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Riot insurance
Thursday, May 8, 2014 - 11:18
Worsening trend

South African businesses need to ensure they have adequate cover for the risk associated with strikes, civil protests and riots, says Hillary Magede, Senior Manager of Business Insurance at Alexander Forbes Insurance (AFI).

Last year, labour unrest affected the construction, car manufacturing, gold, textiles and clothing, and the fuel retailing industries. And with fears around the protracted platinum mining strike spreading to other sectors, Magede says companies must ensure they have adequate and correct cover to protect their business from any financial consequences of civil or labour unrest.
“In strike actions such as the one that occurred in the Cape Town CBD late last year, stalls and shops were looted, traders attacked and businesses brought to a grinding halt. In many chaotic and sometimes violent cases such as these, businesses also suffer losses as a result of being prevented from accessing their premises,” says Magede.
Most businesses that are insured have built-in cover from the South African Special Risk Insurance Association (SASRIA) in their policies, which protects them from consequential loss suffered as a result of strikes and riots. Magede advises that even with SASRIA cover, being prevented from accessing business premises (Prevention of Access), and suffering financial loss as a result, is not covered.
Prevention of access cover applies only if a business has elected to be insured for it and there is damage to surrounding properties or access routes from insured events that prevents the insured from reaching their premises for business.
“Prevention of access cover falls under the main insurance policy (otherwise called the underlying policy) through a conventional insurer and because SASRIA Loss of Profits/Revenue cover is consequential upon physical damage to the assets of the insured, a mere decision not to enter premises out of fear of a threat or danger or being prevented from doing so is not covered,” says Magede.
AFI says to claim from SASRIA, policyholders need to report the incident that has occurred to the South African Police and then inform their insurer, which would facilitate the claim on their behalf through SASRIA.
To claim a prevention of access under their main policy, businesses would need to contact the claims department of their insurer immediately after the incident causing the loss and complete the claim form provided. Typically, claim assessors would then request supporting documents such as previous financial statements (prior months or prior years), sales and stock records, auditors reports, an engineer’s report, geological reports, and or any formal documents confirming prevention of access if declared by an authority such as shopping mall management, Municipal Health or Building managers, or any relevant body following occurrence of an insured event to help quantify the loss of revenue or profits.
Magede says even though SASRIA does not pay for prevention of access it is still important that businesses purchase its cover for interruption following damage to property and that businesses consider purchasing Prevention of Access cover on their conventional policy.
“Unfortunately the conventional policy will not cover interruption caused by damage in an unrest situation nor will it be possible to have cover for loss when people are intimidated from entering your premises because of threat by protesters.”
In its March 2013 Integrated Report, SASRIA recorded a 91% increase in the number of claims, from 1 174 in the prior year to 2 233 in the year ended March 2013.The state owned insurer cited the number and financial impact of labour strikes over that period in the mining sector, the farm worker strikes in the Western Cape and various other strikes as the main drivers for the increase.
 

Copyright © Insurance Times and Investments® Vol:27.5 1st May, 2014
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