The weakening rand is hurting South Africa’s insurance industry and the short-term sector is the most affected, this is according to industry players.
Those in the sector say insurance companies dealing with motor vehicles are feeling the impact especially in cases where car parts need to be imported from outside the country.
“The exchange rate is not good news for us especially in view of the short-term insurance industry spends 45 per cent of its business on motor business. Between 70 and 80 per cent of vehicle claims are related to accident claims,” Viviene Pearson, chief executive of South African insurance association told CNBC Africa.
She however allayed fears of consumers – saying the possibility of raising prices by brokers was unlikely.
“In short-term insurance it is not going to be an issue as brokerage fees are regulated. As an industry we are in constant touch with other industry players in trying to address challenges we are facing,” added Pearson.
Other industry actors said, in a competitive industry like the short term insurance it was important to make sure the price was affordable to consumers.
“We are looking for ways to make it more affordable to the customer although insurance is seen as a grudge purchase,” says Graham Craggs, from Budget Insurance.
“We are not going to pass increases to consumer and to do that we are going to find ways of cutting costs and improving efficiencies. It is still a competitive industry and because of that price is king.”
Craggs also warned of other economic challenges that consumers are dealing with which has an impact on overall affordability.
“There are a number of issues that consumers are already battling with; we have food prices threatening to increase due to drought, the likely electricity tariffs hike and devaluation of the rand. The size of the wallet is reducing.”