Several fundamental shifts have changed the risk dynamics for insurers. This evolving landscape has prompted a heightened level of customer awareness as well as a growing demand for financial safeguards against new and emerging risks. Add to this the effects of the prolonged economic downturn, and the general lack of capacity in the insurance market has called on specialist carriers to bridge the gap.
The hard market in insurance, which has persisted since late 2017/early 2018, has been characterised by the rising cost of premiums and more stringent terms and conditions. Alongside these developments, the industry has also seen a notable rise in the volume of boutique insurers.
Renewed focus on sector-specific risks
This growth has been more evident in certain sectors than in others. For example, persistent and worsening power supply challenges throughout the country has intensified the demand for innovative power generation solutions resulting in the need for new risk products related to renewable energy. With more businesses investing in sources of renewable energy to establish a more reliable power supply, lenders have taken a more hands-on approach to project risk management, which has resulted in the emergence or increase in demand for the services of lenders insurance advisors to safeguard the interest of financiers.
This has in turn compelled business owners to seek greater assurances for longer periods of time in order to protect their investments. Niche-market insurers have responded to this demand across a range of sectors, including construction, where composite insurance products have been developed to serve the needs of the sector.
A changing risk climate with higher exposures
Certain exposures have also seen a sharp upturn, propelled by recent events. A good example of this is the need for businesses to protect their operations from growing cyber security risks. This has been particularly prevalent in South Africa, which has been identified as one of the continent’s most notorious cyber crime hotspots.
Businesses’ exposure to the risks associated with climate change have also been on the radar of specialist insurers. The flooding in KwaZulu-Natal in 2022 – the most disastrous natural disaster yet recorded in Durban, was a wake-up call for insurers. This catastrophe was followed closely by the floods that have broken out more recently in other parts of the country, such as the Western Cape.
Climate-related risks such as these are predicted to grow in severity. For insurers and brokers, this imminent threat has required special attention on building tailored products and packages to help protect clients from flooding exposure. Some insurers have even considered flooding as a risk that will become uninsurable.
For specialist risk experts, this represents an opportunity to step in and develop alternative solutions that can provide clients with an essential safety net against a destabilising environment. These kinds of conundrums are after all, what the insurance industry is charged with solving – all eyes will be on key role-players to develop solutions for an ever more uncertain future.
Litigation risks in the spotlight
The increasingly litigious environment in South Africa has added to these specific, escalating exposures. This has been more pronounced in certain fields, such as construction – an industry faced with multiple risks in areas such as design and supervision.
Tailored risk products have been a game-changer in industries like construction, where large workforces are employed on a seasonal basis and where construction sites are fraught with many serious health and safety hazards.
Specialist products such as SHA’s Employee Injury Assist policy have played an instrumental role in providing contractors and businesses in the construction field to manage the risk of employees being injured or contracting debilitating occupational illnesses.
These kinds of environments also present many opportunities for insures and their brokers to cross-sell products and assist their clients in covering a wide range of exposures in the most efficient and cost-effective way possible.
The growing demand for specialised service
In addition to the renewed call for more innovative product development, the evolving risk landscape also necessitates a greater focus on customer service. For insurers across the board, now is the time to focus on claims capabilities and the competence and expertise of service team members, many of whom are experts on the risks that pertain to specific industries.
Consider a scenario in which a motorist accidently drives into a ditch on a road construction project. Due to the litigation risks involved with such an incident, contractors and site managers need to be equipped and ready with the right information and processes to prevent and/or deal with unforeseen incidents such as these, as and when they arise.
In this regard, brokers with specialised skillsets can play a pivotal role in bridging knowledge gaps and providing clients with advice and guidance on how to employ the right kind of risk mitigation processes – a factor that can help businesses avoid unnecessary financial losses.
For aspiring brokers and insurance experts, now is an ideal time to carve out a niche within the industry; specialising in fields such as marine transit, aviation, and renewable energy, as the country – and the world at large – recalibrates itself to the evolving risk landscape.
The future will likely also see the emergence of more coinsurance solutions, as industry leaders look to meet the demand for higher limits while simultaneously addressing the deficit in capacity for larger liability placements and the like. This, in tandem with the emergence of new, fresh players on the risk landscape, will provide the industry with the buoyancy it needs to thrive amidst the uncertainty of the times.