The only constant in the world of insurance is that the risk landscape is continuously evolving, and the events of 2020 have served as a stark reminder of this.

The third Annual SHA Specialist Risk Review 2020 highlights some of the major shifts in the industry over the year.

The advent of COVID-19 was the single biggest defining event of 2020, and in fact, the century. The devastating human impact on both the lives and livelihoods of people the world over is a tragedy that will not be forgotten. This is according to Gareth Beaver, Business Leader of SHA Risk Specialist who states that from an insurance industry perspective, the fallout from the pandemic has been one of the most complex to navigate in recent history. “It’s important to note that the risk landscape had already begun shifting, becoming tougher to navigate for some time before COVID-19 became the most used term in our vocabulary.”

Beaver says recent years have brought about changes in litigation habits of the population, an increase in consumer awareness and greater access to courts and regrettably in the last few years, an accelerated decline in the quality of risk management. “This combination of factors invariably led to an increase in claims frequency and severity. The trick in building a sustainable business in our field is to make sure that risk selection, pricing and claims management follow the same trajectory as the changing landscape.”

The findings in the 2020 Specialist Risk Review paints a clear picture of the claims trajectory over time. The volatility in claims incurred is evident, following a slight downward trend in 2019 from the 2018 numbers (which was a record breaking claims year for SHA) and then what appears to be a return to the upward trajectory in 2020 – although at the time of publishing the report, the 2020 year was not yet closed off.

“When reviewing the claims data for the various insurance lines, broadform liability stood out, as it presented one of the larger shifts in claims value. We saw a significant increase of 41% in the average value of claims between 2016 (R577 000) and 2019 (R815 000). This statistic was largely driven by personal injury (slip & trip) claims,” says Beaver.

“The average intimated claim just in this class stood at R172 600 in 2016, and shot up to R536 705 in 2019. Claims in this category have continued on an incline in 2020. Over 234 incidences had already been reported before closing out the year – this means that as a best-case scenario, 2020’s final claims numbers will reflect an increase in notifications of over 50% from 2019,” he explains.

Not far behind were product liability claims, which increased by 63% from an average of R1.65 million in 2016 to R2.7 million in 2019. This increase is well above the inflation rate over the same period. “We also expect these numbers to rise in 2020/21 as it has become clear that supply chain issues and quality control cutbacks due to the pandemic are expected to play a much bigger role,” notes Beaver.

Also on the horizon are more cyber related claims and regulatory fines following privacy breaches. “Many businesses were forced to digitally transform their operations at a rapid pace in an attempt to keep employees and customers online during the lockdown. This has widened the pool of potential victims for cyber criminals who thrive in the gaps left in untested security systems,” he adds.

“With these heightened risks in mind, it is vital that businesses take initiative and responsibility for minimizing their risks beyond the mere purchase of insurance. A company’s risk management strategy should include an element of risk transfer to an insurer, but that should not be the only element. Proper training, quality control, risk assessment and mitigation is critical,” concludes Beaver.

Source: Gareth Beaver, Business Leader SHA Special Risks