The geyser has become one of the biggest challenges for insurers, underwriting managers and trustees wishing to manage their premiums.
Roughly 70% of all claims are geyser related and so they have become a challenge for insurers, underwriting managers and trustees wishing to manage their premiums.
This can have adverse effects on the people involved, because the insurer needs to make a profit. A 60% claim ratio is only enough to break even. This means that a claim ratio of 60% is more or less the break-even point.
Put in simple terms, for every R100 of premium received, the insurer is not able to pay more than R60 in claims on average.
If you take an apartment block with the average of 30 units, in which the body corporate would normally pay about R2,000 per month on premiums, or R24,000 per annum. Weigh this against the cost of replacing your average geyser which is R6000.
If you include other damage as a result of this (i.e. water damage) then the claim would rise to R10,000 or more. If there are three claims as such in a year then the claims ratio would be 125%
In order to achieve a 60% claims ratio in such a situation the insurer would have to double premiums. This then results in everyone’s levy contribution going up roughly R800 annually per person.
Geysers do not usually explode or burst, but rather, they corrode and eventually give in. Simple wear and tear and corrosion are sped up by lack of maintenance. Perhaps the geyser is damaged on route before they are installed.
It then start corroding due to rust or wearing away until it is eventually compromised. If the geyser isn’t maintained it won’t be long before it needs to be replaced. Generally the insurance is covered by the body corporate, however the maintenance needs to be done by the owner.
Insurance policies are structured in different ways in an attempt to manage this high-risk area. Some of which work the basis that the older the geyser, the higher the excess. Others offer full geyser cover for a certain amount per month per geyser.
Some offer a maintenance plan to take control of the unnecessary replacements that occur, and so on. In either scenario, it may be unavoidable to pay a higher excesses but this will save owners from having to pay higher premiums each month.
It would be ideal for owners arrange for a plumber or a specialist service provider regularly service and repair geysers to as this would reduce all round costs.
Rules may need to be adjusted to allow them to be easily changed in order to allow the body corporate to take charge of geyser maintenance in certain circumstances.
Complexes with all geysers situated outside on common property are able to be maintained much easier by the body corporate, rather than when 30 owners must call in 30 different plumbers, especially when some owners may be away. However, current prescribe rules don’t cater for this.
For this problem to be combatted, legislators, together with input from the industry should allow for the flexibility of who can maintain the geyser.
In the meantime, trustees need to engage more with their brokers or insurance advisors about higher claims ratios and find the best alternative for all the owners, even if this means imposing higher excesses.
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