Insurance: Human Error Leading Cause Of Claims In Africa

Yemisi Izuora

Africa’s leading cause of liability claims by value is human error, at 77 per cent especially in an era when risk managers are facing larger and more complex losses from a growing number of liabilities, according to a new report from Allianz Global Corporate & Specialty (AGCS),.

In a survey of more than 100,000 corporate liability claims worldwide, it found defective product/work accounts for 10 per cent of liability claims in value, while natural hazards are at 4 per cent.

In South Africa, defective work/product leads the way at 37 per cent in terms of top causes of liability loss by value, followed by water/fire/smoke damage (26%) and property damage (15%).

“Accidents happen and they are sometimes very difficult to foresee or prevent. This is what insurance is for. However, where a process or procedure can be engineered to ensure that businesses carry out tasks with due care, foreseeable losses could be curbed.

“Companies have to be aware of the potential losses before they can mitigate them, so we share loss information and potential loss scenarios with our clients to enhance risk management methods,” said Storm Canham, AGCS Africa liability team leader.

In an analysis of 100,000 corporate liability claims worth €8.85bn ($9.3bn) in the period 2011-2016, AGCS named defective products or work as the most costly cause of liability, accounting for 23 per cent of the value of claims analysed.

Product recalls pushed average claims costs for defective products to exceed €260,000, AGCS said.

Collisions or crashes were identified as the second largest claims loss by value but AGCS said collisions and crashes in aviation and motor accounted for the largest number of claims.
Human error was the third largest claims loss, accounting for 19 per cent of claims value and driven by major losses in aviation and shipping.

The report, Global Claims Review: Liability in Focus, states: “The potential for more expensive liability losses around the world is increasing, particularly in relation to global product recalls, corporate liability, cyber and environmental incidents.

Additionally, new corporate liability exposures will arise from disruptive technologies and the more complex business models of the growing ‘sharing economy’.”

Alexander Mack, chief claims officer at AGCS, warned that while losses from workplace accidents have fallen by 41 per cent during the past five years, emerging liabilities pose new risks for corporates and potentially larger bills, with $1bn claims more common and not just confined to the US and Europe.

“The risk landscape for companies is constantly shifting, with liability risks on the rise globally.
New technologies such as the Internet of Things, autonomous mobility or 3D printing will create fundamentally new liability scenarios for companies in almost every sector,” Mr Mack said.

New technology will give rise to cyber risks, product liability and product recall, AGCS said, adding that automation is likely to increase product liability risk for manufacturers and software providers.

“New data protection laws around misuse or breaches of data will increase cyber liability for companies, potentially resulting in heavy fines and penalties, particularly in Europe from 2018, but also elsewhere,” the report notes.

The top ten causes of liability claims accounted for 80 per cent of the losses analysed by AGCS.

The report identified those top ten liability losses, by value of claims, as: Defective product/work Collision/crash Human error
Accidental nature/damage
Slips/falls/falling objects
Water/fire/smoke damage
Environmental damage
Natural hazards Vandalism/terrorism Property damage.

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