The following is an editorial by Alicja Grzadkowska, senior news editor at Insurance Business. To reach out to Alicja, email her at email@example.com.
Seasonal flu, eat your heart out. There’s a new virus in town and it goes by the name of COVID-19, or the novel coronavirus.
With the number of confirmed cases around the globe now topping 80,000, officials are warning businesses to prepare for an inevitable outbreak of the virus in the US. Canada, on the other hand, seems to have been spared so far after the Public Health Agency of Canada stated that the health risk associated with COVID-19 is low for the country. Accordingly, in the US, there are 53 confirmed cases as of February 25 compared to 10 in Canada, as reported by the World Health Organization (WHO).
Fear and panic about the virus and its effects on the global economy have spooked financial markets, and should be scaring insurers as well. A recent Financial Times report stated that while experts agree that many insurance policies might pay out, a significant number of policies also have exclusions for epidemics and pandemics, though the experts added that it’s too early to say how much the virus will cost the insurance industry. The report noted that the three key insurance coverages likely to feel the most pain as a result of the coronavirus are travel insurance, business insurance, and life insurance.
What insurers as well as the broader public and business community should also fear are the other long-term impacts of the disease. Take, for instance, the upcoming Summer Olympics in Tokyo. Even in the best circumstances, this mass event is a “crowded, sweat-dampened, close-packed and germ-ridden affair that attending [it] can be like hanging out inside someone’s mouth,” according to the Washington Post’s Sally Jenkins.
Throw in a potential pandemic, and attending the Olympics becomes akin to walking into a doctor’s office at the height of flu season, multiplied by the millions of people who will be in Tokyo for the sporting events. With the International Olympic Committee (IOC) estimating that there is a three-month window to decide the fate of the games, losses that would stem from cancelling the mega-event are likely huge, considering that the IOC purchases insurance worth US$800 million for each Olympic event.
The Olympics are just one of the many ways the impact of the virus will be felt around the world. The travel and tourism industry is inevitably going to be hit as people cancel plans or don’t book trips in the first place. The likelihood that there will be a shortage of certain consumer products is also high, seeing as today, “China is the engine of the global economy,” according to German health economist Fred Roeder.
Many businesses are likely contemplating whether to slip into panic mode or stay calm amid the outbreak. First, it’s important to review the facts, which are updated regularly by the WHO. The WHO-China recent joint mission resulted in a range of findings about the transmissibility of the virus, its severity, and the impact of the measures taken. WHO director-general Dr. Tedros Adhanom Ghebreyesus made comments that the team is “encouraged by the continued decline in cases in China.” Additionally, the fatality rate is between 2% and 4% in Wuhan, and 0.7% outside Wuhan, and for people with mild disease, the recovery time is around two weeks, compared to three to six weeks for people with severe or critical disease.
The WHO is also standing by its decision to not use the word “pandemic” to describe the spread of the virus. This is based on the fact that, at least for now, “We are not witnessing the uncontained global spread of this virus, and we are not witnessing large-scale severe disease or death,” said Ghebreyesus.
In the meantime, businesses in North America should review their emergency plans so that they are as prepared as possible for the impacts of the coronavirus.
According to Marsh, important steps include identifying a business’s main vulnerabilities, assessing its preparedness based on existing plans and making sure they will actually work once implemented, as well as assigning clear responsibilities to team members around communication. Another important step is to be clear and potentially more lenient with employees about sick leave. This is not the time for employees to be sticking it out at their desks while coughing and sneezing. Sending sick people home should always be business leaders’ go-to response, but even more so during this outbreak.
Finally, brokers and agents can play a key role at this time by passing along useful risk mitigation resources from insurers to their clients, and answering coverage questions for insureds, such as travellers who might need to change their plans or businesses whose supply chains are dwindling as a result of the public health emergency.
As the WHO stated in its February 25 situation report, “It’s understandable that you may feel stressed and anxious about the situation. It’s a good idea to get the facts to help you accurately determine your risks so that you can take reasonable precautions.”