Power surge insurance claims skyrocket in South Africa

Insurers in South Africa have seen an 80% jump in claims related to power surges due to increased load-shedding over the past three years, Sunday newspaper Rapport reports.

Several of the country’s biggest short-term insurance companies — including Dialdirect, Old Mutual, and Santam — have reported increases in claims in the high double digits.

Between January and March 2023, Dialdirect’s surge-related claims jumped 70%. Among Old Mutual Insure customers, claims for broken geysers and

Santam — the biggest of the bunch when it comes to short-term insurance — published its Insurance Barometer report for 2022/2023 this past week.

The report reveals that personal claims for electric equipment damaged by power surges jumped by 37% between 2021 and 2022. Business claims increased by 45%.

That came on top of 37% and 53% the year before for personal and business claims, respectively.

“The significant spike in these claims can be attributed to the on-and-off ‘switching’ that goes hand-in-hand with Eskom’s load-shedding programme; in turn, a response to inadequate energy infrastructure,” Santam stated.

Santam head of intermediate business Andrew Coutts said the value of the claims has also jumped by 48%.

Despite the power surge scourge, only 21% of Santam-insured households and 20% of businesses have implemented practices or installed special equipment to protect their appliances from damage.

Coutts expects insurance claims to normalise in the first half of 2024 due to added protections and more households and businesses getting backup power.

Andrew Coutts, Santam executive head of intermediate business

The frequency and intensity of load-shedding has increased substantially since 2020.

That year, the amount of power shed through load-shedding increased from about 1,798GWh to 2,521GWh in 2021.

It then more than quadrupled to 11,529GWh in 2022.

2023 has been another record year for the rotational power cuts — with roughly 15,300GWh shed just in the first half of the year.

In addition to more power cuts increasing the likelihood of power surges, the intensified load-shedding also strains electricity distribution infrastructure.

Repairing transformers and other equipment costs Eskom and local municipal utilities billions of rand each year.

Testing the equipment while bringing it back online can also cause additional power surges.

The perceived increased risk of a national blackout of Eskom’s grid has also resulted in many short-term insurers adding grid failure exemptions to their policies.

Santam said although the broad consensus of energy experts was that a total grid failure was unlikely, a more likely scenario was a smaller regional-level grid failure.

“Nevertheless, insurance is not designed to respond to a loss event that would impact all policyholders in a large geographic area simultaneously,” Santam said.

Now read: The dark side of the Kusile comeback — What Eskom is not telling South Africans about its big load-shedding wins

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Power surge insurance claims skyrocket in South Africa