The recent spike in Middle East respiratory syndrome (MERS) cases is bringing fears of a possible pandemic that could have a massive impact on the economy. How are insurers preparing to handle the potential fallout?
Eleven years after the Severe Acute Respiratory Syndrome (SARS) outbreak in Asia, a similar epidemic in the Middle East is now causing alarm for public health authorities worldwide. Though MERS has been around for two years, there is no cure or vaccine for it, and its source of infection remains undetermined.
The cumulative global case count, which crossed the 200 mark in late March, approached 600 in 18 countries spanning three continents by mid-May. Most of the cases have been detected in Middle Eastern countries, the majority in Saudi Arabia where MERS was first reported two years ago. On 14 May, the Ministry of Health said total MERS infections in the Kingdom since 2012 had risen to 511, including 157 deaths. Globally, 571 cases and 171 deaths have been reported, according to the World Health Organization (WHO), though its total did not include the newest Saudi cases.
Not yet a “public health emergency”
At an emergency meeting in Geneva on 13 May, the WHO said the spread of the MERS virus had not yet constituted a public health emergency despite the recent spike in cases. The WHO’s emergency committee said that while the seriousness of the situation had increased in terms of public health impact, there was still no evidence of sustained human-to-human transmission of the virus.
However, the committee emphasised that its concern about the situation had significantly increased. Their concern centred on the recent sharp rise in cases; systemic weaknesses in infection prevention and control, as well as gaps in critical information; and possible exportation of cases to especially vulnerable countries.
On a mission in late April to Saudi Arabia that involved visits to some Jeddah hospitals, the WHO team found that “many standard infection control practices were often suboptimal”, Assistant Director General Keiji Fukuda said. Such practices include wearing gloves and masks, and changing them and washing hands between seeing patients, he said. Some hospitals also had severe overcrowding in emergency rooms, a condition that can worsen the spread of the disease.
Business as usual
Despite the continuing spread of MERS, it appears to be business as usual for medical insurers in Saudi Arabia and in the region, because the health authorities have yet to declare MERS as an epidemic, according to industry players.
A senior insurance executive told Arab News that medical insurers are liable to provide insurance coverage for conditions such as MERS, dengue and swine flu as long as the government does not declare them epidemics. “Any health condition that does not fall under policy exclusions and exceptions is covered as per policy terms, conditions and limits,” he said.
Agreeing, Mr Youssef Al Kareh, Executive Vice President of Saudi Arabian Cooperative Insurance Company (SAICO), said: “Epidemics are not specifically excluded under our medical schemes. The cost of treating infected insureds would be covered, but preventive measures would not.”
Preparing for the worst
Mr Ghulam Mohd Teli, Chief Officer - Health & Life at AXA Insurance (Gulf), said: “As per the general practice, pandemic is a general exclusion from insurance coverage. However, as part of corporate social responsibility, insurers should work in conjunction with government at least on the awareness and prevention.”
Noting that the insurance industry has so far not priced the MERS risk, Mr Al Kareh said the industry needs to assess three alternatives to address the spread: exclude pandemics in case MERS becomes one, provide coverage but with a sub-limit, or provide full coverage.
He added that if the second and third options are taken, covers should be well-priced, starting from the next renewals. “At the moment, even where coverage for pandemics is provided, this is just to cater for medical expenses incurred as a result of infection and not the costs of preventive care; this will remain in place as insurance is designed to cover fortuitous losses only.”
Impact on BCP
As long as there is no official ban on travel or any stringent precautionary measures taken by the government, there should be no impact of MERS on business continuity plans (BCP) for Middle East businesses, said Mr Teli. “However, companies have to raise the awareness among frequent travellers as well as employees exposed to large crowds to reduce the spread in high-risk areas, as they might be affected by some degree of absenteeism,” he added.
Mr Al Kareh said this would be a real test to the preparedness of most companies’ business continuity planning. SAICO, he added, will be re-visiting its BCP to make sure they cater for a plausible scenario of limited outbreak.
“Given the scale of a potential outbreak of a pandemic, our company prefers to work jointly with the insurance industry and provide its full support to the governmental bodies tasked with containing such an outbreak,” he said.
