After the spike in construction projects in South Africa during the Fifa World Cup in 2010, there has been some steady, sustainable activity in the sector. With infrastructure development being prioritised on the national agenda, this is set to increase. Of course, mitigating risk in this complex industry is becoming more and more challenging for short-term insurers, particularly as projects move beyond SA’s borders. Here are a number of trends we can expect to see:
Risk assessment
The risks involved with construction are constantly evolving. Unpredictable weather patterns, especially excessive rain, make it difficult to assess flood risk. Another issue is the lack of skills in the sector. A number of qualified professionals are leaving the country to contribute to projects overseas, leaving behind inexperienced workers with insufficient construction experience – a situation often compounded by a lack of registered training in the industry. As a result, more and more claims are being attributed to human and technical errors.
Cross-border risk is becoming more prevalent as mining and associated infrastructure projects pick up pace across Africa. Insurance companies will need to be well-versed in the regulations of other markets and will also need to prioritise compliance with in-country governance; ensuring that customers are adequately covered beyond SA’s borders. Legislation in a number of countries aims to facilitate the growth of local players in the insurance industry. Service providers, like Zurich, who focus on cultivating strong relationships with partners on the ground will be best placed to navigate legal and taxation requirements.
Short-term insurers should be pushing for regulation that can formally guide cross-border procedures as part of the Treating Customers Fairly (TCF) requirements. This will not only protect customers, but will also streamline the claims process. Scenario planning and the development of technical underwriting capabilities have never been more important in the sector and, of course, brokers will need to share this expertise, and align their values with those of the insurer’s – particularly when it comes to customer centricity and claim payments.
Renewable energy
There is also a trend towards embracing renewable energy on the continent, with new wind and solar powered technologies being developed every day. Insurers will need specific expertise in order to underwrite the risk associated with these ‘newer’ and often unexplored technologies. Companies that are able to draw on a global network of experts that are familiar with these types of endeavours will certainly have an advantage.
Ultimately, it’s about providing comprehensive coverage for construction customers, especially when they embark on projects outside of SA.
Partnering with brokers in delivering on successful multinational mandates will be critical to success, particularly when it comes to consumer education at point of sale. In the end, quality over quantity will always prevail.