Criminals love load shedding – are you covered?

Publishing load shedding schedules, while efficient on the part of Eskom and helpful for consumers, is proving to be a boon for criminals and bane for insurance companies.

In the early hours of Monday morning, burglars helped themselves to 23 Apple Mac computers, worth R600 000, from a secure office complex in Bryanston after load shedding rendered an electric fence, electric locks and alarm system useless.

“Criminals are loving load shedding,” said Genesis CEO, Tim Lazarus, whose client suffered the loss.

In the knowledge that most security systems run on electricity and battery back-ups generally last only a few hours, criminals are planning their break-ins during power outages, Lazarus explained.

Power surges, meanwhile, which may occur when the power returns after an extended outage and send a dramatically increased flow of current to a wall outlet or electrical box, are frying appliances countrywide.

Lazarus said Genesis was getting five or six power surge claims a day.

Specialist high net worth insurance company, MUA Insurance Acceptances said that a power surge in the home of one of its clients blew up his electricity board and started a fire causing massive damage to his home.

MUA’s managing director, Christelle Fourie said the property was insured for “quite a few million”. The claim was still being assessed, but she estimated it could be in the region of R2 million.

Since the rolling blackouts of 2008, Fourie noted that a number of insurance policies now had restricted or no cover for power surges. “A number do still cover it, but for how long will we be able to continue?”, she asked, having recently paid a R750 000 claim for damage to audio visual equipment as a result of a load shedding-induced power surge.

Power surges were often covered under ‘Accidental Damage’ in an insurance policy, but within relatively low limits (around R10 000 to R30 000). “We’ve had a R250 000 claim where a client’s home theatre system was fried to nothing,” Lazarus said. On commercial insurance policies, the ‘All Risks’ section of the policy would provide some cover, but not for office equipment, he said.

Theft as a result of faulty alarms

Fourie pointed out that loss from power surges and theft as a result of load shedding were not risks that insurance companies had priced for. She said insurance for these events would either become very expensive or they would simply become uninsurable since the exposures were too big.

When it came to load shedding-related theft claims MUA would consider each claim on its own merits, Fourie said. “If we find that the policyholder had a habit of setting the alarm and the alarm was off because of load shedding, we will pay the claim.”

Lazarus and Fourie pointed out that almost all insurance policies included a clause to the effect that when premises were unoccupied the alarm must be operative and functional. Lazarus said three of six insurance MDs he spoke to say theft as a result of a dud alarm system caused by load shedding is not technically covered and they “cannot be blamed for Eskom’s shortcomings”.

Hollard, however, said it would pay personal and commercial lines claims if alarm systems were armed and operative before load shedding and load shedding caused the failure. “We would consider not paying a claim if the alarm failure was due to neglect,” said Warwick Bloom, head of group marketing at Hollard.

Similarly, Outsurance said it would pay claims. “As always, we are not “technical” in deciding on whether to settle a claim or not. In an instance where the client had no control over the circumstances, we will settle. That is after all why you have insurance,” said Willem Roos, Outsurance CEO.

Santam and Mutual & Federal had not responded before publishing.

Edite Teixeira-Mckinon, the deputy Ombudsman for Short-term Insurance (OSTI), said where it was beyond the control of the policyholder – for instance, in periods of extended load shedding when back-up batteries run flat even though the alarm was fully functional – the OSTI would judge the facts in terms of its equity jurisdiction. This allows the technical stipulations of a policy to be overridden by sound insurance practice, to the benefit of policyholders.

For the majority of consumers who cannot afford generators, Fourie advised that burglar bars be considered and proper power surge protection installed in homes. “It’s better to try and prevent losses than think insurance companies will pay,” she said.

Moneyweb is awaiting responses from Eskom as to whether it will accept any liability from insurers or policyholders as a result of load shedding-related theft and power surge claims.

Source: Moneyweb

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Criminals love load shedding – are you covered?