Insurance News

Insurance, a legal contract, has been advertised as a commodity lately, like the utensils we use in the kitchen. Even the conclusion period of an important contract is measured in minutes, with no regard to the details of the contract conditions.

Consumers need to be aware of and understand the specific warranty clauses in their insurance policies, particularly those related to valuables such as jewellery. These clauses often have strict requirements, such as keeping items in a locked safe when not being worn, and failure to comply can result in a reduced claim payout, says the Office of the FAIS Ombud.

Vehicle theft and hijackings continue to pose a major threat in South Africa, with alarming statistics showing that the country still grapples with high crime rates in this sector.

The latest vehicle crime statistics in South Africa reveal a troubling shift in the targeting of business-owned vehicles, which are now at far greater risk of hijacking compared to privately owned cars.

In our current struggling economy, businesses are looking to cut costs wherever they can in order to preserve their profits – or even just to stay in operation. If you’re a business owner, you may also be looking to cut expenses that aren’t the absolute essentials, like salaries and rent. More often than not, one of these perceived “non-essential” expenses is business insurance: according to a KPMG insurance survey from July 2023, only 50% of South African businesses have commercial insurance.

If you thought non-life motor vehicle underwriters had things easy, then you know little about the dark web, high and low Controller Area Networks (CANs), relay attacks, signal jammers and the inimitable LONSDOR 500. These and other 21st Century motor vehicle crime-related phrases were introduced during an insightful presentation to the 46th Insure-Talk event, held online recently. The audience was treated to a double-header dealing with the impact of hijacking and theft on South African insurers.

The uptick in ‘ express kidnappings ’ and hijackings across South Africa has opened the door for non-life insurance brokers to add value to clients and bolster their annual premiums by including kidnap and ransom cover in their portfolios. Your writer spent some time mulling over the opening line for today’s newsletter, fearing it might be labelled insensitive; then again, crime triggers many insurance claims. Crime: a significant contributor to insured losses Non-life insurance is designed to respond to on-the-ground risks faced by businesses and households within an economy. Risk mitigation efforts aside, it should protect the insured against losses due to all covered perils, whether from natural catastrophes, manmade disasters or criminal activity. Statistics from the South African Police Service (SAPS) paint a gloomy picture: a 260% increase in kidnappings over the past decade, with an alarming 4 577 cases reported countrywide in the final quarter of 2023. This translates to 51 kidnappings per day over that period, with around two of those being kidnapping for ransom. There have been several high-profile kidnapping for ransom cases reported in the local media recently. In November 2021, a business family paid a R50 million ransom for the safe release of their sons, who had been kidnapped on the way to school. And in early July, a report on eNCA revealed that around 20 Portuguese butchery owners or staff had been kidnapped since 1 January 2023. The crime is so prevalent that the banking division of the National Financial Ombudsman (NFO) has received complaints related to ‘express kidnappings’ where consumers suffered losses after disclosing confidential banking information under duress. For the uninformed, an express kidnapping can be thought of as an extended robbery: criminals ‘grab’ a victim and force that individual to transfer cash out of his or her bank accounts, often holding the victim overnight to reset transfer and withdrawal limits. To learn more about the crime, and the insurance options available to your clients, FAnews spoke to Catia Folgore, Product Head: Crisis Management at iTOO Special Risks. Folgore said the product has evolved significantly over the two decades she has been involved in this specialist area. Growing risk of living in South Africa “When we first started looking at kidnap and ransom, it was mainly a commercial cover for companies that were sending their employees into high-risk countries; now we offer the product to individuals too,” she said. Today, iTOO offers a corporate solution that allows the employer to specify the employees covered and stipulate areas of operation, or a family policy for small business owners or individuals who travel frequently or (sadly) are simply concerned over the growing risks of living in South Africa. It is common practice for families to take out low-premium, low-limit policies to unlock the incalculable benefit of post-event responders. There are 20 events covered on the policy including kidnap and ransom and wrongful detention, with an important distinction between the ‘long tail’ kidnappings portrayed in Hollywood blockbusters, where hostages are held for months while a release is negotiated, and the emerging ‘short tail’ or express kidnappings that afflict the South African landscape. “We added express kidnapping cover because it is much needed in South Africa,” Folgore explained. In these cases, criminals typically take the victim to an ATM and force them to withdraw cash, sometimes even transferring funds between accounts to steal the maximum possible amount. Other lines on the policy include accidental death and disability; medical expenses and assistance following disappearance, hijacking, stalking or threats. The personal lines policy is described as “very comprehensive for the amount of premium paid annually” with commercial insureds able to add business interruption cover too. From a personal lines perspective, the real selling point is access to consultants or responders who assist when a kidnapping or related incident occurs. To this end, iTOO has partnered with an international firm that has 39 years of experience handling over 1500 kidnapping and ransom cases in 80 countries. Kidnap and ransom pay-outs Brokers need to be clear about how the policy pays out. Folgore noted that the full amount billed by their third-party responders is covered by the policy, but cash stolen during an express kidnapping, or any ransom paid, is only reimbursed after the event, subject to policy conditions and limits. As for costs, a typical family policy starts from around R15 000,00 annually, with variations based on underwriting factors. “This is not a one-size-fits-all policy; you might have a family of two versus an extended family of 15, or a member who frequently travels into Africa versus one that only travels domestically,” Folgore explained. Taking out some level of kidnap and ransom cover seems a no-brainer, given the content of the NFO’s recent media release on the topic. Nerosha Maseti, Lead Ombudsman for the Banking Division at the NFO, highlighted the trend in which “criminals force banking customers to disclose their online banking and banking app passwords under threat of violence (duress) after kidnapping and detaining them; once criminals gain access, they can alter account limits and make unauthorised transfers, causing significant financial losses in addition to the trauma of the kidnapping itself.” The NFO shared a case study in which a complainant lost over R100 000,00 following an express kidnapping. In this instance, the victim bypassed the bank’s crime and fraud mitigations under duress and was subsequently refused a refund when reporting the incident to the bank. Pay attention, dear reader, to the NFO’s conclusion regarding the bank’s liability here: “Given the merits of this matter, there were no legal grounds on which we could hold the bank liable for the complainant’s loss – he was essentially a victim of a crime in which the bank was not involved,” Maseti said. Duress or not, the customer had compromised confidential banking details. A costly affair The above sum is small change compared to the full-blown kidnapping and ransom demands that occur periodically. iTOO reports that the lowest ransom they have paid was around R500 000,00 with demands in some of the riskier countries often starting from around USD50 000,00. “We usually quote for a personal lines ransom cover of half-a-million to two million rand,” the expert noted. The cost of third-party resolution experts, fully covered by the policy, can quickly reach thousands of rand, with one recent case costing around R440 000,00 for a six-day-long investigation into a threat incident. There are checks and balances before a pay-out is processed against an express kidnapping claim. “We rely on our consultants, who are involved from the start; we also collect information from the insured, including bank statements, ATM footage and sworn affidavits,” Folgore said. She admitted that the addition of express kidnapping cover was linked to the spike in this type of crime domestically, and said that iTOO was doing whatever it could to train brokers on the evolving cover, to ensure that commercial and personal lines clients were appropriately covered. Writer’s thoughts: Insurance brokers, insurers and underwriting managers are under pressure to respond to the evolving risk landscape. Do you believe kidnap and ransom cover should be a standard offering for every personal lines client rather than a ‘nice to have’ for corporates and high net worth (HNW) families? Original Article - FA News

