Aon’s 2019 Global Risk Management Survey recently identified challenges organisations face in managing traditional and emerging risks.
Aon surveys thousands of risk managers across 60 countries and 33 industries every two years to identify key risks and challenges their organisations are facing. In the 2019 Global Risk Management Survey, respondents ranked economic slowdown as their number one risk. Damage to reputation/brand was named as the number two concern, reflecting the potential for significant consequences when corporate mishaps occur specifically on social medial platforms.
An interesting fact is that climate change moved from a ranking of 45 in 2017 to 31 in 2019, as the frequency and severity of natural catastrophes contribute to rising concerns about the impact on the global economy.
In South Africa, various areas have recently suffered weather damage as several regions have been battered with rain and hailstorms, causing devastating floods and even loss of lives. In an Aon South Africa media release, Mandy Barrett of Aon South Africa pointed out that the damage caused across the country just shows how vulnerable we are to the changing weather patterns and climate change. Climate change is also a huge risk factor as per the recent Global Survey.
In the midst of all the catastrophes, under-insurance remains a fundamental challenge for both individuals and businesses.
According to Barrett, South African property owners are not taking the risks posed by these weather conditions seriously enough and still claim that crime is the biggest threat to their assets. The research and insurance data that was released after the Knysna fires of 2017 also determined that under-insurance was a growing trend. It was reported that more than half of the houses affected was not insured.
“It was heart-wrenching to hear reports that some people affected by the Knysna fires were left severely compromised with either inadequate or no insurance cover at all. How do you recover from an outright loss of your home when you still owe money on it, and have no insurance cover to replace the loss to return you to your former financial position? It points to the need to have a strong relationship with your insurance broker, to meet to review your needs at least every year, and to follow the sound advice given when it comes to insuring your most significant financial investment – your home and everything in it. Most of all, it highlights the folly in assuming that worst case scenarios are simply too unlikely to happen,” Barrett said.
The South African Insurance Association (SAIA) also recommended safety precautions during severe weather conditions, and highlighted insurance products to assist in recovering from the adverse effects of storms and flooding. These include homeowner cover, household contents cover and all-risk cover.
The growing risk presented by these extreme weather conditions demands that individuals and business review their insurance needs in detail and get the proper advice to ensure they are covered when it matters.
Outcome 4 of Treating Customers Fairly (TCF) states that where advice is given, it is suitable and takes account of a customer’s circumstances. The client’s needs must be analysed in order to identify a product that will be appropriate for the client, taking the client’s risk profile and financial needs as well as objectives into account. Any shortfall in a client’s financial circumstances should be highlighted to the client.
Outcome 5 further states that customers are provided with products that perform as firms have led them to expect, and the associated service is both of an acceptable standard and what they have been led to expect.
A financial advisor’s role is ultimately to furnish advice and identify the financial product or products that will be appropriate to the client’s risk profile and financial needs. Climate change as a risk factor should therefore be part of the ongoing liaison with your client to ensure that their product selection is at all times appropriate.
Click here to read the Aon South Africa media release titled “Managing risks of weather catastrophes is essential”.
Click here to read the statement by the SA Insurance Association on flooding and weather damage.
Click here to read more about Aon’s 2019 Global Risk Management Survey.