Customers of several big South African insurance companies won’t be able to claim for certain damages to property caused by the collapse of the Eskom grid. According to reports, several insurance companies have a new “Electricity Grid Failure” exclusion that’s being added to their policies. Although total grid failure remains unlikely, it is now a “possibility”, Hollard spokesperson Warwick Bloom said.
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This change, according to Bloom, is because of reinsurers (companies that provide financial protection to insurance companies) have changed their own policies where they would not offer reinsurance cover in the event of a grid failure. “This means that electricity grid failure — as defined in our letter to our clients — is an uninsurable event,” Bloom said. “Along with other insurers, Hollard is attempting to make this clear for policyholders.”
The biggest concern for consumers comes as a result of the ambiguity of the so-called “Electricity Grid Failure” exclusion. This exclusion hasn’t been tested (and hopefully never will need to be), so it is unclear under which circumstances and for which products the insurance companies will choose to invoke this exclusion.
Rudolf Britz, chief actuary for Momentum Insure, said that the company did not cover grid failure itself, but the impact of grid failure continued to be covered. “For example, if your car is insured through Momentum Insure, and an accident is caused due to a traffic light that is not working due to a blackout, your cover remains intact,” Britz stated. “However, if your business does not survive due to a total blackout, it will not be covered.”
Santam has stated that they wish to create clarity about what it would and would not cover under these circumstances. “We continue to experience great pressure from our reinsurance providers to limit any exposure to systemic events,” said Attie Blaauw, Santam personal underwriting head. “In addition, given the frequency and severity of load-shedding, the change in risk of a potential grid failure cannot be ignored.”