People who are forced to disclose confidential banking information during a kidnapping often have limited recourse, because they are typically held liable for any resulting financial losses. At the release of the crime statistics for the fourth quarter of the 2023/24 financial year and the first quarter of the 2024/25 financial year late last month, the Minister of Police, Senzo Mchunu, said crime was generally on the increase. Mchunu said crimes that should worry the public the most are murder, rape, hijacking, kidnapping for ransom payments, and extortion. “We have been reading about kidnappings and extortion cases in the media; 135 cases of kidnapping for ransom were recorded in the first quarter, with Gauteng and KwaZulu-Natal accounting for 81 and 15 cases respectively,” he said. According to the Statistics SA report, as of the 2022/23 financial year, the total number of kidnapping cases in South Africa reached 15 343. Gauteng had the highest incidences of kidnapping, with 7 818 reported cases, while KwaZulu-Natal had 3 081 cases in the same period. This sudden increase is associated with the rising levels of organised violent crime in the country. The Institute for Security Studies (ISS) stated that kidnappings reported to the police have almost quadrupled (260%) over the past decade. The South African Police Service’s crime statistics for the third quarter of 2023 (October to December 2023) showed that kidnappings had increased by 11% year-on-year to 4 577 cases over the period – working out to roughly 51 kidnappings a day in South Africa. In a recent interview with Newzroom Afrika , Lizette Lancaster, the manager of the South African Crime and Justice Information and Analysis Hub at ISS’s Justice and Violence Prevention Programme, highlighted the alarming rise in kidnapping syndicates: According to Lancaster, these groups have rapidly evolved since the onset of the Covid-19 pandemic, becoming more organised and targeting a wide range of individuals. “These kidnapping syndicates seem to be prolific,” Lancaster stated. “They seem to target various types of individuals, and the increase has been specifically steep since the Covid years, which shows that they’ve become very organised in a very short period of time.” Lancaster pointed out that many cases go unreported, making it difficult to grasp the scope of the issue. “We don’t always know who gets targeted, because not all cases are reported to the police,” she explained. However, data from late 2023 paints a stark picture: “Out of that 50 a day that we saw between October and December last year, only around two of that 50 a day are for kidnapping for ransom or extortion, the high-profile cases that make it into the news where high-value people are targeted by what seems to be very sophisticated syndicates.” Most kidnappings, Lancaster clarified, are associated with robberies and carjackings, often involving attempts to force victims to withdraw money via banking apps or bank cards. “The motive is actually robbery, often trying to withdraw cash from your banking apps and your bank cards. And those are known as express kidnappings; that’s over 60% of these types of kidnappings.” Sexual offences and human trafficking-related kidnappings make up a smaller proportion of cases. Lancaster said, “But, of course, not all cases are reported to the police, and this is important – the number, especially of ransom kidnappings and extortion kidnappings, may be far more than what we know.” A trend has also emerged involving foreign nationals running cash-based businesses in local communities. “What we see are often the kidnappings of what seems to be foreign nationals running cash shops in local communities targeted by extortion groups. When they are not willing to pay protection money, they become easy targets,” Lancaster explained. “Often, they are made examples of or are forced to pay extortion money. If they don’t, they get kidnapped and held for ransom.” Lancaster also touched on the growing role of transnational syndicates in these crimes, often targeting businesspeople with foreign roots. “We’ve seen transnational syndicates in operation, targeting businesspeople that might have foreign roots. But some are South African businesspeople who operate formal businesses and, in some cases, transnationally,” she noted. And she said, they’ve seen South Africans being kidnapped, particularly the express kidnappings, for their bank cards and phone apps. “Those are very real threats to ordinary South Africans.” Liability for loss In response to reports of a rise in kidnappings targeting entrepreneurs, the National Financial Ombud Scheme (NFO) confirmed it has received complaints where victims were forced to disclose confidential banking information under duress. Nerosha Maseti, Lead Ombudsman of the NFO’s