Insurance Headaches for Steel Industry

October 22 - Theft, fraud and bribery are just some of the crimes that have ravaged the South African steel industry, with insurance prices rising as a result.

The financial and liability risk of the steel industry has led many insurance companies to push up the prices of their policies in a bid to counter the costs.

Not only is every scrap of metal removed from just about every place in the country, but fraud also plays a huge part in the rising liability risk.

Simon Baker, who acts as the Business Unit Manager for Alexander Forbes Risk Services, summed it up. "In short, metal theft, along with the alloys used in the production of steel, is on the increase," he said, "posing both a financial and liability risk to the industry."

Baker outlined how criminals use fraud and bribery to cheat the steel industry. "Scrap trucks are rolled onto weigh bridges with their water tanks filled, registering a higher tonnage," he said. "Weigh bridge operators are bribed to recalibrate weigh bridges or allow the same trucks to be weighed twice."

The risk of radioactive material entering a steel smelter because of fraud is also a huge liability risk. While it is required by law that all scrap dealers use Geiger counters to detect steel containing radioactive materials, in truth few do - meaning that a steel smelter can become affected by radioactive material that passes through it.

"You can imagine the insurance implications, in liability, lost production and plant replacement, for a smelter that became radiated through the receipt of radioactive scrap," explained Baker.

The steel industry seems to be at a loss to deal with the problems it faces.