Major headaches for home insurance in South Africa

Short-term insurance companies are facing significant headaches in South Africa as the country faces ever-worsening load shedding, says Mtho Maphumulo, an attorney at law firm Adams & Adams.

Maphumulo said that some short-term insurers have clarified this week that they will not provide cover for damages flowing from an electricity grid failure.

According to the legal expert, there have been reports of global pressure from reinsurers that South Africa is becoming riskier to insure. This follows recent compounding calamities such as the pandemic, Durban floods and July 2021 unrest adding to the damaging energy crisis.

This seems to have now triggered some short-term insurers to reconsider their position insofar as cover for electricity grid failure is concerned.

“This approach – not ensuring grid failure related claims – is most likely to be adopted by most short-term insurers, given the fact that there is no end in sight about the energy crisis – the powers that be do not seem to have a concrete solution to remedy and stabilise the situation.”

Most insurance companies will likely make new changes to reduce their risk exposure, stated Maphumulo.

“It is therefore critical that the insured are aware of the industry changes so that they can take necessary decisions regarding their insurance policies and be covered for exactly what they want to be covered for,” said.

Adams & Adams listed the below considerations for the insured:

• Be on the lookout for correspondence advising of the changes. The insured must ensure that their contact details (with the insurer) are up to date, failing which the insured may be caught by surprise at the time of claiming.

• Where a broker is involved, it may be prudent to ensure that you, as the insured, verify whether there has been any communication from the insurer regarding changes to the policy.

• Some changes are effected at the time of the annual assessment – therefore, you, as the insured, must be on the lookout for whether the relevant provisions on the policy wording/schedule have been changed in any way and whether there has been any change in the premiums. Where a broker is involved, there is a duty on the broker to explain to the insured if there are any changes to the policy.

• It will also be crucial to check whether such an event is regarded as a special peril in the policy – in which case you, the insured, will need to decide whether you want to take out cover for such.

• Cover for special perils comes at a price, so one must be cognisant of that fact. For some businesses, especially those handling combustible material, flammable liquids, heat-generating objects and farms, may need to seriously consider taking out such cover, given their exposure to the risk.

• Where terms of the insurance policy have been changed without any notification to you as an insured, you are most likely to successfully challenge any repudiation that may result.

Damage to home appliances during power surges is a primary concern for consumers and insurance companies. Sumarie Greybe, the co-founder of Naked Insurance, late last year outlined insurance’s stance on the current energy struggle.

She said that geysers are often hit hardest by water and power outages, but it’s important to note that some of the risks associated with them may be covered by a home buildings and contents insurance policy.

However, it’s common for policies to exclude coverage for maintenance issues or incidents that are directly caused by frequent water or power cuts, said Greybe.

As a result, she recommended, among other things, turning off all non-crucial appliances and switching off geysers when away from home for an extended period and installing a surge protector.

Other insurance impacts

Earlier this year, Auto & General detailed a further concern for insurance companies stemming from rolling blackouts

The company said that when a power outage hits, alarm systems, gate motors and electric fencing often stop working – making it easier for criminals to target households.

Auto & General said that if you are burgled during a power cut, cover relating to theft may be subject to debate.

This is because most insurance policies stipulate in their contracts that the house alarm must be activated at all times when the home is unoccupied, added the group.

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