Outsurance excludes total Eskom blackout from insurance policies

Outsurance has joined a growing list of insurers that have added grid collapse exclusions to their policies, removing cover for any loss, damage or liability caused by an Eskom blackout.

It has joined the likes of Hollard, Momentum Insure, Naked Insurance, and Santam. Outsurance attributed the change to a need to review its cover in light of the higher risk of a blackout happening.

“The increased levels of load shedding over the last year, with the possibility of an electricity grid failure, has required a review of our cover,” it said in a notice sent to its customers.

Outsurance says the risk of a grid failure is still remote. However, the insurer explains that it can no longer consider it an unforeseen event, meaning it no longer falls within the scope of insurance or reinsurance cover.

It has therefore implemented the following policy change:

This policy does not cover any loss, damage or liability directly or indirectly caused by a total or partial interruption, interference, failure or suspension of the supply of electricity or restoration thereof.

This exclusion does not apply to power surge events resulting from load shedding. Load shedding is defined as scheduled electricity supply interruptions implemented by any party other than the insured, implemented in phases, which does not affect a whole municipality, province or country simultaneously.

Damage to insured property caused by a power surge following scheduled load shedding will still be covered, provided that power surge is already covered by your specific policy.

“Whilst it is regrettable that this cover will no longer be available, to ensure sustainability and that we are there to assist you on future interactions and claims, it is a necessity,” says Outsurance.

In line with Policyholder Protection Rules, the insurer has given its clients 31 days’ notice of the change, which will take effect on 1 May 2023.

Outsurance’s designation of a total grid collapse as a “possibility” is understandable, as several other prominent insurance companies have implemented similar changes.

In early February 2023, Hollard Insurance notified its clients of an “Electricity Grid Failure” exclusion added to their policies.

Like Outsurace, Hollard spokesperson Warwick Bloom said that while the potential for a total grid failure remains remote, it is now a “possibility”.

He explained that the company’s reinsurers — the firms that provide financial protection to insurers — would no longer offer reinsurance cover in the event of an Eskom blackout.

“This means that electricity grid failure — as defined in our letter to our clients — is an uninsurable event,” Bloom said. “Hollard is attempting to make this clear for policyholders.”

Momentum Insure chief actuary Rudolf Britz said the company will still cover claims resulting from the impacts of a grid collapse. However, the company doesn’t cover grid failure itself.

“For example, if your car is insured through Momentum Insure, and an accident is caused due to a traffic light that is not working due to a blackout, your cover remains intact,” Britz explained.

“However, if your business does not survive due to a total blackout, it will not be covered.”

During its financial results presentation for the six months ending June 2022, Santam said it would implement a general electricity grid failure exclusion on all policies from 1 April 2023.

Santam’s personal lines underwriting head Attie Blaauw explained that it is essential to clarify what it could and could not cover. He also said the policy change resulted from reinsurer pressure.

“We continue to experience great pressure from our reinsurance providers to limit any exposure to systemic events,” said Blaauw said.

“In addition, given the frequency and severity of load-shedding, the change in risk of a potential grid failure cannot be ignored.”

Naked Insurance co-founder Ernest North said that the trend of reinsurers abolishing cover for grid failure makes it an uninsurable event that all insurance companies will likely exclude.

Now read: South Africa’s electricity price nightmare

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Outsurance excludes total Eskom blackout from insurance policies