Fires are costing lives and the economy – up to R15-billion this year, reports Charlene Smith
Fire-insurance premiums are expected to leap by 50% to 100% because of a dramatic acceleration in claims over the past four years, according to the SA Insurance Association.
Clem Booth, who is on the executive of the association and managing director of Munich Reinsurance, says the incidence and average size of fires over the past five years has been greater, but for a small dip in 1995. In 1996, fire losses for individual claims amounting to more than R250 000 were just over R1-billion; they were half that in 1995, and are expected to be significantly worse this year.
“The increase is proving catastrophic for reinsurers, in particular,” he said. “If we increased premiums even 25% it would not begin to cover the erosion in reinsurance profitability.”
Bunny Attree, general manager of Mutual & Federal, says the major impact on the short-term industry has been mainly a consequence of inadequate terms obtainable for “covering fire perils. If the number of fires could be significantly reduced it would have a very beneficial impact for insurers and the insuring public”.
The Greater Johannesburg Public Safety Emergency Management says fires last year cost the SA economy R9-billion and an upward trend this year should see this figure rise to R15-billion.
Gauteng is launching an emergency services awareness week next month, with a special emphasis on fire prevention, in a bid to bring home to people the devastating effect fires have on lives as well as the economy. Shack fires alone, which do not impact on the insurance industry, are continuing to escalate. The Fire Protection Association of Southern Africa notes that in 1995 – the most recent figures available – 1561 shacks burnt to the ground, with the deaths of 76 adults and 31 children and estimated losses of R2,5-million.
And the situation is deteriorating. In two fires in Alexandra alone last month, almost 200 shacks were razed to the ground and 1 000 people made homeless.
Booth says fire-protection standards in the corporate sector are not up to scratch. And emergency services personnel say that slashed budgets and a lack of fire prevention awareness is dramatically increasing their workload.
Booth notes that the building his company occupies in central Johannesburg has no sprinklers, and the architects of its new corporate headquarters in Parktown suggested the company trim costs by leaving out sprinklers. “We pointed out the hazards of doing this, and said we have to set an example,” says Booth.
Having sprinklers is not enough, however, according to one insurance analyst. A major fire in Pretoria a few years ago was worse than it need have been because there was not enough water pressure to get adequate sprinkler capacity to the top floors of the building.
Arson is a growing component of fires, usually from disaffected employees. Booth says the international norm is that a third of all fires are caused by arson. SA had lagged behind this figure until a R100 000 blaze at a major retailer a few years ago, the day after a labour dispute, signalled a new trend.
While SA forensic expertise is not up to scratch, making cause difficult to accurately assess, Booth says a significant number of fires appear to have their roots in labour unhappiness.
“Risk management expertise seems to have declined; we need to get a handle on this and gain new perspectives on arson because we are in a whole new ball game. These are all losses to the economy and lower productive capacity.”
Guardian National Insurance Company had one of the biggest payouts this year when it settled the claims from Pretoria’s Munitoria fire for R370-million. The other major fire so far this year was a recent blaze at B&D Knitting Mills in Cape Town that caused R300-million worth of damage. Guardian was not the insurer in that instance, although it covered a R120-million loss in another blaze in Cape Town at Seardel, also a textile manufacturer.
Keith Kennedy, Guardian general manager, operations, notes that traditional trends usually saw arson during a bad economy. Then, during good economic phases when factories were running at high production levels, maintenance becomes secondary, leading to problems.
“But the economy is not booming, nor is it that down. I am hoping that the incidence of fires has peaked. The problem with fires is that the frequency is low, but when they happen the severity and cost are very high.”
Kennedy said Guardian’s figures showed that large losses of R100 000 and more tend to be due to fire. Claims in this category went up by 23% and in value by 50% for the past quarter, compared with the same period a year ago. Six-month comparative figures showed claims up 6%, with costs up 59%.
Kennedy said it was important that companies ensure they had sprinklers and that they worked correctly. “Staff awareness and employee relations are also important, and this impacts on everything from arson to ensuring that waste material is not left in fire hazardous areas and that fire extinguishers are in the right place.”
However, those who contravene regulations face a meagre R500 fine, which analysts say lacks deterrent value.
Emergency services personnel also say a major disaster is waiting to happen in South Africa’s cities, most of which have warehouses crowded with the poor and inner city buildings that have tenants living in prefabricated shelters on stairwells, landings and even cupboards – all death traps if fire breaks out.
Johannesburg emergency services personnel say they are being hampered in their efforts to ensure buildings have fire fighting equipment by inner-city residents who sell fire extinguishers, or cut off hoses and use them for other purposes – taxi owners often use fire hydrants to clean their vehicles.