Insurers won’t pay for looted, damaged ICT infrastructure

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Last week’s civil unrest. (Photo credit: Twitter)
Last week’s civil unrest. (Photo credit: Twitter)

While insurance companies will not directly pay out for ICT infrastructure destroyed during last week’s unrest, they are liaising with the South African Special Risks Insurance Association (SASRIA) regarding the pay out of tech-related claims.

Last week’s civil unrest, which was initially sparked by the incarceration of former president Jacob Zuma, escalated into days of anarchic destruction, with shopping malls, warehouses and other properties being looted, and in some instances businesses being set alight.

The wave of lawlessness, which took place mainly in Gauteng and KwaZulu-Natal, left more than 200 people dead, with hundreds of business owners reeling from the destruction which has put an estimated 150 000 jobs on the line.

As local insurers, together with government, are still calculating and assessing the total cost, questions have been raised as to whether SASRIA will be able to cover all insurance claims for damage and theft. It is also unclear if this would include pay out for ICT infrastructure and equipment such as electronics, laptops, computers, phones and TV sets.

Speaking during a media briefing yesterday, acting minister in the Presidency Khumbudzo Ntshavheni explained that in KwaZulu-Natal alone, approximately 3 000 stores were looted and stock amounting to R1.5 billion was stolen.

She noted that in KwaZulu-Natal, 161 malls, 161 liquor outlets, 11 warehouses and eight factories were damaged.

Local insurance companies Old Mutual Insure, Discovery Business Insurance, Santam and Momentum Insure told ITWeb they are engaging with SASRIA to fast-track claims made by their clients.

However, in order for companies to claim for technology-related items and equipment, they should have specifically selected SASRIA cover under their insurance policy.

SASRIA is the only insurer in SA that provides cover for loss or damage to insured property as a direct result of social unrest, including rioting, strike action and public disorder.

“Discovery Insure is facilitating the claims to SASRIA, provided the client has the relevant cover,” says Lana Ross, COO of Discovery Business Insurance.

“In this case, if the business-insurance client had their stock or machinery covered on their underlying policy (including ICT infrastructure and electronic products) and had elected to add SASRIA cover to their policy, then Discovery Business Insurance will submit the claim to SASRIA.”

Each policy is unique and each claim is reviewed individually, and “there must be an underlying policy in place at the time of the insurable event, and the payment of policy premiums must be up to date,” adds Ross.

SASRIA was established in 1974 after private insurance firms stopped underwriting high risks relating to political violence as a result of the violence and unrest during SA’s apartheid era.

Private insurance companies, such as Discovery Insure, act as agents for the state-owned SASRIA and sell SASRIA-cover as an add-on to the insurance policies they sell to clients, if the client requests this cover.

“In order for a client to claim for properties destroyed during unrest-related claims under their policy, they should have selected SASRIA cover under their insurance policy with their insurer,” says Andrew Coutts, Santam head of Intermediated Distribution.

“By close of business last Wednesday, Santam had registered 21 motor and 167 non-motor SASRIA claims. At this stage, we are unable to provide a monetary amount for these claims as the loss adjustors must still determine the extent of the loss for each claim.”

According to the Department of Communications and Digital Technologies, close to 20 South African Post Office facilities have been vandalised, with some being set alight, destroying critical ICT equipment in the process.

All four of the South African mobile operators – Cell C, MTN, Telkom and Vodacom – confirmed temporarily closing stores in KZN, due to the ongoing risk of violence.

LG Electronics SA’s Durban-based factory, located at Cornubia Industrial Park, in Sundew Road, Ethekwini, was also affected by the protest action in the community.

Mustek’s Durban offices were looted and its building destroyed and set on fire. The JSE-listed distributor said last week that it expects damages from the riots to not exceed R20 million.

In a telephone interview with ITWeb, SASRIA MD Cedric Masondo said the high-risk insurance public entity is confident it would be able to deal with the expected influx of claims, and that ICT-related claims for damage or stolen goods would be covered for businesses meeting the criteria.

“ICT-related infrastructure and equipment form part of the SASRIA material damage cover – the policy is issued for this cover in terms of the SASRIA fire and material damage policy (F2).

“At the moment, we don’t know what is the full value of stolen property and extent of the damage because it’s only recently when people had the opportunity to go and assess their properties. We have always said we are preparing for the worst case scenario and we’ve made it clear that together with our shareholder, we have an unlimited balance sheet,” explained Masondo.

SASRIA last week told Reuters that the state-owned company expects total claims of up to R10 billion, or R12 billion in a worst-case scenario. At the time, the organisation had received around R100 million in claims.

“However, SASRIA will not respond to claims on the following basis: If a client did not purchase SASRIA cover for the damages or looted items. If the loss or damage of items was not as a result of a SASRIA actions, such as riots, strikes, civil commotion, public disorder, labour disturbance or terrorism in order for SASRIA to accept a claim,” added Masondo.

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