Businesses to get power-cut insurance shock

Power was lost in Auckland on Monday. Picture / Richard Robinson

Many Auckland businesses are likely to be in for a shock when they find their insurance policies do not cover them for Monday's power blackout.

The Insurance Council says many business policies have a time clause which means there is no insurance payout for lost turnover and lost profits unless a power cut was longer than 24 or 48 hours.

Auckland Chamber of Commerce chief executive Michael Barnett said today that would be bad news for many businesses living on tight margins and low profits.

The power blackout left more than 700,000 homes and businesses residents without power for more than five hours after an earth wire snapped at the Otahuhu sub station and fell over the 110kv lines supplying Auckland with electricity.

Mr Barnett said the estimated loss of $50 million to $100 million was realistic. He said many of the service businesses such as accountants would pick up the lost chargeable hours but for other retail businesses the income was lost forever.

Mr Barnett said many businesses would not be aware of the fine print of their policies.

"It is like most of the fine print when you are taking out a policy that is providing a number of benefits," he said.

"You look at it from a helicopter point of view and don't go down into the fine print until the day that occurrence actually happens.

"Anybody who attempts to claim could well be in for a bit of a shock."

He said it was too extreme to say the loss of a day's takings on a small business would be enough to put it out of business but it would hurt many.

"Many of those people are on pretty low margins."

He said Auckland and New Zealand deserved better than to have only one old and vulnerable sub-station in Otahuhu supplying the city with power.

People outside Auckland also needed to realise the power cut affected the entire country because so many firms were based in Auckland and could not do business with the rest of the country or internationally when they had no power.

"Auckland deserves better and certainly New Zealand deserves better than this," Mr Barnett said.

He said many overseas businesses and investors would be wondering if Auckland and New Zealand was a safe place in which to invest and do business with if power supplies could not be guaranteed.

- NZPA