Mr Teli said: “We have a business continuity plan and teams ready to take the necessary actions. Being one of the largest insurance companies in the world, AXA will work as usual as one team to ensure we bring the global and necessary expertise not only to all our customers, employees and partners but also to the public.”
Raising awareness
While there is no evidence yet of sustained human-to-human transmission of MERS virus, there are concerns that the virus could become more contagious and deadly if it mutates. Thus, there should be collective efforts to fight the spread.
Educating the population at large is a worthwhile investment, Mr Al Kareh said, pointing out that “the insurance industry should be an active participant, along with governmental bodies, to spread awareness about the virus and the best ways to be protected from it”.
Mr Teli said that insurers could get involved in investigations as well as join hands with authorities to think of how to address this spread, “as long as the disease is formally not declared as pandemic”. He noted that some insurers are already helping to build the awareness about the disease among the public and their clients, as well as possible preventive measures.
“These prevention actions are in the DNA of AXA and we have already sent several communications to our partners, employees and customers. This should be supported and quickly followed by all companies,” he added.
SARS déjà vu?
MERS, which causes coughing, fever and sometimes fatal pneumonia, is a coronavirus from the same family as SARS, which originated in China. Some experts therefore see the spread of MERS as worryingly similar to the 2003 epidemic.
But while there are similarities, there is a distinction to be drawn. SARS infected 8,237 people in 37 countries between November 2002 and July 2003, with the majority of cases in Hong Kong. Unlike SARS, MERS does not appear to spread as quickly between people for now, but it does seem more deadly. Compared to SARS’ 9% death rate, the fatality rate for MERS is close to 30%.
The global economic cost from the SARS outbreak was estimated at close to US$40 billion, including medical-related costs, and losses in affected industries such as travel, tourism and retail. The figures also included the wider impact on globalised and integrated economies, taking into account the losses resulting from both temporary and persistent economic shocks.
In Hong Kong, the epicentre of the outbreak, insurers paid out $105.28 million as a result of SARS, making the epidemic the city’s second-most expensive insurance catastrophe after Typhoon York in September 1999. The vast majority of payouts was for life insurance, which saw 72 claims worth $101.45 million.
If MERS becomes a pandemic, Mr Al Kareh said the insurance industry in the Middle East will suffer potentially large losses as a result of medical expenses incurred by the insured population; death benefits payable under life insurance policies where death is a result of the infection occurs; and the potential disruption to business due to restricted movement of staff and customers, and possible restrictions by governments trying to control the spread of the pandemic.
Another distinction between the two coronaviruses is prevalence. SARS was a global killer, while MERS so far has mostly been confined to the Middle East. There have been cases reported outside the region, but all were people who either had travelled to the Middle East or were in close contact with infected travellers.
Imminent challenges
The approach of Ramadan is becoming a public health concern given the expected flood of pilgrims into Saudi Arabia for the Umrah. Millions more from hundreds of countries are set to embark on the annual haj pilgrimage in October.
Pilgrims often trek around barefoot in the heat, and share tight sleeping quarters, and many will be travelling from countries where media have given MERS comparatively little coverage and governments have little capacity to monitor for outbreaks among returned travellers.
WHO is already urging people who are going to mass gatherings to be aware of the risks and of what they can do to protect themselves from getting MERS. In addition, a growing number of countries including the US, the UK, Egypt and Singapore have advised certain groups of people to defer their pilgrimages. These include the elderly, expectant mothers, young children and those with chronic diseases. The governments have also provided advice for those undertaking the pilgrimage to minimise the risks of contracting and spreading the virus.
A global risk
There is no doubt that MERS presents huge global risks. In today’s globalised economy, any failure to stop the contagion early will cause significant economic and social issues. The World Bank has said that a severe flu pandemic will more than double the total burden of disease, with economies suffering from worker absenteeism and disruptions in goods and services markets.
While the implications for insurance will depend on how the virus evolves, insurers must be agile and yet careful in handling policy changes and restrictions resulting from the risks, or risk losing the trust and business of their customers.