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Send  Share  RSS  Twitter  01 Feb 2011

INSURANCE: Flooding A Social Catastrophe


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The impact from the recent flooding that has hit   South Africa could easily run into billions, according to government   estimates. This is made worse by the fact that many of those worst hit   are uninsured and will therefore be unable to recover their losses.

This is according to Adam Samie, Chief Executive Officer at Cape Town-based Lion of   Africa Insurance, who says that while it may not be an insurance   catastrophe, the flooding is certainly proving to be a social   catastrophe. "The recent flooding has done some serious damage around   the country.

Unfortunately, the vast majority of those affected live   in outlying areas and do not generally have access to insurance   products. As a result, it is the local communities who are suffering   most, particularly those in informal housing, rather than the   insurance companies.

A statement by the Department of Social Development has warned that   the recent floods across seven provinces may have caused as much as   R160 billion worth of infrastructure damage. The department also said   some 20 000 people, or about 5 000 families, have been affected with   more than 100 deaths.

Samie says the floods have highlighted the need for the local   insurance industry to do more to educate consumers about the risks of   being either uninsured or underinsured, as well as ensuring a broader   range of people have access to affordable risk products.

"When it comes to financial education, much of the focus by business   and government tends to be on encouraging people to save more.   However, in many instances, protecting your assets is as important as   growing them."

Samie says South Africans actually get good value from their insurance   when it comes to incidents such as flooding. We live in a  relatively  benign climate so policies tend to contain little or no  weather  related restrictions. As a result, most people are able to  buy one  insurance policy that provides comprehensive cover, including  for  losses caused by events such as flooding.

"In many other countries this is not the case. For example, homeowners   in California would have to buy more than one policy, such as taking   out separate earthquake cover. In Europe, we also find that insurers   often specify the extent of the cover by the distance to the river  and  the height of the building above a particular flood line."

However, he says for South Africans based at or near flood-prone   areas, such as those living along the Vaal river, it is increasingly   likely that they may find their insurers starting to include certain   restrictions in their policies, or increasing the premium for those   living in areas most likely to be affected.

Samie says it is essential for these consumers to find out their flood   line status. "A flood line is a measure of the highest level water  has  risen to in a five, 10 or 20 year period in a particular area. As  a  result, it is important for all who could be affected to find out  what  their flood line is and to ensure that they take simple steps to   minimise any potential impact."

For example, particular items of value in a home should not be kept   below that flood line and one should also try to avoid any type of   design or innovation that would require excavation on the property   that would then take the property even further down the flood line.

Samie says that while we cannot prevent natural disasters from   occurring, it is possible for those living in high risk areas to   minimise their impact by taking adequate financial and practical   precautions.


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