The impact of load shedding on insurance

It is not only consumers who feel the impact of load shedding, insurance companies do as well. The unexpected escalation in load shedding to level 6 earlier last week, resulting in warnings that the country could be subjected to an even stricter electricity reduction protocol, had many people worried.

South African insurer, Santam, was also inundated with media enquiries on a range of issues, such as whether load shedding is an insurable risk and its impact on insurance claims, says Attie Blaauw, Santam head of personal lines underwriting.

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Insurance coverage for load shedding? 

Blaauw says load shedding or blackouts are not an insurable risk under an insurance contract. “However, insurers offer cover for damage to sensitive electronic items caused by power surges. Power surges and dips happen as a result of load shedding, leading to damage to electrical and electronic equipment in your home.”

When load shedding stages increase, so does the frequency of the rotational power cuts, which increases risk of damage to sensitive electronic items due to power surges, fires and crime, such as burglaries as a result of security systems not operating properly.

Blaauw encourages South African consumers and businesses to revisit their insurance policies to ensure they have sufficient cover which includes potential damage caused by power surges. “Although load shedding and/or blackouts are not an insurable risk under an insurance contract, the damage to home contents, caused by power surges, is often covered. But again, this depends on the individual product.”

In some cases it is included and in other cases it is an optional add-on for which the appropriate cover limit must be selected. The power surge cover limit should also be reassessed regularly to ensure all new electronic equipment is covered for the correct replacement value, Blaauw says.

Santam has seen a significant increase of about 60% in claims for damage to sensitive electronic items due to power surges across its personal and commercial insurance portfolios in the first half of this year, as reported in its interim results released on 1 September 2022.

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How to avoid damage caused by load shedding

Blaauw has these tips for consumers and businesses to protect their devices and stay safe during load shedding:

• Use surge protection: Electric surges are one of the biggest causes of damage to equipment during a power outage. Installing a surge protection device can help minimise some damage in unforeseen situations. Have a surge protection device fitted to your electrical distribution board or alternatively at the power outlet to the electronic device.
• Ensure that your alarm system is in good working condition and that the back-up battery is fully functional to provide power to the system in the event of load shedding.
• Spare torch or headlamp: Keep a torch in your car if you arrive home at night during a power outage. Most smartphones have a built-in torch or torch apps which come in handy during unexpected power outages.
• Emergency contact information: Save emergency contact information on your phone but also keep a paper copy safe and accessible. This should include contacts for emergency services, such as the fire department, police and/or medical services. Also include the contact information of friends and/or family along with making sure that insurance information is accessible.  
• Charge your cell phone, laptop and tablet: Ensure your cell phone, laptop and tablet are fully charged ahead of scheduled blackouts and charge them again as soon as possible after the power returns. It is also a good idea to have an emergency phone charger, such as a power bank that can come in handy during extended power outages.
• Unplug your devices: Consider any electrical connection as live during a power outage as power can return at any time. Unplug any electronic devices or equipment or switch them off at the wall, including telephone cables. This can help avoid power surge damage when the power supply is restored.
• Back up your data: It is always important to back up data in case of a hard drive crash or unforeseen electrical fault. Online “cloud-based” backups are very convenient and are mostly automated, which means that you have one less thing to worry about.

“The reality is load shedding is not going away any time soon and damage will occur, but everyone has a responsibility to ensure they are prepared for the power cuts and can take steps to minimise the chance of damage as far as possible.”