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Old Mutual joins move to limit cover for non-physical damage on BI policies

Old Mutual Insure has followed South Africa’s largest short-term insurer, Santam, in excluding certain types of non-physical damage from its business interruption cover, because it can no longer reinsure these events.

Read: Santam phasing out BI cover for power cuts

It is also replacing its computer exclusion with an exclusion on all cyber-related losses.

In a circular dated 7 April, OM Insure said: “In view of the lack of support from our reinsurers in the event of a large-scale event, we regret to advise that, after careful consideration of our overall exposure, we will no longer be able to provide non-physical-damage business interruption cover.

“This means that we will provide cover for business interruption losses that are due to physical damage to insured property. Consequently, we will not cover losses arising from non-physical damage acts, such as closure or restriction by a lawfully established or recognised authority. Some of the extensions that are impacted include public utilities and public telecommunications.”

The changes apply immediately to new business and to policy renewals from 1 August.

From August, policies with public utilities extended cover and public telecommunications extended cover will have these extensions replaced with public utilities insured perils only and public telecommunications insured perils only.

OM Insure will not offer replacement cover for:

  • Oil pollution;
  • Pollution of any sea, beach or waterway; or
  • Loss of a liquor licence.

The following non-physical damage extensions will still be available, subject to a limit of R5 million:

  • Murder, suicide, food or drink poisoning;
  • Vermin, pests or defective sanitary arrangements;
  • Wild game attack, shark scare or shark attack;
  • Bomb scares; and
  • Guesthouses.

The insurer said it will not allow increases in the limits in the case of existing business, but it will honour the current limits until the policies are renewed.

OM Insure has also amended its exclusion on compensation for injury or death arising from road accidents to clarify that the exclusion applies even when the Road Accident Fund or a similar authority is unable to provide compensation.

OM Insure said it will honour existing quotations for non-physical damage, bearing in mind that quotations are valid for 30 days. It will not honour quotations accepted after the 30-day period.

“Claims will continue to be processed based on the policy wording issued,” the insurer said. Effective immediately (new business) or from 1 August (renewals), it will not accept claims for public utilities extended cover and public telecommunications extended cover.

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