Load shedding leaves consumers vulnerable

Consumers and business owners need to take all reasonable steps to protect themselves from losses resulting from power failures due to load shedding by Eskom, the country’s only provider of electricity.

Paul Goodall, Manager: Reinsurance at Lion of Africa Insurance, says the frequency of load shedding is a crisis for the country, industry and consumers, but individual consumers are the most vulnerable to economic losses due to power failures or surges. 

“Consumers need to take all reasonable steps to mitigate losses and damage as their insurance policies may not cover damage caused by load shedding,” says Goodall. 

The exclusion of losses due to load shedding is part of the standard wording of most short term insurance policies, which states that the policy “excludes any loss or damage which results from the deliberate withholding of power”. 

This clause was introduced many years ago to exclude claims due to interruptions of utility services and, even though load-shedding may not have been contemplated at the time, the exception effectively excludes damage or loss arising from load shedding, says Goodall. 

He advises consumers to contact their broker or insurance company to ascertain whether and to what extent their current insurance policy will cover damage or loss due to load shedding or power surge. 

In most cases, if policies cover such events, insurance companies will accept responsibility provided that policyholders have taken all reasonable steps to mitigate the risks. 

The greatest risk facing consumers is an increase in burglaries when the power is off and their alarm systems don’t work. 

In this instance “reasonable steps” by the policyholder includes making sure that the battery for the alarm system is fully charged, properly maintained, serviced regularly and, hence, operating optimally. Such systems can last for up to four hours which means that they should outlast the load shedding period. However, additional problems can arise with stage 3-load shedding, says Goodall. 

“The increased frequency of power interruptions means that batteries may not recharge completely between power cuts. In this instance, insurers may require evidence that the policy holder has taken all reasonable steps to prevent losses immediately or as soon as possible after the power interruption.” 

It is unlikely that consumers will be able to claim for damage from their insurance companies for the deterioration of food stuffs in fridges and freezers due to load shedding. Goodall says cover against the deterioration of food stuffs as result of power interruptions is not usually covered under Domestic policies, but could be covered in the event of natural events (like lightning) or if the outage results from damage at a power station or sub-station. 

His advice to protect food stuffs during power outages is to replace any damaged seals and avoid opening and closing fridge or freezers doors as most modern fridges and freezers are designed to stay cool for longer periods. 

Goodall says damage to low voltage domestic equipment, including cell phones and computer and audiovisual equipment, due to power surges after reconnection is usually covered under the “All Risks” provisions of Domestic insurance policies. It is therefore essential that Domestic policyholders contact their insurers or insurance brokers to ascertain whether such damage would be covered by their insurance policy. 

Business owners are also urged to consult their insurance company or broker as they face more complex issues. 

Goodall says the wording of most business insurance policies is fairly similar across the industry, but business owners must ensure that they fully understand their policy coverage and, if necessary, arrange such additional covers as may be available. 

With load shedding a part of life for South Africans for the foreseeable future, insurance companies also face challenges both as insurers and as consumers. 

Goodall says insurance companies have a responsibility towards their clients to pay claims. 

“Insurance companies are not intent on hiding behind the fine print in policy documents and are committed to the Treating Customers Fairly regime initiated by the Financial Services Board. To make sure that customers are fully informed Lion of Africa will be endorsing its Commercial policies so as to clearly express the benefits which are available to policyholders.”