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Insurers rejecting Covid-19 business interruption claims


Association says the hospitality industry will lose many more jobs because insurance companies have rejected Covid-19-related business interruption insurance claims.

Fedhasa is the national trade association for the hospitality industry that includes the accommodation and catering sectors. File picture: Pexels

THE HOSPITALITY industry will lose many more jobs through the coronavirus pandemic because insurance companies have rejected Covid-19-related business interruption insurance claims, a leading industry representative organisation for the sector said.

Federated Hospitality Association of Southern Africa (Fedhasa) chief executive Lee Zama said on Thursday that many of the organisation’s members had taken out expensive business interruption insurance policies, with specific extensions to cover notifiable and infectious diseases.

Fedhasa has been representing the hospitality industry since 1949. The industry, including accommodation and restaurants, has been particularly hard hit through lockdown closures and job losses.

“They have been paying their premiums, and when the pandemic hit, believed that these policy payouts would be the much-needed lifeline they had planned for, only to discover that their insurers walked away from their legal obligations,” said Zama.

Zama called on insurers to reach a settlement with claimants, rather than pursue a legal strategy through the courts, which would take months, and in some cases years, to resolve. Failing this, Zama wanted the government, and especially the Ministers of Finance and Tourism, to intervene on an urgent basis.

OUTsurance chief marketing officer Carl Louw said in a telephone interview that as far as he knew, OUTsurance was the only short-term insurer paying out these claims.

The company made the first of these payments in April for losses occurring in March 2020 due to the pandemic and resultant lockdown, and the company had a total rand reserve in this category of about R220 million.

“Our view, from the onset of the pandemic, on the business interruption policies with the cover extension for pandemics is that they are covered and that we needed to get cash to the businesses with the right cover in place as soon as possible. We understand cash flow is king for small and medium businesses,” said Louw.

Zama said, “ What these businesses urgently need is cash to pay salaries and fixed costs, otherwise more businesses will be forced to close, and more jobs will be lost. By paying out on these claims, insurers have the ability to save jobs, but instead we see them hiding behind their lawyers, while the industry bleeds.”

According to an April 2020 survey on the impact of the pandemic on the tourism and hospitality industry, companies have managed their workforces in different ways, with most favouring reduced wages over furlough or redundancies.

Fifty percent of firms had reduced wages for more than 50 percent of staff and 11 percent have made more than 50 percent of their employees redundant.

The survey was conducted by the Department of Tourism, the International Finance Association,and the Tourism Business Council of South Africa.