(June 2023)
The insurance market has been turned upside down over the past 5 years. From COVID-19 to Riots, Floods, Fires, Supply Chain Issues and now add close to 50% increase in power surge claims to the mix…
I felt it would be a good time to share some of the current points of contention when it comes to Buildings and Contents risks and the risk management thereof. Amongst the industry insiders, the chatter is a buzz on the following two topics:
#1 – The Importance of Maintenance of Assets to Ensure a Good Insurance Claims Experience
It’s good to keep in mind that personal insurance policies are designed to respond to most risks of both natural and unnatural causes such as fire or explosion, lightning, burglary, hi-jacking, earthquake, flooding, storm, wind, hail, or snow. Whatever the case, such losses must be caused by a sudden and unforeseen event.
There are typical exclusions in policy wordings that consumers should be aware of, such as gradual deterioration caused by poor maintenance, defective design, wear and tear, mold, discoloration, rising damp, rot, insect infestation, vermin, weeds, roots, etc.
“It is every homeowner’s responsibility to ensure regular maintenance is budgeted for and carried out on their property, as this helps to maintain the integrity of the construction and prevents weak points which can be exposed by severe weather events such as storms or flooding. This requires that the roof, structure and all its fixtures including swimming pool, lapa, boundary walls and paving must be kept in good condition in accordance with the policyholder’s responsibility towards duty of care as outlined in the insurance contract,” – Attie Blaauw, Head of Personal Lines Underwriting at Santam.
The Ombud for Short Term Insurance worte that the primary casue of insurance claim rejections (53%) is as a result of losses casued by defective design, construction or workmanship, wear and tear, and lack of building maintenance. Of which roughly 70% is from expected wear and tear.
The take away is that it is very important for policyholders to have a clear understanding of the difference between accidental loss or damage to property arising from an insured event, and losses caused by gradual wear and tear which are typically not covered by insurance and require regular maintenance by the policyholder.
#2 – Power Surge, the “Shocking” Reality
Santam have published that the number of power surge and mechanical, electrical or electronic breakdown claims continues to increase at a much higher rate than the increase in loadshedding hours. Sadly, this is compounded by an increase in fraudulent claims where policies are being taken up, within 6 months there are power surge claims and then the policies are lapsed by the policyholders after claiming.
The majority of insurers have or are in the process of restructuring their coverage and terms in regard to Power Surge. Talking about the current state of the insurance industry, Oswlad Kuyler, head of Short Term Insurance at Consult by Momentum said that “This will, in turn, impact what your insurance company charges you; either in the form of a premium increase or through remedial actions, such as an increase in your self-insure portion (excess).”
With a reference to the Maintenance Topic above… with all insurers it is a contractual requirement that policyholders take due care (in fact to act as though you have no insurance) in regard to taking steps to be careful, and reduce the changes of losses occurring. The Insurance Ombud (OSTI) has advised that they have seen a high increase in the number of claims insurers are rejecting on the grounds that there was no evidence that policyholders took due care in maintaining or protecting their assets.
This is also part of the reason insurers are endorsing their policies with conditions to fit Power Surge protection to electronics or entire electrical DB boards.
Leading insurers have applied excesses as high as 30% of the claim or a minimum of R5 000 to any electrical surge claims where there is no use of power surge protection devices. As a result, it should now be considered that making use of power surge plugs or DB board protection forms part of a homeowners (and content owners) due care regarding loss prevention efforts for their assets.
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I trust this gives an idea of the importance of both Maintenance AND Risk Management / Mitigation, especially when it comes to power surge at the moment.
Should you have any questions, please don’t hesitate to contact us.
