The Ombudsman for Short-Term Insurance said yesterday there could be no intervention in insurers changing their position on covering load shedding or grid collapse events because of the contractual nature of the deals.
Financial platform Moneyweb reported on Monday that as South Africans contended with the worst load shedding on record, the insurance industry faces a dilemma that has triggered the introduction of exclusionary clauses exempting insurers from paying out claims arising from an electricity grid failure.
Unlisted insurance giant Hollard had informed its clients that it won’t be covering any losses caused by the collapse of the national grid, with Santam due to implement a similar exclusion in April, it reported.
Business Report spoke to Senior Assistant Ombudsman, Peter Nkhuna, who said the Ombud’s jurisdiction was limited to disputes between an insurer and the insured and that either party had a right to revise the terms of engagement when they no longer worked for them.
“If anyone of the parties does not wish to continue with the agreement or changes, they have a right to do so. We are talking about short-term contracts that may be from month to month or even over a year and not even the constitutional court or government or the courts can change that,” Nkhuna said.
He noted that insurers were reconsidered the coverage they were providing amid power surges and load shedding.
He said load shedding was likely to continue to impact South Africa. It had impacted and permeated all sectors of society on a domestic and business level, which required society to consider the ways it impacted on them and make appropriate adjustments.
“The statistics have been there for a while, a lot of things tend to happen with load shedding, there is more and more happening as there is more and more load shedding," Nkhuna said.
He noted the higher incidents of damage to electronic appliances at domestic level and damage to business assets, including but not limited to higher thefts incidents, car accidents as traffic lights work erratically, losses in the agricultural sector as outages spoilt produce and processes as well as in the logistics sector.
“The quality of the environment is not the same as we used to know it. The wider discussion is that load shedding will be here possibly for longer than we can anticipate. We have had farmers raising the spectre of insecurity, which we had not really considered before, so the effects vary between the immediate and what would come in the longer term,” Nkhuna said.
Even re-insurers were in an awkward position because they could not take a risk that the insurance companies they represented could not take.
“This has a wider spectrum effect on all our lives,” Nkhuna said.
The power utility is currently going through its worst bouts of load shedding in history and has targeted five key priorities to ease power cuts, including a 24-month generation recovery plan and securing funds to purchase the diesel used to run emergency units.
This has led to calls for the government to declare a National State of Disaster on Eskom, a move, which led to a Cabinet Lekgotla meeting last week to investigate whether it fulfilled the legal requirements.