By: Kenneth Lourens

(Consort) Insurance considerations and risk mitigation of power surges

Increasing insurance claims

With the rise in load-shedding and electricity disruptions, Insurers have experienced a ‘surge’ in claims related to damaged electronics and other related electrical appliances and/or equipment.

Policy adjustments

Many Insurers are reviewing policies to address the growing risk of power surges. Some have removed power surge coverage from general accidental damage policies, offering it as an add-on instead.

Exclusions and deductibles

Certain insurers have introduced clauses that exclude coverage for damage caused by power surges following outages of more than 12 consecutive hours of grid failures. Notwithstanding the latter, some insurers have increased their deductible structures where such losses are indemnified in terms of the policy.

Importance of surge protection

To mitigate damage, Insurers recommend the installation of surge protection devices.

Challenges for Insurers

The increasing frequency and severity of power surge claims pose challenges for Insurers, potentially impacting the availability and affordability of insurance coverage. 

Focus on risk mitigation

Insurers are focusing on proactive risk mitigation by guiding policyholders in assessing their insurance needs and offering specialised products to protect against power surges. 

Long-term impact

The electricity shortage crisis in South Africa presents both challenges and opportunities for the insurance industry to demonstrate its adaptability and commitment to protecting policyholders in the face of unforeseen events.

Why surge protection is more important today

In the 1950s, power surge coverage was less relevant due to the robustness of electrical systems and simpler electronics. Today, modern appliances and machinery rely on microprocessor technology, which is highly sensitive to voltage fluctuations. Additionally, the increased frequency of load-shedding has intensified the occurrence of power surges, making surge protection a necessity.

How surge protectors work

Surge protectors act as a safeguard against sudden voltage spikes. If the voltage rises unexpectedly, the device diverts excess electricity to the ground, shielding connected equipment from damage. Similar to a pressure relief valve, surge protectors remain inactive during normal operation but engage instantly when an overvoltage occurs.

A properly installed surge arrester at the main electrical panel can protect devices, worth thousands of rands, from damage. However, most surge protectors do not guard against data line surges, meaning additional protection is required for Wi-Fi routers and CCTV systems.

Types of surge protectors

Main distribution board surge arresters (type 1 and type 2)

Installing a high-quality surge arrester in the main electrical panel provides broader protection for an entire building’s electrical system.

Plug-point surge protectors (type 3)

These portable surge protectors offer protection for individual devices, such as computers and televisions, but rely on a proper grounding system.

Industry applications of surge protection

Various industries rely on surge suppression resistors to safeguard electrical and electronic equipment. By understanding the risks associated with power surges and implementing appropriate protective measures, individuals and businesses can significantly reduce equipment damage and financial losses.

Grid failure and load-shedding exclusions

Notwithstanding the installation of surge protection devices, clients need to be mindful of policy exclusions that have been introduced into policy wordings. These exclusions may have a negative impact on claims if it can be proven that the loss or damage was attributed to grid failure or load-shedding. The main causes of loss or damage are the constant fluctuation and the on-off power supply. This unstable power supply may bring about a gradual deterioration of parts or power supply units/boards installed in the equipment. The end result is that ‘wear and tear’ may be deemed to be an exclusion under the policy, resulting in a rejection of the claim.

Consort’s advice on surge protection

Consort Technical Underwriters supports the installation of protective measures. It is important, not only financially, but also environmentally to prevent fires and explosions. Make sure your client is informed and protected.

Whilst insurance compensates for the material loss, it cannot compensate for the loss of time and inconvenience. Be safe by playing it safe.

Consort Technical Underwriting Managers