Importance of Business Interruption Cover
Tuesday, 01 April 2014

Could a mudslide ruin your business? Weather-related claims emphasises the need for business interruption cover

Media Release, Santam

12 March 2014

Small businesses are vital to South Africa’s economy and contribute around 30% to its GDP per annum. However, running a small business is no walk in the park. According to Trade and Industry Minister, Rob Davies, “If seven small businesses start in South Africa, in one year only two of them will continue to be in existence.”

This is a sobering statistic considering more and more South Africans are looking to entrepreneurship and starting their own business as they struggle to find employment. However, when it comes to running your own business, we all know there are no shortcuts. Over and above a competitive market, small businesses face many challenges on its road to success.

There are proactive steps that business owners and entrepreneurs can take in order to ensure the longevity of their business. One such action is obtaining sufficient insurance that is suited to your business, and which will provide you with the necessary protection when faced with a setback.

Shehnaz Somers, Head of Commercial Underwriting at Santam, South Africa’s leading short-term insurer says, “We have witnessed far too often businesses being crippled and forced to close their doors due to inappropriate cover and not being protected sufficiently when disaster strikes.”

Santam received over 200 000 business-related claims over the course of 2013, of which 99% were paid out. Some of these claims included temporary disability, collisions, accidental loss/damage, burst and overflowing pipes, theft and lightening/power surges to name but a few.

Somers says, “Accidents can and do happen, from loss of income or robbery to unexpected environment-related setbacks as the world experiences ever increasingly adverse weather conditions.

Weather-related events have increased in frequency and severity over the past few years. In the past year, Santam again experienced the pressures brought about by difficult weather conditions, principally hail storms in Gauteng, flooding in Limpopo and the Western Cape as well as hail and droughts in the crop business.

In this respect, businesses should make sure they are covered for any eventuality by taking into account their location and specific circumstances.

Says Somers: “In one case last year, the road to a well-known Cape Town-based lodge was blocked by a mudslide due to heavy rainfall. This road is the only route to the lodge but the client had taken out the ‘prevention of access’ extension on their Business Interruption cover. Santam’s Business Interruption cover has an extension which provides cover where infrastructural damage occurs within a 10 kilometre radius which hampers or limits clients from accessing business premises.

“The loss of income as a result of guests not being able to access the lodge, was therefore covered in terms of our Business Interruption cover ,” says Somers.

If you are planning to start a new business, Santam provides the following important tips for ensuring your business is insured adequately:

1. The importance of Business Interruption cover
Business interruption cover is critical for businesses and represents indemnity. Make use of an intermediary to obtain sound advice about insurance for your new business. An intermediary will assist you by ensuring that you have the right cover in place that fits the needs of your business.

“The cover is designed to put your business back into the same position, or as close to the same position, as before the occurrence of a loss,” Somers says.

Stephen Hanssen, CEO at Riverstone Insurance Brokers and Executive Consultant at Catalyst Group said, “It is imperative that the intermediary you choose to manage your business insurance is experienced and qualified. They must be able to analyse the entire risk management programme of your business as well as financial statements,” says Hanssen.

He adds, “Too often we see business interruption claims reduced or repudiated because the intermediary has incorrectly calculated the appropriate level of cover. Your intermediary should request a copy of your financials, in order to accurately calculate your level of business interruption.”

2. The importance of an intermediary
Make use of an intermediary to obtain sound advice about insurance for your new business. An intermediary will assist you by ensuring that you have the right cover in place that fits the needs of your business.

3. The cheapest option is not always the best option
More often than not it pays to opt for an insurer that is reputable and has a good claims track record. Do the necessary homework to determine which insurance company provides the best cover at the most affordable premium.

“When choosing an insurer consider insurance companies that pay their claims quickly, efficiently and that provides 24/7 assistance,” says Somers.

4. Be truthful and disclose relevant information
In order to get the best possible premium, you need to be honest and provide your insurer with as much information as possible. Generally, insurers ask for your previous insurance history, which includes a claims history. You run the risk of your claim being repudiated if you have provided incorrect information to your insurer.

5. Type of cover that must be considered and remember to insure for the correct amount
Entrepreneurs must consider legal liability cover as it protects you, should your business be sued following injury to a third party or damage to a third party’s property. “These types of losses can be financially devastating to a small business and is becoming increasingly more important, especially with legislation such as the Consumer Protection Act in South Africa, and small businesses being more exposed than ever,” says Somers.

Don’t underinsure your business. Identify the five most valuable assets in your small business and obtain adequate insurance cover. These assets could range from buildings and stock to the company’s motor vehicles.

From there, identify five risks that could potentially have an impact on your business and obtain adequate insurance cover for them. These risks could range from a fire or storm to flooding or even crime.