Banking Division, explained that this issue was discussed at the NFO’s recent annual banking workshop. “The discussion also explored possible and available measures to help banking consumers safeguard their financial information and mitigate financial losses,” said Maseti. The NFO suggested that fraudsters are increasingly resorting to kidnappings as banks have strengthened security on online platforms, making it harder to obtain customers’ banking information. Maseti noted that criminals often force victims to reveal their online banking passwords during kidnappings. “Once criminals gain access to these platforms, they can alter account limits and make unauthorised transfers leading to significant financial losses in addition to the trauma of the kidnapping itself,” she explained. The NFO investigates consumer complaints against banks and financial service providers. “If, after investigation, it is found that the bank could have prevented or mitigated the customer’s losses but failed to do so, the NFO’s banking division has the power to recommend to the bank involved to refund the portion of the customer’s losses that could have been prevented but for the bank’s negligence,” she said. As an example, the NFO cited a recent case where a complainant was kidnapped and forced to disclose their online banking credentials, resulting in unauthorised transactions amounting to R103 092. Although the bank’s fraud-monitoring system flagged the suspicious activity and contacted the victim, they confirmed the transactions under duress. After their release, the complainant sought a refund, but the bank denied the claim, saying the complainant had disclosed confidential information. The NFO investigated the case, examining the bank’s terms and conditions, which state that customers are liable for transactions made before the bank is notified of unauthorised activity. “Unfortunately, all the funds transferred out of the complainant’s accounts had already been utilised prior to the bank being made aware of the incident. Therefore, the bank was not found negligent in mitigating the complainant’s loss,” said Maseti. Given the circumstances, the NFO found no legal grounds to hold the bank liable. “The complainant was essentially a victim of a crime in which the bank was not involved. However, the bank agreed to refund a portion of the loss as a gesture of goodwill,” Maseti added. Although customers are typically liable for losses before notifying the bank, liability shifts to the bank once the compromise is reported. In such cases, banks are expected to mitigate further losses. The NFO stated that each case is assessed individually, and banks may offer partial refunds based on a customer’s vulnerability and personal circumstances. However, confirming whether confidential information was disclosed under duress remains a complex challenge for banks. The NFO provided these tips for prevention and mitigation. The tips are similar to those for any hijacking risks. Be cautious when posting online. Avoid posting sensitive financial information or sudden changes on social media. It is extremely important to be vigilant about what information you share on social media and the perceptions you create about yourself, your family, and your friends. Avoid posting about a sudden influx of funds, as this can make you a target for criminals. Do not draw unwanted attention to yourself. Wearing expensive jewellery, carrying high-end branded items, or carrying other valuables in public may attract unwanted attention. Vary your daily routine as often as possible. Diversify your daily activities to reduce predictability. Criminals may monitor predictable routines well before the actual crime is perpetrated to ensure that a person is vulnerable to criminal targeting. Consult your bank. Discuss the measures your bank may offer to help mitigate potential losses if you become a victim of any type of banking fraud. Many banks provide options to tailor your online banking and app experience, including limiting your exposure and risk. Consider investment options. Use accounts with restricted access to limit potential losses. In some instances, investing in a notice account may reduce access to your funds, thereby limiting your overall loss. Consider insurance. Check whether your bank offers duress insurance or trauma counselling services. Original Article - Moonstone

The disciplines of risk management, mitigation and transfer continue to evolve as insurers and reinsurers refine their underwriting practices to accommodate the potential mega-loss events arising from themes such as climate change and cyber liability. As insurance brokers break news about fire and flood exclusions to their commercial and personal lines clients, global reinsurers are coining new phrases to explain their risk approach.