Following the disruptive Covid-19 shutdowns of the past two years, global supply chains have struggled to normalize, driving the price of nearly every product soaring, says Soul Abraham, managing director of retail at Old Mutual Insure.
This sustained hyperinflation has caused the price of many commodities such as oil, wheat, other crops and even computer chips to rise dramatically, resulting in inflation rates last seen decades ago.
“It is likely to persist for at least the next 12 months and is having a significant impact on our industry. Already we are seeing a much higher than expected inflationary figure – almost three times our worst case scenario – and this is significantly affecting our claims cost base, particularly in our motor portfolio,” Abraham said.
Although we work closely with our supplier base to mitigate these costs, we cannot offset them all and unfortunately some must be passed on to our customers in the form of premium increases, he said. .
Trends Affecting Inflation and Claims Costs
Demand is growing rapidly around the world after two years of Covid-19 restrictions. The sustained rise in inflation is caused by the recovery in global economic activity after long lockdowns which have pushed up demand, and therefore the prices of goods.
Supply chain disruptions are driven by port congestion, skyrocketing freight costs and widely publicized shortages of semiconductor chips. China’s strict lockdown strategy when the coronavirus is detected will also influence the supply chain. Shanghai – a major manufacturing hub in the world – entered a nine-day lockdown at the time of writing.
“We are also experiencing double-digit inflation figures in the average cost of auto claims, primarily due to global shortages of semiconductors and microchips, which have negatively impacted the availability of new cars.
“And demand for used cars has exploded since the pandemic began, leading to reduced vehicle depreciation and higher replacement cost at the claims stage,” Abraham said.
Additionally, disruptions to global shipping and transportation agreements have led to an increase in the cost of vehicle parts and repairs.
Shipping costs around the world have increased significantly, which has a direct impact on the costs of imported goods. A significant portion of our costs is related to imported goods. There is also a huge shortage of containers – artificially increasing the supply challenge.
“Furthermore, we cannot ignore the conflict in Ukraine resulting from the Russian invasion, which will have a knock-on effect on inflation. Ford, for example, has previously said its factory in Poland is under pressure due to parts shortages. This led to a production stoppage. There is still a lot of uncertainty about how this will play out.
“We also noted a spike in geyser repair costsamplified by an increased volume of geyser claims and accidental damage from load shedding,” Abraham said.
To combat the general price spike, the South African Reserve Bank and other central banks around the world raised interest rates, putting further pressure on consumers’ purchasing power.
While it’s clear that load shedding is here to stay for the foreseeable future, South Africans don’t need to understand or simply accept national power shortages, said Rein Snoeck Henkemans, MD at Alumo Energy. .
“Eskom remains tied to old, unreliable and poorly maintained infrastructure – a situation that is unlikely to be resolved any time soon. It is simply not equipped to provide a consistent and stable supply of electricity to South Africa” , did he declare.
“On the contrary, we expect to see increasing levels of downtime coupled with rising electricity prices as it attempts to address its structural and financial issues. However, homeowners don’t have to be forever beholden to Eskom, as alternative power solutions such as solar installations are becoming more accessible and affordable.
Where many homeowners’ primary concern is solar installation costs, innovative financing solutions such as Alumo Energy’s lease payment option mean that for a one-off initiation fee of around R10,000 and At a monthly cost of around R1,800, the houses can be equipped with a 5 kW inverter, a 3.6 kWh battery and six solar panels.
“That’s enough to power a fridge, a freezer, up to 20 LED lights, a security system, three electronics, a TV and more. Additionally, within seven years, owners own the system, and the system can also be scaled based on your needs,” Alumo Energy said.
According to the Department of Mineral Resources and Energy, South Africa enjoys an average of over 2,500 hours of sunshine per year, while average levels of solar radiation range between 4.5 and 6, 5 kWh/m2 in one day – more than enough to meet most needs. home’s electricity needs throughout the year.
By offsetting skyrocketing electricity bills, solar systems can therefore generate significant savings over the long term. Alumo Energy calculates, for example, that after powering more than 1,000 buildings across the country, it has saved its customers some R1.3 million in electricity costs.
According to studies, the potential savings on electricity and the growing demand for green homes means that solar systems can increase property values by up to 3% or 4% on their own.
“Not only can solar power help keep the lights on while other homes on your street go out, but it can also save you tons on your electric bill, add value to your home, and do more for the environment,” said Alumo Energy.
“Ultimately, solar power is the most accessible and renewable energy resource available in South Africa, making it the most reasonable alternative to electricity supplied by Eskom. And by combining your solar system with gas appliances such as stoves and heaters, you can essentially end your reliance on the national grid.
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