Load-shedding and grid failure have become a major concern for the insurance sector, according to Mike Brews, director at Horizon Underwriting Managers. The frequent power outages resulting from the ongoing electricity crisis have led to disruptions in both businesses and households, with increased risk and financial losses for policyholders.Brews said insurers were now deeming grid failure as an uninsurable event due to the potentially catastrophic claims that could arise and lead to the closure of most insurers in the market. “Consequently, many insurers are now incorporating a “Grid Failure Exclusion” in their policies as a means of risk management,” he told Freight News.Policyholders are increasingly being advised to make sure they are adequately covered. With load-shedding reaching unprecedented levels, there is also an increased risk of damage to electronic equipment, such as computers and servers, during power outages. This can result in data loss or system failure, causing further financial losses for businesses.The need for businesses to take proactive measures to mitigate the impact of load-shedding on their operations has risen dramatically. This includes investing in alternative power sources, such as generators or solar panels, to ensure continuity of their services.According to Brews, the insurance sector has seen a surge in the transportation of solar panels, inverters, and batteries as citizens and businesses seek alternative power sources to combat power outages. “Unfortunately, the black market for these items has also grown, leading to an increase in losses for insurers,” he said. “The risk associated with alternative power products has now surpassed that of cellphones, creating a new challenge for the insurance industry.”In response to these developments, insurers have been raising rates and excesses, as well as introducing security warranties and coverage restrictions, to effectively address the challenges at hand.South African business owners have expressed their dissatisfaction with the insurance industry's decision to exclude coverage for losses arising from load-shedding or grid collapse events. This prompted the ombudsman for short-term insurance to release a statement earlier this year clarifying that insurers could not be forced to continue providing coverage due to the contractual nature of the insurance policies. The ombudsman also acknowledged that insurers had the right to manage their risk by including “Grid Failure Exclusions” in their policies, leaving limited scope for intervention.Insurance companies have recognised the challenges presented by the current electricity crisis, acknowledging that it is not an ideal situation for businesses. While load-shedding and blackouts are not considered insurable risks under an insurance contract, insurers are advising businesses to review their policies and ensure that they have adequate coverage that includes potential damage caused by power surges. It is important to note that damage to contents resulting from power surges may be covered under specific insurance products, providing some level of protection for policyholders.
