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Load shedding destroys electrical appliances – what it means for home insurance

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Insurance claims related to power surges have increased by almost 50% over the past year, thanks to load shedding.

“If we compare our incident rates from January 2022 to July 2022 with those from January 2021 to July 2021, we have seen a 46% increase in surge loss rates. [for the former period]”said Wynand van Vuuren, King Price’s Customer Experience Partner.

Dialdirect manager Anneli Retief told MyBroadband that their surge requests have doubled over the past four years.

Outsurance also noted an increase in claims related to power surges during regular load shedding.

An Outsurance spokesperson explained that the intermittent power supply caused by load shedding leads to power surges and power drops.

“These surges and sags in the electricity supply damage electrical circuits in electronic devices and, in some cases, cause fires.”

Lizo Mnguni, head of underwriting at Old Mutual Insure, pointed out that fires resulting from power surges were an often overlooked risk.

“If you’re away and some of your electronics are still plugged in when the power comes back on and on, it could cause a fire,” he said.

“We’ve seen several cases where this has happened, resulting in more damage to the insured,” Mnguni said.

Regular load shedding has also increased the number of burglaries and traffic 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, shedding led to a 3.2% increase in burglaries and a 5.2% increase in vehicular accidents,” Retief said.

“Over the weekend, those numbers more than doubled, increasing the risk of burglary by 8% and that of vehicle accidents by 13.5%.”

Naked Insurance co-founder Ernest North confirmed they have also seen an increase in claims for car accidents and fixed items such as gate motors and geysers.

“We’ve had to replace a lot more geysers over the last four to five months,” he said.

Besides obvious damage, load shedding can also render an insurance claim invalid because it does not meet all the conditions of the policy.

“Most insurance policies state in their contracts that the house alarm must be activated at all times when the house is unoccupied,” Retief explained.

“So if your home is broken into during a power outage, then theoretically your theft-related coverage would be moot.”

However, Retief said each case is considered on its own merits.

“We believe load shedding is out of our customers’ control, and therefore they should not be penalized for it.”

Naked’s North added that insurers generally don’t cover broken items because of the long-term damage caused by shedding.

“If your refrigerator randomly stops working after four months, during which there have been regular load shedding, you cannot claim from your insurance.”

Ernest North, co-founder of Naked Insurance

King Price’s Van Vuuren explained that insurers face a new challenge as these cases increase.

“One of the biggest challenges for the insurance industry right now is accurately differentiating between power surge claims and normal component failures due to power variation.”

“Traditionally, component failure is not covered by a normal risk-based policy,” Van Vuuren said.

“In the majority of cases, this circuit damage renders the item uneconomical to repair,” Outsurance said.

To protect themselves from the risk associated with load shedding, insurers mainly use two methods.

“Various risk mitigation measures are also being introduced in the industry to limit the extent of their exposure, either by introducing endorsements on policies or by introducing an alternative franchise structure,” Van Vuuren said.

Discovery Insure announced this week that it will increase the deductible for surge-related claims by R1,250 from September 1, 2022.

He also announced several other excess increases, including on vehicles, buildings, household contents and portable goods.

Van Vuuren said one of the endorsements used by insurers requires customers to install a surge protection device on their distribution board.

“The cost of installing such a device with a new certificate of conformity is around R2000 – R3000,” Van Vuuren said.

He said the most affordable option involves consumers purchasing surge protection outlets for expensive electronics.

Another preventive measure is to install backup batteries for alarm systems, garage doors and electric gates.

“By all indications, the load shedding is going to be with us for some time,” said Van Vuuren of Dialdirect.

“However, a proactive approach to home and road safety, along with comprehensive insurance coverage, goes a long way to mitigating the risk and protecting you and your loved ones.”


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