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Geyser insurance – An update

(Updated 15 January 2025)

Geyser insurance is ever evolving and affected greatly by the insurer’s response towards this risk. It is a balancing act between current legislation, client expectations and managing the risk.

What does legislation say?

There are two basic pieces to look at:

 Regulation 3 (Sectional Titles Schemes Management Act 8 of 2011) states, inter alia:

 Other risks against which a body corporate may insure, in terms of section 3 (1)(h) of the Act, are

(a) …

(e)  water escape, including bursting or overflowing of water tanks, apparatus or pipes.

This states clearly that burst geysers should be covered.

Then prescribed management rule 31 qualifies this regulation stating:

“Notwithstanding that a water-heating installation forms part of the common property and is insured by the body corporate, a member must maintain, repair and, when necessary, replace such an installation which serves that member’s section or exclusive use area; provided that where such an installation serves sections owned or exclusive use areas held by more than one member, the members concerned must share the maintenance, repair and replacement costs on a pro-rata basis”.

What does this all mean?

We interpret this very simply: the body corporate indeed does need to insure geysers, pipes etc., however, it is for owners to pay for maintenance and repairs of geysers, including the replacement of old “kaput” geysers.

How do most sectional title insurers respond to legislation (regulations and rules) on geysers?

Insurers are in the business of providing cover for risks. Owners expect to have cover for their geysers. Insurers product cover to meet this demand.

It is a little more complex than that though. In South Africa, geysers (hot water tanks) are typically installed with a five-year warranty. Usually manufactured with glazed mild steel inners, owners are supposed to change their anodes every 18 to 24 months so that the tanks are better preserved against rust and decay. In reality, very few people change their anodes resulting in lower lifespans of the geysers. It is our view that the average lifespan on these geysers, is about seven years. 

When this geyser fails, owners expect insurers to respond. Most insurers have thus, over the years, developed maintenance geyser sections or tailored geyser wordings to cater for this and price their policies accordingly. Geysers are then managed via excess and premium.

Is a system of geyser insurance cover even viable?

The temptation to replace a geyser once it is outside its warranty period is very high. Replacing a geyser rather than repairing it is much more profitable, and owners are happy when this occurs as the insurer is picking up the tab, subject to excess. This causes a higher incidence of geyser replacement claims and is not viable on the long term. It causes high claims ratios ultimately resulting in higher premiums and higher excess. It can even lead to the dilution of cover or policy cancellation, in more severe circumstances.

How can one manage geyser claims going forward?

Mitigation is the way forward and we suggest that, as a norm, making use of the insurer’s appointed or recommended call centre, is often, a good place to start. We say often, not always. Very often, a scheme already has a trusted service provider, in which case, making use of the trusted supplier/plumbing services may be the best option. The statistics (claims history) will very quickly tell a story, and something an experienced broker can assist with.

Appointing an insurance broker who understands sectional title and committed to mitigation of risk, is another way to manage this risk. Such insurance brokers will properly assess your policy and claims and very quickly see where things are going wrong. One of the things a broker may suggest, as we often do, is that a higher spec geyser option be structured into the policy, such as a stainless-steel geyser with a 10-year warranty.

In conclusion: Without mitigation efforts, one can expect higher premiums, higher excesses and reduced cover where geyser replacements are excessive. Mitigation by way of using trusted suppliers and reputable geyser call centres coupled with high spec products will go a long way to stabilising claims ratio and having a sustainable insurance premium, both for the insurer and insured, going forward.

If you found this article helpful, please do share with your colleagues, fellow trustees and owners!

Author:  Mike Addison

Addsure is a leading sectional title insurance broker. Get fit and proper advice from advisors who understand sectional title.