Climate Changes Affect Insurance Prices

High-risk areas could mean higher premiums Santam to use climate change predictions and your physical address to calculate your future premiums

Citizens living in certain geographical locations around South Africa may want to think of upping and moving, following an announcement by Santam insurance company that it will be reassessing the price of policies based on climate changes and areas that are considered 'high risk'.

The change in the global climate and the natural disasters that are occurring as a result, have forced insurance companies from all over the world to reassess their policy prices. Re-insurers have been saying for years that the South African insurance industry is simply not prepared for climate changes and the damages they will bring. As a result, Santam has decided to take the first steps into this unknown territory and has declared that a new pricing structure would be adopted to insure against the effects of global weather changes.

There are several 'high risk' areas in the country, and these are the locations that will be targeted by Santam. They include people living near the seashore due to the risk of rising sea levels and wind intensity. Predictions have it that exposed homes on the sea shore will eventually be hit by freak waves that rise way above the traditional high water mark in some regions around the country.

Peter Johnstone, a UCT weather specialist said on this point: "The whole of the Western Cape's south coast is exposed to risk. There are some areas that have had two or three '100 year floods' in the past five years. We're still doing research on cut-off lows - they're little systems; they stop in one place and they rain like crazy. When you've got all that rain coming down in rivers, and at the estuaries you've got a storm whipping up the sea and pushing it up into the estuaries, the run off is not as fast as in other times, so you get a back up of water and flooding."

Santam said that it would use climate change predictions, together with a client's physical address, to assess future prices in insurance policies. A manager with the company, Ray-Ann Sedres, said: "Climate change is different. More volatile climatic events create less certainty and inevitably results in more complex and higher pricing structures."