The Impact of Load Shedding on the Agri Policy | Blignaut BlueStar | Sanlam Financial Planners Pretoria

Business Insurance

The impact of load shedding on the Agri policy

Once again load shedding is part of our daily lives and numerous questions have been raised about whether our policyholders do indeed have cover in terms of the policy due to the potential negative impact load shedding can have on the agricultural sector and the broader value chain.

Electricity is an important input cost for many farmers, especially those who depend on irrigation.

Load shedding can affect irrigation activities directly in that farmers cannot utilise their electric pumps during their access window to water, and/or indirectly by the load shedding of key irrigation scheme pump stations. In the latter case, a farmer may have access to electricity, but the irrigation scheme pump stations may be affected by load shedding (or vice versa).

It can also result in damage to loss of electrical and electronic equipment and machinery as a result of power surges/spikes caused by the supply of electricity being switched on or off. Furthermore, physical loss of or damage to stock-in-trade due to the interruption of the electrical supply (mostly refrigerated stock). Loss of income following the interference with or interruption of business as a result of interruptions in the supply of electricity is a reality.

Understanding Coverage in Agri Policies

It is important to understand your indemnity in terms of your policy. Santam has extended the wording of the Fire and Office Contents section to include R50 000 power surge cover on all Agri policies.

Damage to refrigerated stock due to an interruption in power supply can be insured whereby Santam provides cover for the loss of or damage to such stock as a result of the total or partial failure of the public supply of electricity to the insured premises. However, the electricity provider merely withholding electricity is excluded, unless such withholding is caused by damage to the utility.

In a case where load shedding is applied due to there being insufficient capacity at the electricity generating station, no cover will be in place. In cases where the interruption is a direct result of loss or damage to the electricity generating unit’s property and/or equipment, cover will be provided subject to the 24-hour exemption period. As soon as supply has been restored, the cover will lapse. It is also important to take note of the reference to a public utility. This cover therefore is not available in respect of insureds who generate their own electricity. If the power surge causes a fire, the fire will be covered in terms of the Fire and Office Contents section.

Cover for electronic data-processing equipment is available. We define this equipment as “electronic apparatus for processing and calculations or controlling functions which are expressible in numeric or logic terms”, such as computers, laptop computers and similar equipment. It is company underwriting policy that all data and power lines/cables that enter of exit the premises be equipped with surge arrestors. Such surge arrestors reduce and prevent damage to electronic equipment. It is therefore important to ensure that policyholders do indeed protect their equipment with the necessary surge arrestors.

For Business Interruption where Fire peril now includes power surge, cover is available for damage to Public utilities. Policies that require the installation of an alarm stipulate that such alarm be activated and in working order when the insured premises are unoccupied or closed for business. Santam has undertaken to indemnify insureds in the event of systems failing to operate as a result of load shedding. The interruption of electricity must be beyond the control of the insured. The same principle will apply in the event that the response company could not react to the alarm’s signal due to an interruption in the supply of electricity. However, insureds must ensure alarms are in working order and are activated under normal circumstances.

It is important to note that most residential and industrial alarm systems’ back-up batteries can last for at least 6 hours. Therefore, policyholders must ensure their alarm system’s batteries are tested regularly so that the maximum protection is provided by the system.

Under the Business All Risks section, cover is provided for the loss of or damage to the insured property irrespective of the cause. Therefore, power surges are covered as no specific exclusion applies.

The Accidental Damage section includes accidental physical loss of or damage to the insured property that is not otherwise insured or for which insurance is not available. It is important to remember that the insured will therefore not enjoy cover in respect of damage to electronic equipment caused by a power surge, as cover is available in terms of the Electronic Equipment section. The only exception to this rule is the All Risks section. Items that can also be insured under the All Risks section can also be insured in terms of the Accidental Damage section.

Machinery and equipment (excluding electronic equipment insured in terms of the Electronic Equipment section and machinery insurable in terms of the Machinery Breakdown section) insured in terms of the Fire section, exceeding R50 000, will enjoy cover in terms of this section if the damage is caused by power surges. The Machinery Breakdown Section does provide cover against power surges, except if the power surge is caused directly by lightning.

Increasing numbers of policyholders are installing generators on their premises to counter the impact of load shedding. All such installations must be done by qualified personnel. Various cases in which installations were not done properly and damage occurred as a result thereof have already been reported.

The lifespan of electrical and electronic equipment can be influenced by the ill-considered switching on and off of such equipment. Of course, load shedding has the same effect on such equipment. If the equipment is not damaged by a sudden and unexpected identifiable cause, no cover applies. Any mechanical, electrical or electronic breakdown is specifically excluded unless it is the result of an insured peril.

Don't hesitate to consult with a financial adviser to discuss your insurance policy comprehensively and ensure you have the protection you need.

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