The legal risks for organisations have grown exponentially in recent years, with a new report – the SHA Annual Specialist Risk Review 2019 – revealing that between 2016 and 2018, the average value of liability claims inflated more than 100% and that the total value of capital settlements on liability claims grew by 42% during the period.
The review also reveals that the value of annual liability claim payments increased by a staggering 190% since 2013, from R59 million in 2013 to R171 million at the end of 2018, thus highlighting the increasing need for comprehensive specialist risk insurance for local businesses.
According to Gareth Beaver, CEO of SHA Specialist Underwriters, a weak economy, an increasingly litigious environment and the rapid evolution of fraud and cybercrime are all playing a role in the progressively more perilous landscape that South African businesses operate in.
The SHA Annual Specialist Risk Review combines SHA’s own claims data with information gathered from local corporations, professionals, SMEs as well as brokers, and provides insight into how liability risks are changing, what’s driving these changes and which market sectors are most exposed.
Beaver says the report has revealed that the frequency as well as severity of claims against both professional indemnity and liability insurance policies are steadily rising, putting both uninsured and underinsured businesses at huge risk of suffering catastrophic losses if they are sued for damages by a third party.
“Our claims data reveals that the size of claims for liability and professional indemnity have skyrocketed over the last five years, with the combined sum of claims paid out increasing from R276 million in 2013 to R440 million in 2018. Some of the liability classes in particular have experienced staggering growth in intimated claims size of over 100%.
The findings contained in the review also point to the undeniable fact that the frequency of liability suits against businesses and professionals is on the rise. Demonstrating this, the data shows that one in ten professionals has been sued at some point in their career, and one out of every five businesses has had a product liability claim.
“Furthermore, the severity of commercial fraud and cybercrime has increased in recent years, with a little under half of all companies having suffered losses as a result of commercial crime, and over half of all businesses surveyed had experienced cybercrime incidents that led to significant business interruption and financial losses,” says Beaver.
Lastly, the cost of legal defence – even against frivolous lawsuits – now threaten to impact the bottom line of any business. “Liability cases routinely take between three and five years to resolve, and legal fees are going up by between 8% and 10% each year. This means that having sufficient liability cover in place to cover the cost of both litigation and damages is paramount,” he explains.
“The Specialist Risk Review unpacks all of these points in great detail and looks at the specific risks and gaps in cover across all liability categories, that business owners and brokers should be aware of. As the leading specialist risk underwriter in South Africa, with 34 years’ experience in the liability and professional indemnity markets, we believe that it is vital to share what we have learned, in the hope that we can ensure a sustainable specialist insurance market well into the future,” concludes Beaver.