Statistics reveal that some 70% of claims are as a result of geysers: geyser replacement (35%) and other resulting damages (35%). Prescribed rules suggest that geysers should be insured against bursting and suggest that the maintenance of geysers is for the account of the owners.
It’s a bit perverse to think that 70% of claim costs are as a result of something that should not be insured. Most geysers need replacement as a result of wear and tear, decay, lack of maintenance and subsequent collapse. It can also be argued that the geyser replacement is an act of maintaining the property – an owner responsibility. Therefore, if prescribed rules are properly adhered to, the body corporate should not be insuring repairs, maintenance and replacement of old geysers.
However, trustees need to apply their minds to this cover. There is usually an expectation from owners that geyser replacement be covered, to some extent at least. Geysers form part of the buildings therefore the trustees may elect to insure geysers. Trustees can manage the extent of geyser insurance by way of excess structure, i.e. trustees are mandated to increase excess payments or reduce where they can as long as they are doing so in the best interests of all the owners.
Each situation is different and the dynamics of schemes vary. Different buildings may have different owners with different socio-economic needs. One complex may be full of resident high income earners, another lower income earners, another fixed income pensioners or investor owners / absentee landlords with tenants. One could apply different excess structures to each scheme’s needs. We often have requests from higher income complexes to rather increase excesses and reduce premiums. Lower income and fixed income earners usually prefer lowest or nil geyser excess trading off for a higher premium so that unexpected excess payments are affordable to owners. Complexes with mainly investor owners / tenants may prefer a 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 renewal date and get a feel for the trend. Trustees should encourage owners to make use of a preferred plumber and geyser products with higher spec manufacturing (e.g. no anode and pex lining) offering a 10 year guarantee such as Solartherm / Durantherm . Get your insurance advisor / broker involved and take an overall longer term view and implement a geyser policy.
Author: Mike Addison, Addsure
Contact Addsure – The Leaders in Sectional Title Insurance – to get fit and proper advice from advisors who understand Sectional Title. Contact us in Johannesburg (011) 704-3858; Durban (031) 459-1795; Cape Town (021) 551-5069.