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South Africans Face Higher Insurance Premiums as Climate Disasters Surge

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South Africans can expect higher insurance premiums as climate-related disasters become more frequent and costly, putting increased pressure on insurers.

Traditionally, South Africa has been considered a low-risk country for natural disasters. However, extreme weather events such as floods, fires, and hailstorms are becoming more common, leading to massive insurance payouts and driving up costs for consumers.

Massive Payouts Leading to Rising Costs

According to Thabiso Rulashe, Head of Investor Relations and Strategy at Santam, recent natural disasters have already cost insurers billions:

  • Western Cape floods (2023): R403 million
  • Gauteng hailstorm: R180 million
  • Fire claims (2023): R422 million (9% increase from 2022)
  • Weather-related claims (first half of 2024): R607 million (up from R150 million in 2023)

With climate change accelerating, these numbers are expected to rise, making it more expensive for insurers to provide coverage.

Consumers and Businesses to Feel the Pinch

Rulashe warned that households and businesses will bear the brunt of rising insurance costs, making coverage less affordable.

Moreover, the protection gap—the difference between total economic losses and insured losses—is widening. In South Africa, this gap stands at 83%, compared to the global average of 60%.

Low-income communities are hit hardest, as they often lack insurance and struggle to recover from disasters.

“Each unprotected asset represents a potential setback, impacting not only individuals but entire communities,” said Rulashe.

Are Institutional Investors Making the Problem Worse?

While insurers warn about climate risks, some of the country’s biggest financial institutions continue to invest in high-emission industries, worsening the crisis.

Environmental advocacy group Just Share has criticized major insurers like Old Mutual and Sanlam, which own significant stakes in:

  • Sasol – South Africa’s biggest polluter
  • Thungela and Exxaro – Major coal mining companies

By funding fossil fuel companies, these institutional investors are fueling the very crisis that is leading to higher premiums.

“They want to appear as if they take climate change seriously, but their investments tell a different story,” said Just Share’s Tracey Davies.

The Future of Insurance in a Changing Climate

Insurers are now turning to data-driven solutions to predict and manage risk more effectively. Technologies such as predictive analytics, geocoding, and scenario analysis are being used to improve risk assessment and set fairer premiums.

However, if climate change continues at this pace, insurance could become unaffordable for many South Africans, leaving them vulnerable to financial ruin after disasters.

The link between climate change and rising insurance costs is undeniable. While insurers push for higher premiums, their own investments in polluting industries raise questions about their commitment to sustainability.

With extreme weather events becoming the new normal, South Africans will need to brace for a future of higher costs and greater financial uncertainty.

Do you think insurers should be held accountable for their investments?

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