What keeps businesses awake at night in an era of economic and political flux? The 2024/25 Santam Insurance Barometer Report, which was released last week, provides a snapshot of the insurance landscape for commercial lines.
The research for the report was conducted between January and April amid a turbulent backdrop. Globally, investors were adjusting to shifts under the new administration in the United States, and South African businesses were wrestling with a stagnant economy, said Thabo Twalo, the chief underwriting officer at Santam Broker Solutions.
“Businesses and commercial brokers participating in the survey were extremely concerned about the impact of the economy on their prospects. Eight in ten business respondents said they had been negatively impacted by emerging risks over the past two years, with over half (53%) of respondents in this group indicating economic change as a top concern,” Twalo noted.
Yet, optimism persists. “Survey respondents seemed optimistic about prospects over 12 to 24 months,” Twalo said, “with more than half of corporate and commercial respondents expecting revenue growth, and around 40% stable results.” This resilience reflects South Africans’ knack for innovation, although a sluggish economy stifles new business growth and expansion.
“The insurance industry will have to find innovative ways to offer supportive risk mitigation and transfer solutions to small and growing businesses,” he said.
The fourth edition of Santam’s biennial Insurance Barometer was based on a survey of 881 respondents, of which 350 were corporate or commercial entities. These findings were overlayed with Santam’s claims experience.
Evolving risks
Insurance risks are shifting. “The frequency of motor vehicle accidents is far higher than theft and hijacking, [but] the severity of motor theft is far greater,” Twalo said.
Accidents often allow repairs, while theft typically means total loss. Rising repair costs, driven by pricey imported parts amid geopolitical tensions, are pushing more vehicles into write-off territory.
Crime remains a thorn in the side of commercial clients, with 22% citing loss of stock, 22% theft by staff, and 18% financial losses as key issues. “Theft under the buildings section remains the major driver of crime-related commercial lines claims,” Twalo said, although claims dipped in 2024. Large firms are bolstering on-site security, but off-site theft of items such as laptops persists.
Meanwhile, fire and weather perils top Santam’s commercial property claims, with weather events delivering a “mixed bag” of high-volume smaller incidents.
Looking ahead, 75% of corporate and 68% of commercial respondents ranked economic conditions second to poor infrastructure – potholes, supply chain woes, and soaring transport costs.
Stepping up risk mitigation
Businesses are stepping up risk management. One in seven respondents said they had taken additional measures such as installing CCTV cameras (56%), vehicle-tracking devices (29%), fire equipment maintenance (27%), and on-site security (25%),” Twalo said.
Twalo acknowledged these measures are not cheap. “The cost of the required interventions can be prohibitive in the short term,” with sprinkler systems or flood defences costing hundreds of thousands of rand.
Nevertheless, he said risk mitigations are essential for the long-term sustainability of clients and the short-term insurance industry. Although more than half of businesses grumble about cover limits and exclusions – 40% say it hampers operations – those adopting mitigations see their value in ensuring continuity.
Claims trends
Claims spiked in 2024, with 36% of respondents filing short-term policy claims, up from 25% previously. Most logged one or two claims, although 13% of large corporates reported more than 10. Santam, however, saw a drop in commercial lines claims volume and value between 2023 and 2024.
Once again, the motor class dominated, with 42% of survey respondents reporting they had made a claim against this cover type. Respondents also reported submitting claims under the by goods in transit, machinery breakdown, and theft categories, although these were less frequent.
Notable shifts emerged. Power surge claims plummeted, thanks to stricter underwriting and efforts to ease the electricity crisis. Fire claims also declined, while weather perils now loom large, driven by frequent smaller events.
Business interruption: the silent threat
Business interruption (BI) reveals a stark disconnect. Globally, the 2024 Allianz Risk Barometer ranks it second, yet only 7% of commercial respondents prioritise it.
“The biggest threat to the economic viability of a business is a disruption that causes it to halt operations, resulting in loss of profits,” Twalo said. BI cover is vital, whether from machinery failure, fire, or cyber-attacks.
Small and medium enterprises struggle to grasp BI structuring. “Business interruption is a massively underestimated risk,” Twalo said, urging better broker education, particularly for sectors such as hospitality and manufacturing, where supply chain delays can cripple recovery.
Cyber insurance: bridging the knowledge gap
Cyber insurance lags despite heightened awareness. Although 80% of commercial respondents bolstered cyber protections, only 17% bought coverage.
“Cyber risks are hard to quantify,” said Twalo, noting that uncertainty around ransomware and limited claims data fuels hesitation. Insurers must clarify coverage.
Cost deters smaller firms, yet Twalo said the premium paid for cyber cover is dwarfed by the losses that arise following a data breach or ransomware attack. Policies offer extras such as dark web monitoring, and he called on insurers to empower brokers to highlight this value.
