Big insurance changes for cars in South Africa

Santam has recorded a rise in profits for the full year ended December 2023 – but has flagged the need for significant changes to the insurance sector – including more security features on high-risk vehicles.

In its financial results for the year ended 31 December 2023 (FY23), Santam said that it achieved a resilient performance despite challenging operating conditions.

Weak economic growth in South Africa, the company’s biggest market, was not conducive to insurance growth, denting any meaningful improvement in employment levels.

Consumer disposable income also remained under pressure despite inflation easing over the year.

Adverse rainfall led to high claims frequency in the first quarter of 2023, followed by floods in the Western Cape in June and September. The Turkey earthquake and hail in Gauteng during November also led to further losses due to natural events.

Claims inflation was also high due to the weak rand exchange rate. At the same time, the cost of reinsurance increased substantially following the significant losses experienced globally and in the South African market since 2020.

However, the group responded through several strategic and operational measures to mitigate these challenges.

The group gained traction in the implementation of geocoding, with 86% of the group’s core property book covered to date. This resulted in several losses being avoided during the Western Cape floods.

The group also implemented several underwriting actions, such as enhanced risk assessments in underwriting, segmented premium increases, changes to excess amounts and enhanced security requirements for high-risk vehicles.

“These actions are yielding positive results, with a marked turnaround in the profitability of the motor book and mitigation of power surge losses,” the group said.

In its Insurance Barometer report for the 2022/23 financial year, Santam noted that high-value vehicle theft claims shot up by 128% on the commercial side, with criminals targeting delivery trucks in particular.

The report added that Santam’s incurred claims for high-theft-risk vehicles were over six times higher than the 2019 base measure and over double the incurred claims for 2021.

“The experience was so poor that several corrective actions were needed to minimise exposure. Doubling up on vehicle trackers, discussing tech-linked weaknesses with vehicle manufacturers, and promoting Faraday pouches to prevent the cloning of keyless access signals,” Santam said.

Financials

Despite the challenging economic environment, the group’s headline earnings per share improved from a revised 1,817 cents in FY22 to 2,310 cents in FY23.

This group thus increased its dividend from 1,307 cents in FY22 to 1,400 cents in FY23.

Read: South Africa becoming an insurance nightmare