Hefty insurance premium hike for people living in disaster-risk areas

South Africans living in disaster-prone areas will be forced to pay more as insurance companies hike premiums for climate change-related cover and claims.

According to a source in the industry, many insurance companies have been revising their policies to get away from paying maximum claims related to natural disasters caused by climate change.

“The rise in climate change has taught insurance companies that they need to protect themselves from permanent closure. 

“It is not a secret that the Kwa-Zulu-Natal floods early this year cost insurance companies a lot of money. Remember, back in the day, South Africa didn’t have these disasters that are occurring. Now, anything can happen, so the companies are in a process of redrafting their policies to get clients to cover more of the damage through their premiums,” the source said.

According to experts, South Africa is set to see more severe weather events, such as heavy rainfall and extreme drought, as climate change affects the country. 

Many insurance companies are updating their policies to increase premiums for customers living at  the coast and areas earmarked for flooding and other natural disasters, in particular.

Earlier this year the South African Reserve Bank noted that climate change would probably increase the frequency and severity of physical climate-related risks. This increase would translate into increased claims, particularly in the non-life insurance sector.

“In the long term, it is possible that insurance and reinsurance [insurance companies getting insured by other companies] could become more expensive and product offerings could be limited in areas that are more exposed to the effects of climate change,” it said.

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