“Setting up a business can be a costly affair. Safeguarding your company against potential risk is the single most important way to ensure that your income is protected against possible accidents or natural disasters,” concludes Somers.

Please contact DMKC Insurance Brokers for further advice on Commercial Insurance covers available.

Is your Car Hire Good Enough?
Tuesday, 01 April 2014

Your hired car provision may not be comprehensive enough to meet your needs. Alexander Forbes Insurance believes that you should plan ahead and investigate the possibility of extending your replacement car hire cover on your motor policy.

Gari Dombo, MD of Alexander Forbes Insurance, suggests extending your car hire from thirty days to sixty days because it is common for vehicles to take longer than thirty days to be repaired as a result of:

  • Vehicle agents not keeping adequate stock of parts and therefore repairs being delayed sometimes for weeks so the part or parts can be imported.

  • Most panel beaters close their businesses over certain holiday periods such as the festive season.

  • Adverse weather conditions such as hail storms can overwhelm panel beaters with unplanned for work, and this problem can be made worse if it happens near or during their holiday shut down. As a result panel beaters may not necessarily have the capacity to complete the necessary repairs to your vehicle within thirty days.

Dombo highlights that paying a little bit more will reduce one’s frustration of being without transport.

"When you plan to travel across the border with your hired car it is important to get permission from the hirer and also check that your motor policy covers you for damage to the hired vehicle when it is outside of South Africa."

In conclusion Dombo stresses the need to fully understand and be aware of the terms of your motor vehicle insurance contract. "You may need to extend your car hire cover.”

Article taken from: Media Release from PPS Short Term Insurance

Please contact our offices, DMKC Insurance Brokers, on 021 710 6300 to discuss the various Car Hire options available to you. 

Alarming Increase in Identity Fraud - Be aware!
Thursday, 21 November 2013

Alarming increase in identity fraud in Gauteng

Media Release, Justicia

18 November 2013

There has been a dramatic surge in identity theft and business fraud in Gauteng with the number of cases under investigation more than doubling between 2012 and 2013, according to private investigations company, Justicia Investigations.

Company director, Conrad van der Merwe, said that the company had investigated no cases of identity theft during 2012. This year, Justicia was taking on between two and three new cases every month – a figure that they expect to continue to grow. One of these investigations led to the arrest of a key member of a syndicate in October.

A two month long investigation began with an act of kindness. The syndicate used a “disabled” woman in a wheel chair as bait. She asked passers-by to help out by pushing her a few blocks in the Johannesburg CBD to the flat where she allegedly lived.

“When the victim pushed the ‘disabled lady’ to the identified block of flats, this good Samaritan was violently assaulted by the same ‘disabled lady’ and two male accomplices and robbed of her handbag, wallet, cell phone and whatever shopping she had done before the incident!” he explained.

“To add insult to injury, the syndicate then took over her identity and whole life! They used the victim’s ID to open fraudulent bank accounts, rent a flat and open clothing accounts at retailers. As a result, the victim had to try to explain to SAPS investigators that she was not the fraudster they were looking for in connection with several cases. She also had to explain to all the stores where accounts were opened that she was not responsible for opening them,” he said.

The end result was that her ID number was blacklisted as fraudulent, making it impossible for her to open an account, get credit or sign a lease. “They effectively destroyed her identity and her life - all because she was kind enough to help a seemingly disabled woman,” he said.

It did not stop there. According to van der Merwe, members of the syndicate informed a large marketing company of a change in the banking details of one of their business partners. The new account was the fraudulent account that they had opened using the victim’s ID number. As the fake bank letters looked genuine to the accountant, she changed the banking details on the payment system. At month end, an electronic payment of more than R600 000 was made into the fraudulent account.

“A few weeks later, the accountant received a statement indicating that no payment had been received. When she sent through proof of payment, she was horrified to discover that she had paid R600 000 into the ‘wrong’ account. The bank confirmed that the entire R600 000 had been withdrawn at their Musina branch. This was a crippling blow to the company as they now had to repay the bill and write off R600 000,” he explained.

Van der Merwe said the arrested syndicate member was found in possession of another six stolen RSA identity documents, four of them with her picture already installed professionally. Further investigation by Justicia revealed that the suspect was a female Zimbabwean national with no passport, no work permit and no legitimate identity document, making a living out of impersonating her victims and abusing their identities.

“The suspect was already in the process of ruining the lives of another four South African citizens with her devious activities. She is a phantom who lives like a parasite on one South African ID after another,” he said.

