LoA cautions local municipalities
Underinsured municipalities could be hit hard financially in the event of a man-made or natural disaster.
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Under insurance is a major problem in many South African homes, but Lion
of Africa insurance group has pointed to a larger-scale problem. The company
said that the majority of South African local municipalities are not
sufficiently covered should disaster - man made or natural - strike their areas.
Lion of Africa said that municipalities are traditionally responsible for
their own insurance costs and yet 60 percent of them choose not to take out full
coverage. The group offers insurance policies to approximately half the
municipalities in South Africa.
"This situation could spell financial disaster for these municipalities as
the insurance cover paid out could fall well short of the liability incurred as
the result of the damage to or destruction of assets," said the local authority
department national manager for Lion of Africa, Colly Mata.
Local? authorities need to make sure that they are covered for damage to all
their assets, including equipment, roads and other infrastructure, vehicles and
sports facilities. Should disaster strike and municipalities are not properly
covered, it could mean millions of rand in damage.
Lion of Africa said the most underinsured municipalities were in the
KwaZulu-Natal area, as well as in the Eastern Cape.
The company showed as an example, the effect that underinsurance could have
on local municipalities in times of disaster. Severe flooding in the South Coast
recently left many municipalities in financial shambles as they were were
"woefully under insured".
The communications officer for the Ugu municipality, Brian Dube said:
"Underwriting of municipal assets is a very technical process and, given that
many municipalities lack such expertise, it is possible that many municipalities
are under insured."
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