Climate change could present financial costs to households and businesses. The increased risk of damage to property in the face of severe weather patterns,...

Climate change could present financial costs to households and businesses. The increased risk of damage to property in the face of severe weather patterns, could hike insurance premiums, experts warn.

Although short term insurer Santam says it has no imminent plans to hike insurance premiums, the company confirmed that changing weather patterns could have bearing on insurance premiums in future.

“It is far too early to tell if insurance will increase as a direct result of the recent flooding.  As in all insured countries, claiming for loss or damage can increase your insurance premium. We can, however, say that insurance premiums in the future could rise due to climate change,” says Shehnaz Somers, head of personal lines underwriting at Santam.

One of South Africa’s biggest names in short term insurance circles, Santam says it expect “more claims” during the course of this year as meteorological events induced by a changing environment are expected to hit South Africa. In recent months, the country has experienced extreme weather, which manifested in floods, hailstorms and high rainfalls, following five-year drought.

“Climatologists and meteorologists expect wet weather to continue well into March and even April,” says Somers.

“This is a cause for concern, especially for those that have not insured their property or vehicles, or those who have under-insured their valuables to save on insurance premiums.

In January, floods devastated eight provinces in South Africa, causing damage to houses, cars and commercial agricultural crops in parts of the country. Hailstorms hit Eastern Cape and KwaZulu Natal in December causing damage to vehicles and homes. There have been a few weeks of relative calm, but more is expected, says Santam.

The rest of the world has not been spared extreme climatic events in the past two years. Europe was ravaged by severe snow storms during the holiday peak travel season, which saw airplanes grind to a halt and passengers stranded in airports for days in that country’s largest airports such as Heathrow in London.

In more tropical areas such as China, Kenya, Costa Rica and Uganda, hundreds of people were buried alive and killed in landslides and mudslides during 2010 alone. Italy was not spared. Landslides result from heavy rains in areas with poor vegetation and leave a trail of damage to property in their wake.

First National Bank chief economist, Cees Bruggemans says changing weather patterns is a natural phenomenon, although at this point in history it is associated with mankind causing the damage.

“The past tells us that the future will be different. (Changing weather patterns) will certainly impact the insurance industry and have an impact in agriculture and housing structure if storms increase in frequency and intensity,” says Bruggemans.

According to Santam, only 35% of South African drivers insure their vehicles, which is an alarmingly low number.  “Suffering flood damage to a home or vehicle, and not having insurance to cover your loss could very well cripple a family financially.”

Somers says damage to homes, property, vehicles and the loss of revenue from damaged agricultural crops caused by recent floods is expected to run well into the “multi-million rand mark” and has already affected many insured South Africans.

“Most claims,” says Somers, “are from people in low-lying flood plains or from those living or working in close proximity to rivers and dams.” – SIYA MITI

News editor