What trustees can do to mitigate loss relating to their geysers

When insurance claims become an issue, and one very often finds that geyser replacements and resulting damages are the main culprit. There are solutions to this problem.

Over the years, we have engaged with hot water specialists and other industry experts with a view to finding the best ways to mitigate rising geyser claims and its negative effect on sectional title scheme’s claims ratio.

Insurers have three main blunt tools to manage negative geyser claims ratios – these are:

1. Increasing the geyser excess
2. Limiting the cover
3. Increasing the premium

What can trustees do?

Trustees have several proactive steps they can take, particularly when it comes to long-term planning. These include ensuring regular maintenance of geysers, implementing a program for replacing geysers with higher-spec or longer-lasting models, consulting a hot water installation specialist to oversee repairs and replacements, and collaborating with the insurance advisor to ensure the geyser insurance is structured effectively.

Let’s consider these individually:

1. Ensuring that geysers are properly maintained

Theoretically, the maintenance of geysers is the most obvious way to prolong the life of the standard mild steel geyser. If this is practiced from day one, this certainly does have its merits.

This involves the regular changing of anodes, valves and other components such as thermostats and elements.  Changing of anodes can be successful but if left too long, threading may also rust and corrode to such an extent that this is no longer viable. Regular maintenance can also be costly for owners and often, regular maintenance of geysers gets neglected.

2. Implementing a higher spec or longer lasting geyser replacement program

Trustees can implement a geyser replacement program whereby owners are encouraged – and even incentivised – to replace their geysers once it has failed with a stainless-steel geyser. Products such as the WaterLite 444 stainless steel geyser can last up to four times longer as a mild steel geyser and have no need for anodes, making it cheaper to maintain. Over the longer term, the claims ratio can only improve.

3. Engaging a hot water installation specialist to oversee all repairs and replacements

There is usually an immediate improvement to claims ratio when a specialist hot water installation is contracted to service and maintain the scheme’s geysers with the honesty factor being the major mitigation factor.  All too often plumbers will advise to replace geysers rather than repair which comes at a much higher cost when; for example, a simple flush of the geyser could have sufficed. Making use of a reputable geyser servicing company, preferably one with insurance company credentials, can save the scheme some money and will often have an immediate positive impact on claims ratio. It also means that there are not multiple plumbers fiddling with systems and that geysers are installed correctly and compliant.

4. Engaging with the insurance advisor to structure geyser insurance appropriately

An experienced insurance advisor will be able to structure your existing policy or find an appropriate matching product to suit your geyser needs. Instead of serving up a standard policy with standard geyser excesses and limits, a little tweaking of the policy can go a long way. For example, sometimes when a geyser is replaced with a higher spec geyser it will have a minimal impact on the premium per owner, but in the long run it may save the owner thousands in repair, maintenance and future replacement costs.

5. Consider a geyser call centre-driven option

Switching to using the insurer’s call centre is, in many cases, a very good option, but not always so. It is usually a very good idea where the policy is with the likes of CIA, CIB, and a few others where better-quality service providers are appointed.

If your scheme does not have a geyser claims ratio issue, in other words, your geyser claims are within acceptable levels and already being dealt with by a trustworthy and reliable services provider, one would not want to change the status quo.

Some call centre operations are internally managed by the insurer and thus well managed whereas other are outsourced and often seek out the cheapest service provider and cheapest geyser product. Thus, although usually the best option, considering a call centre option should be done with much consideration and under guidance of an experienced insurance advisor.