events, including three major hurricanes and on the African continent too, the claims were high. Major fires in the Cape and in Durban, as well as severe hailstorms and flooding all resulted in large and unexpected claims for the South African market. Insurers have paid out on those but are in turn facing increasing reinsurance rates and have begun passing those increases to the insureds. Some risk managers, however, are warning that insurers have been overreacting. As one South African with insured interests across the continent said: “We have had two large claims, but they were nothing that extraordinary and well within the expected range. “Now however, we are struggling to find capacity for some of the book and those who we have supported for years are letting us down.” She said she was furious with the insurance industry and had lost faith in the relationships. She also said the international insurers were among the worst behaved. “There has been an arrogance with local offices making promises they can’t keep. Their behaviour has not been good,” she warned. Risk managers are reporting increases of anything from 50% to 100% and also of a drop in available cover. They said they need strong brokers to fight their corner and to seek out the best deals. One risk manager argued: “Africa is hurting us. You just say the word ‘Africa’ and the whole of London gets scared. They put up the rates just because its Africa. “They want us to understand their policies, but they don’t understand the risk and just give us a blanket rate.” Another said: “They are not honest about what capacity they have and then they pull out of the negotiations.” The picture is mixed, however, with huge variances between covers and some risk managers across the continent reporting that their rates have stayed the same. Those that renewed their insurance programmes at the end of last year generally enjoyed flat pricing; however, those who have just gone through the cycle – or are facing it within the next couple of months – are reporting problems. It has not come as a shock and risk managers said they were prepared for increases. However, it can be a difficult conversation internally, as boards question why the insurance programme is so much more costly at a time when the economy is struggling. “We had budgeted for some increase but not the level we have been given – no one could have predicted that,” said one risk manager. Risk managers said it is a time when they can prove their value to the boards, however they would like more support from insurers. Insurers said that too often insurance buyers do not appreciate exactly what cover they are buying and the arguments start at the claims stage. They also said that prices had been spiralling down for many years and this was in fact a much-needed correction. Another insurer said: “Risk managers are looking for someone to blame and they are blaming us. “But they need to compare apples with apples. They need to read their policies with more care and they need to take more responsibility.”

Risk managers warn insurers are letting them down as rates rise

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