Understanding the Rising Costs of Insurance in 2024
As we navigate through 2024, insurance costs continue to be a significant concern for both clients and brokers. At ClientSure Brokers, we are committed to keeping you informed about the factors influencing these costs. Here, we delve into the key drivers of insurance cost inflation and what it means for you.
Insurance Cost Inflation Remains High
Despite a slight easing in the Consumer Price Index (CPI) to around 5% in 2024, insurance cost inflation remains elevated at 8%. This trend is influenced by a combination of factors, including economic conditions, currency depreciation, and sector-specific cost increases.
Key Factors Contributing to Insurance Inflation
- Currency Depreciation: The South African Rand has depreciated from R18.53 per USD in 2023 to R18.79 by May 2024. This depreciation is expected to continue, leading to higher import costs and increased claims costs.
- Building Cost Inflation: Building costs have surged, with the building cost index peaking at 19.1% in the first quarter of 2024. This significant increase emphasizes the need for adequate sum insured adjustments at renewal to avoid underinsurance.
- Motor Vehicle Costs: Motor vehicle values are depreciating at slower rates compared to pre-COVID levels. However, repair costs for partial losses have increased due to inflation in parts, labor, and paint costs. The overall impact on motor claims inflation is currently at 6%.
High Property Repair Costs
The property sector has experienced substantial cost increases, driven by heightened demand and inflation for building materials. This year's average building cost index was 10.4%, underscoring the importance of adjusting insurance coverage to reflect these rising costs.
Motor Insurance Challenges
The motor insurance sector faces unique challenges with premium increases driven by both partial and total losses. Vehicle theft claims continue to rise, and the cost of repairs is escalating due to parts and labor inflation. Consequently, motor insurance renewal rates are also affected by these trends.
Emerging Risks and Climate Change
Cybersecurity Threats
In South Africa, the frequency of cyber-attacks has surged, with a notable increase in ransomware incidents. Businesses need to be vigilant against social engineering and AI-driven phishing attacks, which are expected to dominate the cyber threat landscape in 2024. The economic impact of these attacks is estimated at R2.2 billion annually, emphasizing the need for robust cybersecurity measures and insurance coverage.
Climate Change
Climate change is causing more frequent and severe weather events, impacting insurance costs. South Africa is transitioning from El Niño to La Niña, leading to above-average rainfall and increased flood risks. Notable recent events include the KwaZulu-Natal floods in 2022 and 2023, and the Tongaat tornado in 2024.
Conclusion
Understanding the factors driving insurance cost inflation is crucial for making informed decisions about your coverage. At ClientSure Brokers, we prioritize keeping you updated and ensuring that your insurance needs are met amidst these evolving challenges. For personalized advice and comprehensive insurance solutions, contact us today.
Disclaimer from ClientSure Brokers
ClientSure Brokers makes every effort to ensure the accuracy and reliability of the information in our publications. However, we are not liable for any actions taken based on the content or recommendations provided. The information is intended solely for informational purposes.
