South Africa’s crime levels have serious financial implications, according to the insurance industry, which is seeing an increase in claims from certain crimes.
This week’s release of the crime statistics for the period April 2014 to March 2015 showed increases in crimes such as car hijackings, truck hijackings and residential robberies, which increased by 14.5%, 29.1% and 5.2% respectively.
But according to Viviene Pearson, the acting chief executive of the South African Insurance Association, these statistics are not a surprise to the insurance industry, which has seen a similar trend over the last two years, specifically in terms of car and truck hijackings.
“It’s still a very serious problem and still on the increase, and obviously very costly,” said Pearson. Although she could not give an exact figure, she said it was substantial, probably in the region “of a couple of billion rand”.
Truck hijacking has become a “huge issue” as these crimes not only incur losses for the companies that own or insure the trucks but also entail claims for the cargo itself.
The industry is also seeing an increase in household and business robberies, with small business suffering the most, said Pearson.
Santam, one of the country’s largest short-term insurers, said the latest crime statistics mirror trends in its own claims data for the 2014-2015 financial year. It recorded a 21% increase in commercial vehicle hijacking claims; a 21% hike in reported household robbery claims – or theft by use of force or violence; a 13% decrease in the theft of private vehicles; a 13% increase in business robbery claims; and a 4% dip in commercial vehicle theft claims.
Pearson said crime does not only affect the insurance industry, it also affects consumers, because the higher risk is reflected in increased insurance premiums.
This is particularly evident in vehicle insurance, which makes up about 45% of all short-term insurance business.
The crimes that are on the increase, such as hijackings, are typically violent and speak to the increase in other serious crimes such as murder, Pearson said.
According to the police’s crime statistics, the country’s murder rate has risen by 4.6 % since last year.
And although vehicle theft is on the decline, thanks to increased security measures both by car manufacturers and drivers, it has been accompanied by other crimes such as hijackings.
One of the main motives behind many residential robberies, Pearson noted, is to obtain the keys to the family car.
The reason for this is that the insurance industry, alongside organisations such as Business Against Crime, has worked hard to bring down car theft by insisting that insured vehicles have tracking devices and more manufacturers are installing security devices in cars.
“It’s [become] difficult to steal a car, and that is why it needs to be hijacked,” said Pearson.
Although the increases are alarming, there have been some improvements over the years in tackling vehicle-related crimes, in part thanks to organised efforts by business and insurers, she said.
In 2002, the percentage of motor vehicle claims relating to theft was about 80%, according to Pearson. That figure has been turned around, with 70% to 80% of car claims now being accident-related.
Only 35% of the vehicles on South African roads are insured.
Under these circumstances, Pearson warned against consumers cutting out insurance to save money.
Products such as general household insurance are typically less expensive, but car insurance premiums reflect the risk, she added.
“The risk is not only reflected [in] these crime figures, but now in South Africa mainly through the [number of] road accidents.”
Many vehicles on the road are financed by the banks, and the outstanding debt is still owed regardless of whether the car has been stolen or damaged in an accident.
“You still owe that debt and you don’t have a car,” she said.
“People who find themselves in those kinds of positions are really badly off.”
She suggested that, rather than cancel their short-term insurance, consumers should talk to their insurer to negotiate a different package, such as taking on a larger excess to reduce premiums.
Alternatively, consumers can look at different types of vehicle insurance such as third party, fire and theft cover.
“There are ways and means to address it rather than making a decision that could really backfire on you,” she said.