Load-shedding destroys electrical appliances — what it means for household insurance
Power surge-related insurance claims have increased nearly 50% in the past year, thanks to load-shedding.
“If we compare our incident ratios for Jan 2022 to July 2022 with Jan 2021 to July 2021, we have seen an increase of 46% in the ratios for surge-related claims [for the former period],” King Price client experience partner Wynand van Vuuren said.
Dialdirect head Anneli Retief told MyBroadband that their power surge claims have doubled over the past four years.
Outsurance also noted an increase in power surge claims during regular load-shedding.
An Outsurance spokesperson explained that the intermittent power supply caused by load-shedding results in power surges and dips.
“These surges and dips in the supply of electricity result in damages to electrical circuits of electronic items, and in some instances result in fires.”
Old Mutual Insure pricing manager Lizo Mnguni pointed to fire resulting from a power surge as a risk often overlooked.
“If you are away and some of your electronic equipment is still plugged in when the power comes back and goes on, this can lead to a fire,” he said.
“We’ve seen several instances where this has happened, which results in more damage for the insured,” Mnguni said.
Regular load-shedding has also increased the number of burglaries and vehicle accidents.
To illustrate this, Dialdirect compared the number of burglaries and car accidents from July 2019 to May 2022 with periods without load-shedding.
“During the week, load shedding resulted in a 3.2% increase in burglaries and a 5.2% increase in vehicle accidents,” Retief said.
“Over the weekend, these figures more than double, increasing the risk of break-ins by 8% and that of vehicle accidents by 13.5%.”
Naked Insurance co-founder Ernest North confirmed that they have also seen increased claims for car accidents and fixed elements like gate motors and geysers.
“We’ve had to replace a lot more geysers in the last four to five months,” he said.
Besides the obvious damages, load-shedding can also render an insurance claim invalid due to it not fulfilling all the policy conditions.
“Most insurance policies stipulate in their contracts that the house alarm must be activated at all times when the home is unoccupied,” Retief explained.
“So, if your house is burgled during a power cut, then, theoretically, your theft-related cover would be moot.”
However, Retief said each case is considered based on its own merits.
“We believe that load-shedding is beyond the control of our customers, and therefore, they should not be penalised for it.”
Naked’s North added that insurers typically do not cover any items breaking due to the long-term damage caused by load-shedding.
“If your fridge stops working randomly after four months, during which there was regular load-shedding, you can’t claim from your insurance.”
Ernest North, Naked Insurance co-founder
King Price’s Van Vuuren explained that insurers are faced with a new challenge as these instances increase.
“One of the biggest challenges to the insurance industry at this moment in time is to accurately differentiate between surge claims and normal component failure as a result of the varying power supply.”
“Traditionally, component failure is not something covered under a normal peril-based policy,” Van Vuuren said.
“In the majority of cases, these circuit damages render the item uneconomical to repair,” Outsurance said.
To shield themselves from the risk associated with load-shedding, insurers primarily use two methods.
“Different risk mitigation is also introduced within the industry to limit the extent of their exposure either by introducing endorsements onto the policies or introducing an alternative excess structure,” Van Vuuren said.
Discovery Insure announced this week it would increase the excess for claims relating to power surges by R1,250 from 1 September 2022.
It also announced several other excess increases, including on vehicle, building, household contents, and portable possessions claims.
Van Vuuren said that one of the endorsements insurers use requires clients to install a surge protection device on their distribution board.
“The cost of installing such a device with a new certificate of compliance range around R2000 – R3000,” Van Vuuren said.
He said the more affordable option involves consumers buying surge protection plugs for expensive electronic items.
Another preventative measure includes installing backup batteries for alarm systems, garage doors, and electric gates.
“By all indications, load shedding is going to be with us for a while,” Dialdirect’s Van Vuuren said.
“However, a proactive approach to home and road safety, as well as having comprehensive insurance cover in place, goes a long way in mitigating the risk and keeping you and your loved ones safe.”
Loading ...