He confirmed that the suspect had been charged and had appeared in court during October. She was deemed a flight risk and denied bail. The case will return to court in November.
Justicia’s ongoing investigations have revealed that, although a proportion of the criminals that are stealing ID documents and using these to commit fraud, are South African, the bulk of the “specialists” are mainly Nigerians and Zimbabweans.

In light of this, he appealed to South Africans to guard their ID documents and not to give out their ID numbers without checking that those requesting it were trustworthy. He also encouraged people not to carry ID books in purses or handbags and never to leave important documents in their cars.

“Justicia Investigations also wants to appeal to all accounting staff of firms not to just accept notice of a change in the banking details of clients without contacting the company in question on a landline (not cell phone) to verify that this is actually happening. Ignorance could cost them dearly,” van der Merwe warned.

Although there are no official, up-to-date statistics to indicate the incidence or the extent of the increase in the number of cases of identity fraud in South Africa, credit bureaus and insurance companies are raising the alarm. They estimate that identity fraud could be costing South Africa more than R1-billion every year.

The SA Fraud Prevention Service, a non-profit organisation that works to combat fraud, identity theft and financial crime, is now receiving up to 25 complaints daily. According to the organisation’s chairman’s report for 2012, the number of fraud filings received by SAFPS increased by 27 percent year-on-year in 2011, with 14 320 new incidents being reported.

Globally, identity theft is one of the fastest growing cybercrimes with the number of reported incidents increasing by 13% globally in 2011. According to the Federal Trade Commission, 9.9 million Americans were affected by identity theft last year with 19 people falling victim to identity theft ever minute.
Importance of correct disclosure
Thursday, 02 May 2013

The recent High Court judgment of Jerrier and Outsurance has served as a timely reminder to insureds of their duty to disclose to the insurer material information.

Both the insured and insurer owe each other a duty of good faith during the course of negotiating the contract of insurance. That also applies each time when the insurance contract is renewed even if it is a monthly policy. The duty of good faith includes the duty not to misrepresent, or omit to disclose facts material to the assessment of the risk to be insured.

There is a statutory test for materiality. What is considered is whether a reasonable prudent person would consider that the particular information misrepresented or not disclosed should have been correctly disclosed to the insurer so that the insurer could form its own view as to the effect of the information of the relevant risk.  Because a contract of insurance is one where the insurer needs to assess the circumstances and terms, and the amount which it can provide as an indemnity on the happening of a specified uncertain event, and how much it must to be paid to assume that risk, disclosure of information material to the assessment of the risk is very important.

Where there has been material misrepresentation, the insurer can, within a reasonable time avoid the contract of insurance or the obligation to pay claims.

It is usually when a claim is made that the insurer learns of the misrepresentation. That is why it is essential for insureds, whether in respect of personal insurance or corporate and commercial insurance to make sure that all information material to the underwriting of the risk is disclosed before concluding the contract of insurance.

In the case of complex commercial or corporate risks, the guidance of a specialised broker in the insured’s particular industry is recommended.

The type of facts which would need to be disclosed are:

  • those which show an exceptional exposure to risk. For example, if the life to be insured is a smoker or has a cardiac condition; the insured has received threats of physical violence to the insured’s property from a disgruntled workforce or competitor; in the case of motor insurance, if the insured driver has a poor driving record; in the case of a building, if it is constructed of flammable material, for example the roof is thatch, or if a warehouse, it does not comply with building regulations in respect of fire protection and detection. Information regarding insurance history of the insured to be, for example, whether requests to other insurers for insurance were declined or a previous policy was cancelled or allowed to lapse by the insurer;

  • those relevant to the insured’s financial or business integrity, including circumstances which may show that the motive for seeking insurance may be improper or dishonest or that the insured may be prone to causing the insured risk to materialise. For example, insurance sought for a business when the insured is trading in insolvent circumstances, or in dire financial circumstances, a poor insusrance claims history or the insured company’s directors have been convicted of crimes of dishonesty.

These are only a few examples of material facts. What would need to be disclosed is always a factor of the type of insurance sought, the risk to be covered and the nature and business of the insured.

In Jerrier’s case:

  • The decision is based on a specific wording of a clause that there will be no cover if full disclosure is not made of accidents during the course of the policy.  Disclosure after inception is not usual.

  • Neither the pleadings nor the court specifically relate the non-disclosure to the renewal although it seems to be implied in what is said.

A good rule of thumb is when in doubt to make the disclosure or to obtain the guidance of a good broker.

