There have been headlines on various media platforms regarding insurers “pulling the cover” for claims in the event of a failure of the national electricity grid. This may give rise to the assumption that such cover existed in the first place. Please be advised that insurers are now providing “absolute clarity” that should such an event happen, the unknown consequences of this and any damages (physical or financial) related to such an event is not covered – grid failure is NOT an insurable event.
The reports state that the respective Insurers will not cover any loss, damage, legal liability, cost or expense of whatsoever nature directly or indirectly caused by, contributed to by, resulting from, arising out of, in connection with a national (including regional, municipal, local and/or private) interruption, failure or suspension of the electricity grid of South Africa for whatsoever reason, whether due to damage, an inability and/or failure, whether partial or total, of the utility supplier to generate, transmit or distribute electricity, or otherwise.
Example:
- if a defined event takes place at your premises (e.g. fire, stock deterioration, burglary, leading to business interruption and so on) that has caused financial loss to the business because of grid failure, there will be no cover.
It is hoped this situation of Grid Failure will not materialise, however, we want to make our clients (Personal and Commercial) aware that there is no cover.
Recommendation to risk manage and self-mitigate the loss/damage : If possible invest in alternative energy solutions that can power your alarm systems, outdoor lights and electric fences. From a business perspective, ensure that you regularly back up data via Cloud solutions, consider the amount of Stock you hold at any given time, and possibly evaluate your business model for opportunities to be less energy dependent.
Note:
What is the difference between Loadshedding and Electricity Grid Failure?
Loadshedding refers to the intentional, partial, or total withholding of electricity supply by any party other than the insured, which is implemented in phases and does not affect a municipality, province or country at the same time.
Electricity Grid Failure/Interruption refers to a partial or total interruption, interference, suspension, blackout, and/or failure of the electricity supply from the national, regional, or private grid to the electricity grid of South Africa.
It is at this point remarkable that power surge cover remains in place as per your own Policy provisions as may apply albeit we have noted insurers applying more stringent underwriting (e.g. higher excesses; condition for SABS surge protection; limited cover rather than full section sum insured).
It has been explained that Power surge and dips can happen as a result of loadshedding, leading to damage to electrical and electronic equipment. So the increase in stages of loadshedding means so too the frequency of the rotational power cuts and so to increases the risk of damage to such aforementioned equipment due to power surge. Power surge does not only happen during loadshedding albeit the risk increased. Most damage is said to occur when the electricity supply is restored which an Insurer states is a separate event to load shedding.
In short, the intent of the clarification of Grid Failure as a formal exclusion is not to cancel out Power Surge cover.
This subject, may be construed as a negative / threat, however, there too are positives / opportunities when looking at Risk Management – it is time for each of us to innovate in such challenging environments and seek out the opportunities that allow us to become more independent of our reliance on public utilities.