From rolling blackouts to civil unrest: These risks keep insurers awake at night

Several risks are keeping our insurers awake at night due to various things currently playing out in South Africa that are likely to affect insured consumers in 2023. These will significantly affect consumers who either do not have the right cover in place, or even none at all.

“The risk profile, especially for home owners, is changing rapidly, given the severe and frequent increase in weather disasters, as well as impact from planned power cuts, which is forcing many consumers to resort to alternative power supply in an effort to keep the lights on,” says Lizo Mnguni, spokesperson for Old Mutual Insure.

These risks are rolling blackouts, climate change causing adverse weather, the economic climate and civil unrest.

ALSO READ: How going off-grid will affect your insurance

Rolling blackouts

“While everyone has come to accept the instability of the national grid, reports suggest that load shedding is likely to be a guaranteed event for the next two years. In this scenario, we are in for a bumpy ride,” Mnguni says.

With the unprecedented level of load shedding implemented over the past 12 months, he says Old Mutual Insure noticed a significant increase in claims, especially power surge claims, that almost doubled. Since 2018 the number of electronic equipment, burst geysers and power surge claims has increased by 93%.

“Power surge claims are increasingly difficult to insure. Insurance companies are in the business of managing risk and when the frequency and severity of claims increase, it can affect the availability and affordability of insurance coverage.”

Mnguni encourages policyholders to take the steps necessary to protect electrical equipment from power surges, with, for example, the installation of power surge protectors. Policyholders should also take other preventative measures, such as turning off electronics during load shedding, unplugging non-essential devices during storms and keeping electronics away from sources of heat and moisture.

When policyholders take proactive measures to protect their electrical equipment, they not only reduce their risk of damage from power surges but also help to maintain the availability and affordability of insurance coverage.

Many consumers now invest in alternative power supplies such as inverters, generators, UPS batteries and even solar power and solar will likely become popular as government recently introduced a tax break on solar panels for individuals.

“Make sure you have the right cover in place for the right back-up system, which may either be building or content cover to ensure you are not at risk of not being covered for a loss event,” Mnguni says.

If you go to the expense of installing an alternate power supply, do not cut corners. “Ensure you have the proper warranties in place and use a certified installer.”

ALSO READ: As weather catastrophes become more common being underinsured can be devastating

Climate change and weather

Mnguni says consumers could face significant weather risks in 2023, which makes it even more important to either keep your insurance cover in place, or ensure you have adequate insurance, so that you are in a position to repair property that is lost or damaged.

South Africa is currently in a prolonged La Niña cycle, which is wreaking havoc on the country. “We have seen the effects of the Johannesburg floods in late 2022, brought on by La Niña and of course, the biggest catastrophic event of 2022 and in history, the KwaZulu-Natal floods.”

Old Mutual Insure’s data and research reveals that the average annual catastrophe claims in the past 10 years between 2012 and 2022 are 10 times higher than between 2000 and 2011.

“This is also changing the risk profile for policyholders as well as geographic locations. For example, previously, if you lived in KwaZulu-Natal, the likelihood of mudslides may have been remote, but now, with the weather changing so rapidly, the risk of a mudslide may have increased dramatically compared to what it was 20 years ago. Your policy may not have covered it before, but now it may be essential,” Mnguni says.

Policyholders may have previously thought that they do not need specific insurance because the infrastructure surrounding their property is good, with minimal risks, but this is also changing.

“You are generally covered for it under the buildings cover, but we see some insurers exclude flood risk from policies in areas where there are regular floods. In this scenario, make sure you review your policy and that you still have cover for these events,” says Mnguni.

There is clear urgency for consumers who thought that they would never need insurance, to now start thinking about it.

ALSO READ: How to cut spending while keeping your long-term insurance

Economic climate

Mnguni says high inflation will be around in the early part of 2023, before tapering off in the second half of next year. “With the inflation situation, it is even more important to be insured in 2023.”

Old Mutual Insure data suggests that used car prices increased by between 8% and 14% in the past two years, but the average cost per claim also increased significantly. The company’s claims inflation has been on an upward trend since 2021 and this continued in 2022.

Civil unrest

“There is a greater risk of civil unrest in 2023 compared to 2022, especially around the instability of the grid. We are keeping our eye on this,” Mnguni says, recalling the unprecedented riots of July 2021.

He reminds policyholders that if they experience damage to their properties due to civil unrest, it would be covered under Sasria. “Most people have this cover simply by having an insurance policy. If you have buildings or contents insurance, as well as car insurance, you will almost always have Sasria cover in place.”

However, it would be a good idea to double check if your insurance includes Sasria cover.