Article by Donald Dinnie - Director of Norton Rose South Africa

Hijack warning to clients
Tuesday, 28 August 2012

Tracker has advised that there is a new number plate hi-jacking trend brewing around.  These hi-jackers will stalk you to a parking lot or mall, after parking your vehicle, they remove your number plate and wait for you to drive off.  They then follow you and overtake you displaying your number plate at their window as if you had lost it and want to give it back to you.  Shocked that your number plate has fallen off your car, you bring your vehicle to a halt to get it from them.  This is all they want you to do and by the time you realise what has happened it is too late.  Please don't stop for anything, a number plate is valueless compared to your life.

Read in the FIA weekly indaba of the 28 August 2012

FIA Code of Conduct
Wednesday, 06 June 2012

DMKC is a member of the FIA and subscribes to their code of conduct.  The code of conduct is attached under the documents section under the sub-section compliance.

Leaving expensive belongings in cars overnight
Wednesday, 06 June 2012

A new South African survey has revealed that 82% of respondents leave expensive belongings in their cars overnight, not only exposing their motor vehicle to potential expensive break-ins but also leaving their personal and sometimes irreplaceable belongings vulnerable to being stolen. According to Christelle Fourie, Managing Director of MUA Insurance Acceptances, the survey, which was conducted on behalf of MUA, is particularly alarming given the recent South African Police Service Crime Report for 2010, which revelated a 1.8% increase in theft from or out of a motor vehicle.

Fourie says the types of claims for items that have been stolen from consumers' motor vehicles have increased markedly following the recent criminal 'trend' of thieves interfering with the remote control locking of vehicles.  "Motorists press their remotes believing they have locked their vehicle.  However, interference, deliberate or otherwise, by third party remotes being pressed at the same time reportedly interferes with the locking process leaving the vehicle open and exposed to petty criminals".

"The problem for the consumer with these cases is that signs of forced entry are usually required by the insurer in order to show that the vehicle was broken into.  If there is no sign of forced entry then the insurer must work on the assumption that the client simply failed to lock the car.  In doing so, any claim would be rejected as the client failed to act with due care and diligence".  Fourie says motorists must be vigilant and ensure that when they leave their vehicle it is securely locked.  "Go back to the vehicle to double check, as failure to do this may leave consumers at risk of having a claim repudiated". 

"Unless belongings that have been left behind in a vehicle were hidden from view, it is highly likely that such a claim may be repudiated.  In South Africa especially,  terms and conditions stipulated by most insurers insist that belongings not be left on display.  It is also important that clients are made aware of the fact that this general restriction often applies regardless of whether the client has unspecified all risks cover in place, as such a theft would be seen as negligence on the part of the client.  Fourie says in order to ensure that a claim will be covered most insurers will insist the motorist stores those items left in an unoccupied car within a locked compartment such as a cubby-hole or boot.  "If the vehicle does not have a boot in which bigger items may be stored away, then it is possible that an additional excess will also apply". 

Article by Christelle Fourie in FIA Insight Magazine, 4th Quarter Edition 2011

Vehicle locking - Take Reasonable Precautions
Monday, 10 October 2011

Recent information suggests that thieves use a household remote, such as the type used to open garage doors and gates, and block the signal of a car's remote.  This means that an unsuspecting motorist who locks their vehicle with a remote may have not actually locked the vehicle, as a thief could have watched and pressed a household remote at the same time, interfering with the vehicle remote and preventing the locks from engaging.  Thieves then open the unlocked doors and steal items from inside the vehicle.

Various Insurance Companies have confirmed that this type of loss would be rejected because if there are no signs of forcible and violent entry into the vehicle when the item is stolen then there would be no claim.

All vehicle owners or drivers should take reasonable precaution to ensure that the vehicle is indeed locked before leaving the vehicle especially if there are valuables inside the vehicle.  One should not assume that the vehicle is locked merely because one pushed a button.  Always check first before walking away.

This information was taken from communication from Mutual & Federal and the Short Term Insurance Ombudsman

Avoid Under Insuring your home
Tuesday, 02 August 2011

Article by Shirley Burger, National Head of Claims, Alexander Forbes Insurance.

The market value of a property does not represent the cost of rebuilding and may be considerably more or less depending on housing market supply and demand.  As such, homes must be insured for the cost of rebuilding all structures entirely from scratch.  So, "if you are insuring at market value, the cost of buying or selling the property, you are insuring incorrectly" says Shirley Burger, National Head of Claims, Alexander Forbes Insurance.

Generally, homes that are insured at market value are likely to be underinsured when house prices are low, since in a weak property market the cost of rebuilding a house is often higher than its market value.  Conversely when property prices increase you run the risk of being overinsured as the cost of rebuilding a home is likely to be less than its market value.

In short,  if you insrue at market value, you will either be paying too much premiums by being overinsured or you will be under insured and suffer a reduced settlement when you claim.

See the FIA website, FIA Insight 2nd Quarter Edition 2011 for the full article.