• Santam will pay up to R1 billion to business interruption clients whose claims have been rejected by the insurer.
• The payment is relief, and not settlement of their claims and it will not have to be paid back.
• The affected businesses in tourism, hospitality and non-essential services must register a claim.
• But large corporate clients are excluded. 

South Africa’s largest short-term insurer has agreed to pay up to R1-billion in urgent relief to policyholders whose business interruption insurance claims have been rejected by the insurer which argued that the lockdown is not covered under its policies.

This comes after an agreement that the Financial Services Conduct Regulator (FCSA) had with short-term insurers who offer business interruption (BI) cover to provide some relief to their clients in the hospitality, leisure and non-essential retail services industries.

But relief will only affect those businesses who had contagious disease extension in their BI cover. The FSCA said the relief will only be an interim measure while insurers seek legal certainty through courts.

"This interim relief will take the form of once off payments to policyholders to enable them to continue running their businesses while waiting for the outcome of the legal process," said the FSCA in a statement.

Santam's court case will be heard on 1 September while Guardrisk whose case has already received a ruling in favour of a client will also be heading back to court to appeal that ruling.

In a statement issued on Sunday, Santam CEO, Lizé Lambrechts said the insurer's relief will focus mainly on small and medium sized commercial policyholders policyholders in the hospitality, leisure and non-essential retail services industry. Large corporate clients are excluded.

Policyholders will have to register a claim in order to qualify for the relief. Their policies must still be in force and Santam will start making payments from the first week of August 2020.  

"After careful consideration of the situation, especially the unforeseen length of the lockdown and the ongoing restrictions that are impacting businesses, we decided to assist with a substantial payment commitment to help sustain our policyholders in the most impacted industries,” said Lambrechts.  

The R1 billion will cover a portion of about two months’ worth of cover the affected clients had with Santam. The insurer capped it at two months because this is the period where most businesses were impacted by the restrictions imposed under the Level 4 and 5 lockdowns, it said.

But this will not affect the September 1 court case, said Santam.

"We hold a firm view that our CBI policy wording is very specific and only covers businesses for interruptions as a result of the outbreak of a disease at a local level, or within a specified radius," said Lambrechts.

Specialist in public loss adjustment, Insurance Claims Africa (ICA), which represent more than 600 BI plicyholders who have cover with different insurers said The relief is "definitely a step in the right direction".

However, ICA CEO, Ryan Woolley said it appears that the size of the interim relief is a small percentage of what the claimants are owed.  "To term this a lifeline, would be an exaggeration," he said.

He said the ICA remained "disappointed" that insurers did not agree to a settlement instead and that are they still continuing with the court processes.