Risk is all around us, risks are evolving, the market is changing and the role of a broker during these ever-changing times has become even more significant.

Following severe insurance losses over the last couple of years, we are experiencing a hardening market, and capacity is being reduced and restricted by the reinsurance market. This will ultimately feed down to the insurers at the renewal of their treaties and has a knock-on effect on insurance premiums and risk covers for the policyholder.

While several factors have contributed to the current state of the insurance industry, there are some key influences and drivers that can be noted, specifically the catastrophe losses in the past 3 years. Covid and the significant impact across business and the economy, SASRIA and the July 2021 riots, as well as floods and natural disasters, and more specifically, the KZN floods in April 2022. In an article written by Santam Insurance, the company states that the KZN floods were the most significant natural catastrophe in the company’s history, with an estimate of Santam’s gross exposure to the KZN floods at R4.4 billion. These are the results from just one of the country’s insurers.

When looking forward, the risk landscape is also constantly changing and there are new risks and exposures that one should consider.

Cyber risks continue to rise. The shift to remote working, increased digitisation, and rising cyber threats make cyber cover one of the most important insurance considerations for 2023. There are personal, and business covers that one can put in place to safeguard against cyber threats.

Eskom’s unstable power utility supply also creates additional exposure and increased risks. With the continuation of this and the erratic power surges, some insurers will be charging additional for power surge cover and excluding grid failure.

The state of the economy and increased poverty has also had a negative impact on crime, and we can expect rising crime rates.

There have been notable increases in motor vehicle accidents and resultant claims due to poor driving capabilities, and declining road conditions. In addition to increased motor claims, motor part inflation is significantly higher than standard inflation and is currently more than 20% – both these factors have had a significant impact on motor claims being paid out by insurers. Another area to highlight is geyser claims, especially in the domestic market, which is also seeing a substantial increase in numbers and related costs. Geyser maintenance is an important consideration.

Policyholders, in collaboration with their brokers, need to focus on adequate insured values and risk management. A significant thrust from the industry at present is compliance. Clients will no longer be able to bypass or play down compliance, with fire protections and regulations around compliance becoming increasingly important. This is being seen across the industry.

It is in these challenging risk environments that clients can recognize the true value of the intermediary and the benefit that can be gained by consulting with a broker who is there to help clients to structure the most effective risk management solutions.

The insurance landscape is ever more complicated, and it is vital to have a broker who has the knowledge and experience on where best to find capacity for the consumer, and the most competitive terms. Ultimately, an experienced broker will ensure the best cover. The broker also fulfils the important role of ensuring the client understands the covers that are in place and explains this in detail. This manages expectations on where the policyholder enjoys cover and ensures an understanding of what limits and exclusions may be in place.

What do these challenges mean for the customer regarding insurance in 2023?

Higher premiums can be expected, with the total cost of risk likely to increase well above inflation. We may also see increased terms and limited covers being imposed by loss limits, especially on specific covers such as floods. We are also seeing the exclusion of certain covers and higher deductibles/excesses.

Whilst it remains a challenge to manage, these changes reflect the unprecedented nature of the shifts in our risk environment and the resultant impact, and highlights the importance of ensuring you have an expert risk advisor to manage your portfolio. With the ever-changing and complicated risk environment, we encourage you to ensure the right protection and risk measures are in place to protect your assets and limit risk exposure.

At Econorisk, we are serious about risk. Are you?