Whenever there is a claim against an insurance policy there is a resultant effect on the claims ratio for that policy used by the insurer to annually re-evaluate its risk. The geyser has become one of the biggest challenges for insurers, underwriting managers and trustees of ST Schemes wishing to manage their premiums and any excess payable that is set by the insurer.
The geyser (the water-heating installation) installed in a home situated in a Homeowner’s Association or in a sectional title unit is the responsibility of the owner of that unit to maintain and repair and when necessary to replace such an installation (even though in a Sectional Title Scheme the water heating installation forms part of the common property and is insured by the Body Corporate – STSMA Regulations Annexure 1 – MR31(1).
Every homeowner should have an insurance policy that covers that homeowner for any loss or damage that was caused by the leaking or bursting of geysers, water supply tanks, cisterns and water pipes that form part of the building. For sectional title schemes the geyser providing hot water to the unit must be insured by the Body Corporate as part of the building insurance that is one of the insurance policies that a Body Corporate must hold in terms of Sectional Title legislation.
Homeowners should however be aware that some insurance companies may not cover the resultant water damage to your fitted carpets, walls, or furniture, and that sometimes, the owner may even have to pay two excesses – one for the geyser and one for the damage to the home contents., but this is usually stated in the policy, which should be checked and understood by the policy holder.
In Sectional Title schemes the excess amount that the insurance company does not cover in the event of an insurance claim, is for the unit owner’s expense.
Any insurer will look for means to minimize the cost of their loss when dealing with insurance claims lodged for geyser installations in Sectional Title community scheme, and in individual homes located in Home-Owner Associations. These include any one of the four options listed below or a mixture of all of them:
Increasing the monthly insurance premium paid for each geyser that is covered by the policy without changing the excess amount or applying limits to the cover provided with exclusion clauses.
Limiting the maximum amount of cover provided when a geyser claim is made. This may then require a co-payment by the owner to the plumber employed to do the repair / replacement – usually upfront
Increasing the excess amount that must be paid by the owner of the geyser when an insurance claim is lodged. For Sectional Title schemes the trustees may even negotiate with the insurer for a lower rate where higher excesses are applied for geysers. In this way the trustees are acting in the best interest of all the owners, because they are negotiating the most appropriate terms and rates for the body corporate so that premiums remain reasonable and sustainable.
Including clauses to the policy that would allow the insurer to limit or even to repudiate the claim in certain circumstances where stipulate maintenance of the geyser installation has not been done or not covering geysers above a certain age since installation.
The owners of ST units and free-standing homes must ensure that their geysers are properly maintained. This would be done by employing a plumbing contractor to annually check their geyser installation for compliance with the latest plumbing regulations and the terms and conditions of the insurance policy, to change the geyser anodes as required, and to check the geyser for faulty valves.
The trustees of an ST Scheme may even require that a higher specification is used for the replacement geyser to be installed when an insurance claim is made (even at an extra cost to the unit owner) and consider instituting a geyser replacement program if the age of the geysers installed in a scheme looks likely to cause ongoing costs in the long term to the Body Corporate.
Owners and in the case of a ST Community scheme, the trustees, may consider engaging a hot water installation specialist to provide a detailed analysis of the scheme’s hot water installations for each unit to check for faulty hot water installations that don’t comply with current legislation, and engaging with their insurance broker (specialist) to structure their geyser insurance to that which is most appropriate to their scheme’s specific situation.
