Geyser Claims: Understanding South Africa's Most Common Insurance Issue

Statistically, around 70% of household insurance claims relate to geysers. These claims split roughly evenly: half for geyser replacements themselves, and half for the resulting damage, water-damaged ceilings, walls, and flooring after a geyser has burst.

What Does the Law Require?

Sectional title legislation suggests that geysers should be insured against bursting, while prescribed management rules state that geyser maintenance is the owner's responsibility.

This creates an important distinction: the unforeseen bursting of a geyser should be insured, but wear and tear shouldn't be. Aged geysers must be maintained or replaced, and these costs should be paid by the owner who uses the geyser.

Here's a surprising fact: approximately 70% of geyser claim costs accumulate from events that, strictly speaking, shouldn't be insured. Most geysers need replacement due to wear and tear, decay, lack of maintenance, and subsequent collapse. If regulations were properly followed, bodies corporate shouldn't be insuring repairs, maintenance, and replacement of old geysers.

The Expectation vs. Reality Gap

Despite what legislation suggests, there's typically an expectation from owners that geyser replacement should be covered to some extent. Geysers form part of the buildings, so owners often vote to insure them. The question becomes: should insurance cover wear and tear and maintenance costs?

The market generally demands comprehensive geyser cover, and since insurance products offering this are available, it's commonly accepted that the geState will be covered. This doesn't mean it's legally required; it means it's become market practice due to consumer demand.

Finding the Right Balance

Trustees must negotiate premium excesses and rates with insurers, usually with guidance from insurance brokers. With this flexibility, trustees can seek the best and most appropriate excess model for their scheme, finding a balance between cost mitigation and sustainable premiums versus comprehensive geyser cover.

Each situation is different. Scheme dynamics vary significantly; different buildings have different owners with different socioeconomic situations. One complex might have high-income earners, another lower-income earners, another fixed-income pensioners or investors with tenants.

Higher-income complexes often request increased excesses to reduce premiums. Lower-income and fixed-income earners usually prefer the lowest or no geyser excess, accepting slightly higher premiums so unexpected excess payments remain affordable. Complexes with mainly investor owners may prefer moderate excesses, reasonable but not crippling, when problems arise.

Managing Geyser Claims Effectively

The best way to manage geysers and claims ratios is to periodically revisit recent claims history at the renewal stage and assess trends. Trustees should encourage owners to use preferred plumbers or insurer call centres and appropriate geyser products.

Different products suit different schemes. Many insurance advisors recommend higher-specification geysers, such as stainless-steel models, as these offer numerous benefits, including typically 10-year warranties and being largely maintenance-free. While the initial investment is higher, the long-term savings, resulting from reduced claims and a longer lifespan, often justify the cost.

Practical Recommendations

For Trustees:

• Review claims history annually at renewal time

• Assess whether current excess levels are appropriate for your scheme's demographics

• Consider implementing a preferred supplier programme for geyser installations

• Educate owners about the importance of regular geyser maintenance

• Discuss with your insurance advisor whether higher-spec geysers might reduce long-term costs
  

For Owners:

• Understand that geyser maintenance is your responsibility

• Consider having your geyser serviced every 3-5 years

• Know the age of your geyser; most have a lifespan of 8-12 years

• Budget for eventual replacement rather than assuming insurance will cover everything

• Report any signs of problems immediately (unusual noises, water temperature issues, leaks)
  

The Cost-Benefit Analysis

While it might seem counterintuitive to increase excesses or invest in more expensive geysers upfront, these strategies often prove cost-effective over time:

Higher Excesses can significantly reduce premiums. For schemes where most owners can afford a R2,000-R5,000 excess if needed, the annual premium savings often exceed the excess amount over several years.

Quality Geysers with longer warranties reduce claim frequency. A stainless-steel geyser costing R5,000 more than a standard model but lasting 5 years longer represents substantial savings when considering installation costs and potential water damage.

Preventive Maintenance is always cheaper than emergency replacements. A R500 service call that identifies and fixes a small issue can prevent a R20,000 claim for geyser replacement plus water damage.

The Long-Term View

Get your insurance advisor or broker involved in developing a sound geyser policy for your scheme. Try to take a longer-term view rather than focusing solely on immediate costs. A comprehensive geyser strategy should consider:

1. The demographic profile of your scheme

2. The age and condition of existing geysers

3. Historical claims patterns

4. The balance between premiums, excesses, and cover

5. Quality standards for replacement geysers

6. Maintenance requirements and responsibilities
   

Understanding the Reality

While legislation suggests geysers shouldn't be comprehensively insured, market reality and owner expectations mean most schemes do provide this cover. The key is structuring it intelligently, balancing affordability, adequate protection, and long-term sustainability.

Remember that insurance is ultimately a collective fund. Every claim paid comes from premiums paid by all owners. Excessive claims drive up everyone's costs. By encouraging responsible maintenance, using quality products, and setting appropriate excesses, schemes can provide necessary protection while keeping premiums reasonable.

The geyser insurance question doesn't have a one-size-fits-all answer. What works depends on your scheme's unique circumstances, demographics, and priorities. The important thing is making informed decisions based on a clear understanding of costs, benefits, and legal requirements, always with guidance from qualified insurance professionals.