Statistically, around 70% of claims are geyser-related. Geyser replacements seem to account for half of these, the other half being the resulting damages i.e., damages to the property such as ceilings and flooring after a geyser has burst.
What insurance is needed?
Regulation 3(e) of the Sectional Titles Scheme Management Act (STMA) suggest that geysers should be insured against bursting and Prescribed Rule 31 (also the STSM Act) advises that the maintenance of geysers is for the account of the owners.
Accordingly, the unforeseen bursting or escaping of water should be insured, not wear and tear; whereas aged geysers must be maintained (or replaced) and should be paid for by the owner who uses the geyser.
Did you know that as much as 70% of claim costs accumulate from events that should not be insured? Most geysers need replacement as a result of wear and tear, decay, lack of maintenance, and subsequent collapse. Therefore, if regulations and prescribed rules are properly adhered to, the body corporate should not be insuring repairs, maintenance, and replacement of old geysers.
What trustees must consider
There is usually an expectation from owners that geyser replacement should be covered, to some extent at least. Geysers form part of the buildings; therefore, the trustees may elect to insure geysers. The question is: Should trustees insure wear and tear, maintenance, etc.?
The market seems to demand that geysers be fully covered and as the product offerings are available, it is generally accepted that geysers are covered.
Trustees negotiate premium excess and rate with the insurer under advice from the insurance broker. With this in mind, trustees can seek out the best and most appropriate excess model for the scheme, finding a balance between mitigation and a sustainable premium versus geyser cover and excess.
Each situation is different, and the dynamics of each scheme vary as different buildings may have different owners with different socio-economic situations. One complex may have high-income earners, another lower-income earners, and yet another fixed-income pensioners or investor owners or landlords with tenants.
We often have requests from higher-income complexes to increase excesses and reduce premiums. Lower-income and fixed-income earners usually prefer the lowest or no geyser excess, electing a slightly higher premium so that unexpected excess payments are affordable to most owners. Complexes with mainly investor owners may prefer a more reasonable excess, but not a crippling one when things go wrong.
The best way to manage geysers and claims ratios is to periodically revisit the most recent claims history at the renewal stage and assess the trend. Trustees should encourage owners to make use of a preferred plumber or the insurer’s call center and an appropriate geyser product. Different products may suit different schemes but we generally advise a higher-spec geyser, such as a stainless-steel geyser as these typically offer a 10-year warranty and are largely maintenance-free.
Get your insurance advisor or broker involved, try to take a longer-term view, and implement a sound geyser policy.
Added value content:
- Download our e-booklet: My geyser claim
- Can an owner get a stainless-steel geyser as a replacement? Read more.
Author: Mike Addison
Addsure is South Africa’s leading sectional title insurance brokerage. Obtain fit and proper advice from advisors who understand sectional title. Contact our head office, Cape Town (021) 551 5069 who will put you directly in touch with one of our nationwide advisors.